Does It Matter Whether You Pay With Cash Or A Credit Card?

Are there any downsides to using credit cards instead of cash?

There are many signs that the world is moving towards a cashless economy. As just one example, a large study spanning 60 countries found that consumers made a total of 417 billion cashless payments in 2014, up from 311 billion transactions just four years earlier (or a third more, in percentage terms). One recent industry study found that only 14% of American consumers use cash for everyday purchases. And another 2014 study reported that just 9% of people preferred to use cash. 78% of those surveyed, in contrast, preferred to pay for things with a credit or debit card.

Just a decade or two ago, most people used cash for most things. But today, a vast majority of Americans make purchases with credit or debit cards.
The benefits of using a credit card are obvious. There is the convenience. No need to carry big sweaty wads of money. Then there is the liability. If cash gets stolen, it’s gone. There is no recourse. But if a credit card gets stolen, a call to the bank will fix the problem. The shopper has minimal liability, and often no liability at all.

Are there any downsides to using credit cards instead of cash? And more broadly, does it matter how you pay for your purchases?
Well, it turns out that it does matter, and in rather interesting and important ways. Most of our understanding about the effects of paying by cash vs. using a credit card comes from recent consumer psychology research studying the links between payment method and shopper behavior.

#1. Paying with a credit cards is less painful than paying with cash. So shoppers spend more money.

Paying for any purchase produces an immediate pain of paying, which the shopper then balances against the future benefits from consuming it. But this pain is not the same for cash as it is for credit cards. In a 2008 paper in the Journal of Experimental Psychology: Applied, researchers Priya Raghubir and Joydeep Srivastava found that there are significant differences in spending based on how shoppers pay for things. Their main argument was that:
“the more transparent the payment outflow, the greater the aversion to spending or higher the “pain of paying”’ …leading to less transparent payment modes such as credit cards and gift cards (vs. cash) being more easily spent or treated as play or ‘monopoly money.’”

Raghubir and Srivastava argued that using credit cards dulls the ‘pain of paying’ for two important reasons: (1) there is a separation in time between when the credit card is used to buy something and when the bill has to be paid; and (2) using a credit card allows different purchases to be mixed together. When the bill is actually paid (say, once every month), the shopper is not able to attribute the payment to any one particular purchase.
Because of these two reasons, people overspend when using credit cards. In one study, the authors found that participants were willing to spend $175 to throw a Thanksgiving party when using a credit card to buy the food, but only $145 when using cash. These findings have been replicated by others.

#2 Credit card users not only spend more, but they also purchase more unhealthy things.

Another consumer psychology study analyzed the food buying behavior of a thousand households over 6 months. The researcher team found that the shopping baskets of those who paid with credit cards had a larger proportion of impulsive and unhealthy food items like ice cream, candies, cookies, and potato chips. Why? This is what the authors had to say:
“Our conceptualization is based on the premise that when consumers encounter vice products – such as cookies, cakes and pies – the emotive imagery and associated desire trigger impulsive purchase decisions. These visceral factors entice them to include such vice products in their shopping baskets, even though they consider such products to be unhealthy. Pain of payment can curb the impulsive responses, and thus reduce the purchase of such vice products. Since paying in cash feels more painful than paying by credit or debit cards, paying in cash can reduce the purchase of unhealthy food items.”

These studies were done before contactless payments using smartphones like Apple Pay became popular. Today, it is easy to imagine that because these methods make spending money even more painless, they are encouraging shoppers to buy impulsively, over-spend, and purchase unhealthy products even more.

#3 Those who pay with cash enjoy a better relationship with their purchased products.

Recent research shows that payment method also affects the shopper’s relationship with the purchased product. In a series of studies done by Avni Shah and colleagues in a just published paper, the consumer psychologists found that shoppers who paid cash to buy something increased their emotional attachment with the purchase compared to credit card users. In one study, the authors sold mugs emblazoned with the university logo at a discounted price, and then asked study participants the minimum amount that they would demand to give up their mug. Those who paid cash wanted $6.71 for the mug (they had paid $4.95 to buy it just a few minutes earlier). But those who paid with credit card only wanted $3.83.

