cash cards | Funny about Money

Yes. Feeling somewhat smug (!) about the new cash-card “envelope” method, which for reasons not altogether clear is working like a proverbial charm. There’s so much psychology involved in the budgeting game that one sometimes feels like one is pulling one over on oneself.

As you may recall, the cash-card envelope scheme entails not using a credit or debit card at Costco, the Empire of Impulse Buys. A substantial part of the stuff that stocks my household and feeds me and the dawgs comes from that budget-gobbling place, so I’m not staying away. But if this business of having to take the annual RMD (required minimum drawdown) from savings a month or two earlier than the prior year is to stop, then a grip must be gotten on the spending!

Since most of the spending happens at Impulse Buy Hell, that’s where the grip must start. So the idea was to figure how much could sanely be spent at Costco in a given month — and also budget a set amount for gasoline, which also comes from Costco because it’s the cheapest supplier in my part of the Valley.

We have monthly allotments of $60 for gasoline and $300 (or less, if possible) for general purchases.

And amazingly: so far this budget is working just about right. Come the end of last month, I had $30 left on the gas card and $4.67 on the general purchases card. That was after spending $90 on a giant bucket of pool chlorine tabs.

We’re now more than halfway through August. I don’t expect to need any Costco items between now and the 31st — all the meat and dog food makings are in hand, all the household products stocked up. Awesome. As of August 15, the gas tank was full and $30 remained on the gasoline card.

Since there’s no way I’ll drive enough to run the car out of gas between now and September 1, that means the gas card may very well have enough cash to buy next month’s allotment of gasoline. All of it. If that’s the case, then the amount slated to be moved out of checking to the gas card for September gasoline can instead be moved to emergency savings. Yes!

Meanwhile, as of August 15, $17.16 remained on the “general purposes” Costco cash card. On August 17, its balance was $29.44. Later the same day it held $20.66. Yes: three bucks more than it contained two days before. 😀

How, you ask did this sleight of hand occur?

Through the magic of returned merchandise, that’s how!

I’d bought a box of LED lighbulbs that promised “vivid” wonderful glorious light and 15,000 hours of burning time. Well…they were vivid, all right: vivid BLUE! Ugh!!!!!

So I dragged the things back — $12 back on the card.

Meanwhile, running low a few days earlier on the cheddar cheese I normally buy at CC, I’d bought a couple chunks of fancy stuff at a Whole Foods, hoping to avoid another trip to the Queen of Impulse Buys. It was expensive stuff — not as expensive as it would’ve been before Amazon engrossed WF, but pricey. But it looked good, aged and fancy and all that. Next morning when I sliced off a piece to go with breakfast, I found it absolutely flavorless!

Jeez. If I’d wanted flavorless cheese, guys, I’d have bought Kraft. So I schlepped back to Whole Foods and got ten bucks back for that return. Then during the same trip to Costco that clawed back the 12 bucks for the neon blue lightbulbs, I picked up a chunk of their excellent cheddar cheese (which will easily last till the end of the month and then some), plus the blueberries and the tomatoes I’d forgotten during the previous week’s actual shopping trip. Spent less on the cheese and produce than the bulbs had cost, so I ended up with a net increase in the budget’s bottom line.

{Cackle!}

It’s highly unlikely that I’ll need to buy anything more at Costco for the rest of this month . But if I do, it surely will not run more than twenty bucks. Money is budgeted for regular grocery-store purchases, so if I need any other food or household items, that’s where they’ll come from. But in fact nothing like that is needed just now, so I expect precious little buying in those precincts.

An amazing $297.50 remains in the month’s budget — and that’s after all the regular bills (power, water, Medigap and on and on and on) are accounted for. In other words, we have almost $300 to cover the next 13 days, during which no incidental purchases should be needed! That’s assuming no emergencies occur.

With any luck, then, if nothing happens between now and the end of the month, I should have almost three hundred buckolas to transfer over to emergency savings on August 31. And that’s in one of the highest-cost months of the year.

Since over the past year or so I’ve been consistently overspending available funds — and running out a month or two before the RMD was scheduled, forcing an early drawdown — that suggests that the “envelope method” works.

It may, indeed, work Big Time…

Good grief! Rousted out of the sack at 6:30 ayem by the bulk trash pickup, flashing their lights into the bedroom. I thought it was the Fire Department! Grr…I’d planned to sleep in for a while today, after working myself stupid yesterday on a horrifically mind-numbing project.

{Ugh!} Speaking of bulk trash, what do we have here but an e-mail from the sidekick reporting that our brilliant author’s 87 gerjillion ditzy boxed pullouts disappeared from the file I sent her!? How many more hours am I going to have to spend on this garbage?

Where was I? Yesterday, comes in the snail-mail a notice from Sears saying its credit-card issuer, Citibank, has made “some changes.” I’ll bet, think I. Actually, I expected the “change” would be to cancel the account, which I opened only to get the benefit of a 12-month no-interest scam on some appliances and have never used since.

No. They’re writing mostly to say they’re upping the already usurious interest rate another couple of points.

Interest on this card, in the wacko free-for-all age of the unregulated market, can go as high as (hang onto your hat) 29.9 percent! For heaven’s sake. And this is on a card for Sears, a joint commonly patronized by folks who never spend their time swimming in money. Is that or is that not the most rapacious thing you ever heard?

