Consider the current economic and political climate:

1. Banks are lending to only the top tier credit worthy customers

2. Credit card companies have slashed your credits limits to just above what you owe, or canceled your credit altogether

3. Even if you have credit, you're probably paying the maximum interest rate allowed by law. 

4. Banks and Credit Unions are refusing to refinance your house and there is nothing you can do about it. Congress passed laws             to help home owners that have no teeth.

5. Most people paying the minimum on credit card debt will take nearly 20 years to pay it off. ASSUMING, they don't charge another         nickel during that time.

While Wall Street and Banks "To Big to Fail" continue to reap the rewards of loose banking regulations, Main Street is still suffering and wondering when the "economic recovery" will start for them. The middle class in the United States has been steadily shrinking for decades. Today, 20 percent of households hold nearly 85 percent of all the wealth. 

Which brings me back to my original question, cash or credit? When you look back at the 60's and 70's, most people:

1. Did not have credit cards

2. Had savings accounts

3. Purchasing pattern: Saved their money, then made purchased. Did not finance!

4. Besides a mortgage and car, relatively debt free

5. Had an adequate retirement plan

Personally, I've been debt free (except my mortgage) for years. It's a great feeling to owe no one and have money in the bank. Did this change come with sacrifices, you bet. But after decades of being miserable, paying thousands of dollars in interest, having my interest rates go up every year, and credit cut off, not being able to see the light at the end of the tunnel, I'd had it! I cut up all my credit cards and paid them off within a couple of years. And by the way, I had "Excellent Credit" for what ever thats worth.

It's a life altering change that will send you into shock for a while. We're so used to instant gratification these days, that we'll go out and buy what our heart desires without consulting what out budget can afford. You don't have to be a CPA to figure out, you can't spend more than you bring in. It's not sustainable and eventually, if not corrected, will force you into bankruptcy. Or worse, a life of paying the banks interest on a debt you'll never pay off. 

So personally, I've chosen cash and so are a lot of other people these days. It may seem like a radical idea, but trust me, life goes on without credit cards. Living within my means has given me back peace of mind, some thing thats eluded me for decades.

Gustavo A. Viera, CPA