In other studies, the authors also found that cash users are also less interested in the options they did not select. Instead they publicly signaled their commitment towards the item they did purchase. And finally cash users were more loyal and likely to make a repeat purchase afterwards. In the context of donations, the authors found that those who paid cash were 9.9% more likely to donate again over the course of a year than those who donated using a credit card.

Cash or Credit Card?

We end up with a paradox with these findings.
The world is moving rapidly towards payment methods that are more and more convenient and less and less painful. Stores encourage us to brandish our credit cards, and increasingly, to use our smartphones to pay in seconds with a click of a button. Cash is frowned upon as slowing things down, outdated, and suspicious. Sweden is on its way to becoming completely “cash-free” and other countries are sure to follow.

And we, in our naïve enthusiasm for speed and convenience, are adopting these payment methods uncritically. But as the research described here shows, there are some serious downsides to using painless payment methods. When compared to paying by cash, people tend to overspend, they buy things impulsively, their shopping baskets tend to fill with unhealthy food, and they are less committed to products they have purchased. Even for marketers, this is mixed news.
The message is clear. As shoppers, we need to balance the convenience of paying with negative outcomes that we are likely to suffer because we no longer feel the pain of paying.

10 Things You Can Do to Avoid Fraud

Crooks use clever schemes to defraud millions of people every year. They often combine new technology with old tricks to get people to send money or give out personal information. Here are some practical tips to help you stay a step ahead.

Spot imposters. Scammers often pretend to be someone you trust, like a government official, a family member, a charity, or a company you do business with. Don’t send money or give out personal information in response to an unexpected request — whether it comes as a text, a phone call, or an email.

Do online searches. Type a company or product name into your favorite search engine with words like “review,” “complaint” or “scam.” Or search for a phrase that describes your situation, like “IRS call.” You can even search for phone numbers to see if other people have reported them as scams.

Don’t believe your caller ID. Technology makes it easy for scammers to fake caller ID information, so the name and number you see aren’t always real. If someone calls asking for money or personal information, hang up. If you think the caller might be telling the truth, call back to a number you know is genuine.

Don’t pay upfront for a promise. Someone might ask you to pay in advance for things like debt relief, credit and loan offers, mortgage assistance, or a job. They might even say you’ve won a prize, but first you have to pay taxes or fees. If you do, they will probably take the money and disappear.

Consider how you pay. Credit cards have significant fraud protection built in, but some payment methods don’t. Wiring money through services like Western Union or MoneyGram is risky because it’s nearly impossible to get your money back. That’s also true for reloadable cards like MoneyPak, Reloadit or Vanilla. Government offices and honest companies won’t require you to use these payment methods.

Talk to someone. Before you give up your money or personal information, talk to someone you trust. Con artists want you to make decisions in a hurry. They might even threaten you. Slow down, check out the story, do an online search, consult an expert — or just tell a friend.

Hang up on robocalls. If you answer the phone and hear a recorded sales pitch, hang up and report it to the FTC. These calls are illegal, and often the products are bogus. Don’t press 1 to speak to a person or to be taken off the list. That could lead to more calls.

Be skeptical about free trial offers. Some companies use free trials to sign you up for products and bill you every month until you cancel. Before you agree to a free trial, research the company and read the cancellation policy. And always review your monthly statements for charges you don’t recognize.

Don’t deposit a check and wire money back. By law, banks must make funds from deposited checks available within days, but uncovering a fake check can take weeks. If a check you deposit turns out to be a fake, you’re responsible for repaying the bank.

Sign up for free scam alerts from the FTC at Get the latest tips and advice about scams sent right to your inbox.
If you spot a scam, report it at Your reports help the FTC and other law enforcement investigate scams and bring crooks to justice.