Over at Consumerism Commentary, Flexo has a discussion going about the merits of debit cards vs. credit cards. I’ve never used a debit card, partly because I have enough numbers to memorize, thank you, without yet another PIN, but mostly because I think they’re dangerous. If someone steals it, he can not only empty your checking account, he can drain it to the bottom of your check-cashing credit line. In my case, that’s $3,000 plus whatever cash is in the account at the time.

I realize they’ve changed the law since these things first came out, so that you do have some protection from rip-off artists. But the fact remains that you may not realize what’s happening until the account is already bouncing EFTs. So even if the bank reimburses you for the stolen money, you still are faced with the enormous hassle trying to explain to all your creditors that you’re not, no indeed not, a deadbeat. Your credit could be damaged, and who has time to run through every punch-a-button maze for every faceless corporation with which we all have the pleasure of doing business? That’s a nightmare scenario that I’ve preferred to avoid.

A credit card—providing you pay it off on time—has many advantages. First, most credit card issuers back you up to some degree in a dispute with a merchant. Second, many credit card issuers provide insurance for products that are lost, damaged, or stolen shortly after the purchase. Third, many credit cards give you kickbacks in the form of cash or “rewards.” And finally, you make only one transaction a month in your checking account, rather than a score of them. This allows you to keep your money in a money market account, which earns a sou or so more in interest than a checking account does.

There is, as many PF bloggers note, the risk that you’ll spend more money when you’re waving a card around than when you’re forking over cold, hard cash. Personally, I have the opposite experience. Cash disappears out of my purse like water flowing through a pipe. Put $100 in my hand in the morning, and by evening it will be gone and, more to the point, I’ll have no idea where it went!A credit card statement gives me a paper trail, so at least I know where I diddled away the money.

And as a practical matter, I don’t diddle it away with a credit card. I budget a specific amount each month that can be charged to the credit card. The credit union automatically transfers that amount out of my paycheck into a money market checking account, from which I pay credit-card bills. Using an Excel spreadsheet, I enter each transaction as a debit against the budgeted amount, so that at any given time I know exactly how much remains to spend. I also know when I’ve spent it all, and so I know when to stop charging stuff.

This works effectively to keep me from spending more than I have.

Recently, however, American Express, which issues the card I use most, changed the closing date on a billing cycle. I dodged an overcharge only because I was ill and so didn’t make it out to buy groceries on the extra day that appeared in that cycle.

Needless to say, I was less than pleased. Because I was running pretty tight on the budget, had I bought the groceries I needed that day, I would have had to raid savings to pay last month’s bill.

It occurred to me that I could get around this problem by purchasing cash cards at Costco and Safeway (which collect most of my money) in the amount that I normally spend at those emporiums each month. This would set my budget in stone: run out of cash on a card, quit buying. It would moot any cute little changes designed to trip up credit-card users. But if I charged them on my AMEX card, I’d still get a bit of a kickback (not as much, because the Costco gasoline purchases get a very nice kickback, but something). It would also mean that if I had not used the entire balance on such a card, that much more would be available to spend the following month.

Let us ruminate…

If indeed I have not spent a month’s alloted budget at Safeway, so that I have, say, $150 left over at the end of a budget cycle, then the only place I can spend that money is at Safeway. Wouldn’t I rather have that money in the money market account, where it’s earning a little interest and where I can spend anywhere? While it’s true that the next paycheck puts another $150 spendable dollars in there, if the leftover cash remains in my account, the account contains 300 interest-bearing dollars rather than only 150 of the same.

And if a debit card is risky, how much riskier is a cash card? Anyone can use it, and as far as I can see, there’s no protection at all if you lose it or if it’s stolen. With a debit card you have a hassle. With a cash card, the money is already spent (effectively), and it’s as stealable as cash itself. Bad.

Costco’s cash card can be used to buy gasoline as well as food and household products. Costco will not take cash or checks at its gas pumps, which consistently underprice all other gas stations: you have to use an AMEX or a Costco card. If AMEX continues to close its billing cycle on unpredictable days, a cash card in the amount of $50 or so would allow me to buy gas near the end of a cycle without worrying about whether I would overrun my budget. While gas prices are low, it would even leave enough to buy a day’s worth of groceries. The theft of an entire month’s food budget would of course be a disaster, but fifty bucks wouldn’t break the bank.

It would be convenient to have a cash card to buy food and gas if, as happened a few months ago, the AMEX card mysteriously quits working. On the other hand…cash would serve the same purpose and need not be carried around in a wallet, where it’s infinitely vulnerable to diddling way, theft, or loss. It probably would be better to stash a hundred bucks in a file folder and use it as a small emergency fund.

Overall, then, pretty clearly a cash card has no advantage over a debit card and no advantage over cash. For those of us who need to see actual dollars in order to keep a grip on them, a cash card poses the same budget-busting risk as a credit card. In stop-loss terms.the debit card has only a slight advantage over cash should you lose it or have it stolen from you.

IMHO, the credit card has got it all over either a debit card or cash, assuming you can exercise a modicum of self-discipline. It’s safer, it lets you see where you’ve spent your money, and it gives you a kickback.

So… In the past I’ve made the day before and the day of the AMEX billing cycle end date “no-buy” days, to be sure all payments clear on the statement I’ve budgeted for. Now I’ll also refrain from spending on the day after the billing cycle is supposed to end. That should obviate any repercussions from this new “gotcha.”

Budget Micro-smugness

Credit cards, debit cards, cash cards