Debt Settlement Produces Real Results for Americans Struggling with Unsecured Debt

Forensic Analysis of Debt Settlement Program Participants, Commissioned by the American Fair Credit Council, Validates Economic Benefit to Consumers

Debt Settlement Produces Real Results for Americans Struggling with Unsecured Debt

Fort Lauderdale, FL – February 21, 2018 – The results of a six-year study of consumers enrolled in debt settlement programs, commissioned by the American Fair Credit Council (AFCC) and performed by the Certified Public Accounting firm of Hemming Morse LLP, once again shows consumers realize financial benefit from debt settlement program participation. Furthermore, the study illustrates that consumers have realized greater benefits since regulation of the industry went into effect in 2010. The most recent report, the third of its kind since the AFCC first commissioned the study back in 2012, tracks the outcomes of over 400,000 clients in 2.9 million accounts enrolled in debt settlement programs during the period January 1, 2011 to March 31, 2017.

The 2017 study represents the most comprehensive, forensic analysis of its kind, and documents the economic benefit consumers received as a result of their participation in debt settlement programs over the past decade. The study revealed several positive findings for consumers seeking relief from the burden of credit card debt. Most notable among the findings are that consumers are receiving financial benefit in the form of debt reduction resulting from regulations imposed on the debt settlement industry through the Revised Telemarketing Sales Rule in October of 2010 by the Federal Trade Commission and The Consumer Financial Protection Bureau. For consumers struggling with unsecured debt, the data clearly shows that debt settlement offers significant advantages compared to other options. Key takeaways include:

• Debt settlement on average saves consumers $2.64 for every $1 in fees paid

• More than 95% of debt settlement clients receive savings in excess of fees

• Most consumers see initial account settlements within 4-6 months of program start

• Debt settlement clients pay no fees until settlements are completed

Robby Birnbaum, President of the AFCC commented, “This report validates what our association and its members have known for years; debt settlement programs can offer struggling consumers a proven path to improved financial health. While not for everyone, these programs offer consumers tremendous benefit and an important lifeline towards an improved balance sheet and financial stability.”

For more information or to obtain a copy of the report, visit the American Fair Credit Council’s website at

About The American Fair Credit Council
The American Fair Credit Council (AFCC) is the leading association of professional Consumer Credit Advocates. The AFCC, and its member companies, work to represent the rights of consumers struggling with the overwhelming burden of debt. The AFCC has developed a strict Code of Conduct centered on best practices designed to protect the rights of consumers and require member companies to follow strict regulatory guidelines for operation. All AFCC members operate on a “No Advanced Fee Model” and never charge a fee for services until a consumer’s debt has been successfully negotiated.

Robby Birnbaum – President
The American Fair Credit Council
Phone: (888) 657-8272

About Hemming Morse LLP
Founded in 1958, Hemming Morse, LLP is a national firm leading the accounting industry in Forensic and Financial Consulting Services, as well as Financial and Compliance Auditing of Employee Benefit Plans. Based in California, with more than 100 employees working from offices in San Francisco, San Mateo, Los Angeles, Walnut Creek, Santa Rosa, Fresno and Chico, Hemming Morse handles complex and high-profile assignments that are local, regional, national and international in scope.

Rebuilding Credit: The Basics

Since I’m in the process of rebuilding my credit, I thought I’d walk you through some of the steps I’m taking to meet my credit goals.

Please understand that there is no “quick fix” for your credit. Your credit report is created based on your use of money, whether responsibly or irresponsibly. You can, however, put in extra effort by disputing incorrect or out-of-date items on your report, paying off debts, and acquiring one or two new trade lines where you may be lacking. To the rest, I’ll say, “Time heals all wounds.”

My Credit History

Historically, I’ve had dismal credit, but I was able to build it back up to excellent credit with a credit score of over 750. Realistically, I see myself doing that again, because I know it just takes a little time and organization, and I’m not starting from the bottom. My scores range from poor to fair, so I have a bit of a head start.

In the last 5 years or so, I’ve had some derogatory marks added to my reports. I’ve also not had any credit cards, BUT I also have no debts (which is good and bad). This is a big reason my credit is lacking, because this affects my “credit history”, which is an important factor in deciding my credit score, but there are deciding factors. According to FICO, these are the top 5 to consider, in order of importance:

  • (35%) Payment History – Paying your accounts on time (collections, late payments, etc.).
  • (30%) Amount Owed – Combines debt, credit utilization, and number of accounts.
  • (15%) Credit History – Age of accounts and how often you use them.
  • (10%) Credit Mix – Types of accounts (installment, revolving, mortgage, etc)
  • (10%) New Credit – Don’t open too many accounts in a short amount of time.

These topics cover many more details that you can find on the Fico Website, but essentially, they will be the most important to you. I would like to add that too many hard inquiries may have a mild negative impact, and public records may have a significant negative effect on your credit score. Public records include liens, judgment, and bankruptcies.

Where to Start When Rebuilding

The first thing you’ll want to do is get your hands on all three of your credit reports and scores, if you don’t already have current copies. You can get all three reports (no scores) through for free, every 12 months, or you can order them directly through the credit bureaus’ websites. Experian offers all three reports with scores for 39.95. Or there are many credit monitoring sites that you can pay a small monthly fee and get updated information monthly on all changes to your report..

DEBTS: If you have unpaid balances, charge-offs, and/or are in collections. This will continue to be a derogatory mark on your credit report. This is absolutely step #1 in improving credit. ALL DEBTS MUST BE PAID, or settled with a $0.00 balance. If they’re not, stop here, and get a plan together today.

Once you have your reports, look over them for inaccuracies. If you find that you may need to dispute inaccuracies or out-dated information, simply dispute the information with the credit bureaus directly. This is the first thing you want to do – clean it up and make sure everything is accurate and updated. The information reported will vary from one credit report to the next, so be thorough.

Next, you’ll want to set some credit goals, and to do that, you need to locate the part of your report that talks about why your score is low. It will usually be titled something like “understanding your score” or “factors affecting your score”. This will let you know what is hurting your credit and what you can do to improve it. Some things will not be able to change. For example, one of mine is “insufficient information on a mortgage account”, which I can’t do anything about since it’s an old (and closed) account. A different bureau has no items to display for me to improve on, which sounds great, but leaves me feeling lost with a mediocre score. What this tells me is there is nothing hurting my score, but I definitely need to still build up my credit responsibly. <— my new goal!

New Revolving Credit Tradelines

Once any disputes are completed to your satisfaction and you have your goals in mind, it’s time to take action. For me, since having no revolving credit was hurting me, I decided to get a secured card through Discover for $500 and only use it at a 10-15% debt-to-credit ratio, meaning I never charge more than $50-$75 on it each month, and pay it off completely and on time. After six months, I can be reevaluated for a larger credit line. After one year, I may qualify for an unsecured card with them based on my payment history. This is a great way to be smart about revolving credit while giving your credit score a lift!

And, I did a lot of research before choosing Discover to help build my credit. Not only are there the above-mentioned features, but I also earn 1% cash back and get to view my FICO score for free through their partnership with TransUnion. It’s a win-win for all involved.

Whatever you do, don’t apply for multiple revolving accounts in a short period of time, as this appears as though you need credit. I only applied for one secured card and will wait 6 months before considering any other revolving accounts. Generally speaking, new accounts may temporarily show negatively on your credit report until around 90 days of on-time payments.

Installment Loans

I was already in the market for a “new” used car for my oldest daughter, and it occurred to me that this may be an opportunity to help build my credit by financing. At first, I was concerned that my credit may not allow the financing, but I soon learned that “fair” scores are considered “good” in a car dealership.

I got a 7.24% interest rate, which isn’t awful, but that’s not really the point. The point is the bank will make a little money off of me, and in return, I will use them to build up my credit. Another win-win!

I didn’t want to be in debt with this purchase or pay massive interest, so I saved up the money in advance and put it in a separate savings account. I put a nice  down payment on it (banks like to know you have cash to put down), and was able to finance the rest over 48 months. Of course, I’ll be paying it off in less than a year without penalty, but don’t tell the financing company!

The Bottom Line

I don’t believe credit is essential to life, but it’s definitely essential to qualifying for a mortgage. Most other things you can reasonably save up for, even a used car. Only buy what you can truly afford, even if you finance it, and pay on time, every time.

Everyone makes mistakes, even with credit, or especially with credit, but it can be re over time, and with a little patience and forethought.

Consumer Debt Help Association Moved To New Location

Consumer Debt Help Association has been operating out of the Delray Office since the company was formed in 2009. Unfortunately at that time with a new business renting was the only option. Since the company is such an established business now, and growing, almost ten years later, we were fortunate enough to purchase a building in the neighboring town of Lantana to make our permanent home. Please send all correspondence to this new address moving forward. Thank you for your trust and we will continue to work our hardest to obtain the lowest settlements possible for you and to get you out of debt is the shortest amount time that we can.


New Address –

Consumer Debt Help Association

516 N. Dixie Hwy

Lantana, FL 33462

How Long Does It Really Take to Improve Your Credit?

I was recently looking through last year’s check registers for confirmation of a payment I had made when I noticed my handwriting on several pages looked odd. It took me a moment to realize why: at the time, my right hand was in a cast and I had been writing with my left.

I remembered how grueling that month felt. Just about everything I did was more difficult and time-consuming, and I just couldn’t wait for the day until I got my cast off. In time, my hand healed. And although it had happened just a year before, it now felt like a distant memory.

Time can help heal your credit, too. The mistakes you’ve made, or the financial troubles you’ve experienced, may be terribly painful right now. They may feel all-consuming. You may be frustrated, angry or just plain worn out. And you may feel like you’ll never have good credit again. But eventually, those memories can fade, too.

Here are three ways time can help heal your credit.

Some Information Disappears

After a certain period of time, negative information can no longer be reported. Generally, that time period is about seven years with these caveats:

  • Collection accounts or charge-offs can be reported for seven years plus 180 days from the original date of delinquency (usually the date you failed to make your payment to the original creditor, resulting in the account eventually being charged off and/or sent to collections).
  • Paid tax liens may be reported for seven years from the date of payment.
  • Judgments may be reported for seven years or until the statute of limitations has expired, whichever is longer.
  • Bankruptcies may be reported for 10 years, though the credit reporting agencies will remove completed Chapter 13 cases seven years after the filing date.

As long as the dates reported for the negative items on your credit reports are correct, you probably won’t have to do a thing to make them disappear. They will automatically be removed, and once they are, it will be as if they didn’t exist. They can no longer impact your credit scores.

In The Meantime, It’s Old News

No matter how annoying it may be to see negative information every time you get your credit reports, keep in mind that this information often has less impact on your credit scores over time.

“An awful lot of people assume that because information stays on a credit report for seven years … all that data is equally important all the way through the seven years,” says Barrett Burns, CEO Of VantageScore. But that perception is generally wrong. “As data gets older it slowly loses predictive value,” he says. In other words, it will likely have less of an impact on your scores over time.

In fact, VantageScore crunched the numbers to help illustrate the impact, over time, of various actions on credit reports. For example, a missed payment could cause a VantageScore credit score to drop by 50%, but it could recover in about a year and a half. (The impact won’t be the same for everyone, though. It will depend on the contents of their credit reports. Often someone with a higher credit score will see a larger drop when negative information appears on their reports, compared to someone with a lower score.)

In other words, that credit card payment you missed five years ago may seem like a bigger deal to you than it really is.

In 2011, FICO published estimates of how long it would take FICO credit scores to recover from mortgage-related problems and found that “In general, the higher (the) starting score, the longer it takes for the score to fully recover.”

For example, it would take an estimated nine months for a consumer with a starting FICO score of 680 to bounce back from the impact of a 30-day late mortgage payment, while it would take an estimated 2.5 years for someone with a starting FICO score of 720 to recover. Someone whose FICO score was 780 when they missed that payment could take three years to get back to where they were.

You Build Experience

One of the five major factors that make up your credit scores is the age of your accounts. Here, you get “credit” so to speak, for having experience with credit. This factor looks at the average age of all your accounts as well as the age of your oldest account. And time is your friend. The longer you’ve had your accounts, the better you can score for this factor.

There is a caveat here, too, however. If all the information on your report is negative, then when it’s no longer reported you’ll start all over again. That’s why even if you have been through bankruptcy, it can be a good idea to (cautiously) get back in the saddle again and establish a positive credit reference, even if it’s with a low-limit secured credit card. Otherwise, when your negative accounts are no longer reported, you could find yourself with little or no credit history.

How to Make Time Your Friend

Burns says that in providing data about how time affects credit scores, VantageScore wants to “give people hope that they can get back on their feet in a reasonable period of time and to give them a path to get there.” So how can you take advantage of Father Time?

  • Know what you’re dealing with. Good or bad, you need to know what’s on your credit reports. Get your free annual credit reports at and check dates carefully. And get your credit scores for free, which you can do on so you can monitor your progress over time.
  • Focus on what matters. An old late payment may not have the impact you think it does. Catching up on an account that you recently fell behind on, or even paying down high credit card balances, might have more positive impact on your scores.
  • Apply for new credit judiciously. Remember, new accounts affect the average age of your credit history.
  • Head in the right direction. Going forward, set up auto-pay or payment reminders so that you don’t miss a payment and see your scores drop again.

Christina Goethe, director of communications for FICO, sums it up this way: “Raising your FICO scores after a poor mark on your report or building credit for the first time will take patience and discipline, but it can be done. The best way to get there is for an individual to consistently pay their bills on time, to keep their overall debt as low as possible and judiciously apply for new credit.”

Scam: Caller threatens arrest if you don’t pay

Scam:  Caller threatens arrest if you don’t pay.

People across the country are forking over hundreds, sometimes thousands, of dollars in what they believe to be a fee to ward off arrest warrants.


Story Highlights

  • Scammers are telling people they have arrest warrants to trick them into paying a fee to clear them
  • Scammers have posed as local law enforcement in Kansas, Oregon, Georgia and other states
  • Police warn that they never ask people to wire money

In a growing scam reaching people across the country, phone fraudsters are using the threat of arrest warrants to pressure people into forking over hundreds, sometimes thousands, of dollars.

Just recently, police in Georgia, Kansas, Oregon and Florida have investigated phone scams in which a caller impersonates a local police officer. The callers, manipulating caller ID to make the number appear to come from the local sheriff’s office or jail, tell potential victims they have an outstanding warrant for an unpaid debt, missed jury duty or some minor infraction and that a fine is due.

The callers convince people to make the payments by wiring it through Western Union or buying a prepaid credit card like Green Dot and registering it online.

Police don’t notify people about arrest warrants by phone, and they don’t accept money to clear them, the Collier County, Fla., sheriff’s office said in a warning last week.

“They try to make this as convincing and as frightening as possible,” says Kati Daffan, a staff attorney with the Federal Trade Commission’s Bureau of Consumer Protection.

In Georgia’s Floyd County, Amanda Middleton, 31, paid $1,550 to clear a non-existent arrest warrant related to a payday loan she never had.

Middleton, 31, got a call saying she owed $495 for a loan. She says she checked with her creditors and found no record of the loan. She had previous debt disputes after another Amanda Middleton failed to pay off a loan, she says, so she brushed it off and told the caller to e-mail proof.

But after a second call from a so-called police officer threatening to arrest her, Middleton gave in.

“He said, ‘In our eyes, you’re just refusing to pay the debt,'” she recalls. “‘We’re just going to have to proceed forward and have you arrested.'”

Her husband checked the number; it was the sheriff’s office. Middleton paid the $495, along with a $500 fine and several “litigation fees” — a total of $1,550.

Only after Middleton sent the money through a prepaid credit card did she call the sheriff’s office and learn there was no warrant.

“I don’t consider myself to be very naïve,” she said. “We were doing what you do in that call. I called all my creditors. I asked for documentation on it. My husband called the number back. I thought we were being very careful.”

Floyd County Sheriff’s Deputy Jerry Duke says he has seen earlier versions of the scam, when so-called loan-collection agents would try to convince people they had to pay off loans. Impersonating police is a new twist, he says.

It is nearly impossible to track down scammers, Duke says. Wire transfers and prepaid cards are untraceable, and manipulated phone numbers are tough to trace.

“There’s really no recourse for them,” Duke says. “The best thing that can be done is making people aware.” Continue reading “Scam: Caller threatens arrest if you don’t pay”