Consumer News And Recalls

BOSTON (WBZ) ― It might be an understatement to say the credit card companies have a public relations problem. Between soaring fees and sky high interest rates, most consumers see them as a necessary evil at best.

As a result, more shoppers are trying to use cash instead. This might sound like a good idea, but ignoring your credit cards could actually hurt your financial standing down the line.

Still, a number of consumers told us they are making the transition from credit to cash. When asked why, one man said, "No tracking, no receipts, and nothing to resolve at the end of the month."

It's easy to understand why many of us now want to ditch the plastic.

In recent years, Americans have had a love affair with their credit cards. Collectively, we now carry about $22 billion in debt. A coffee here, a gadget there, and it can really add up, and we often don't even realize it. Jill Schlesinger of CBS Moneywatch says, "We could identify somewhere between 10 to 20 percent of your total money that you don't know where it goes, part of the problem is because you use credit cards."

Research has shown that using cash does make most of us spend less than if we used credit cards. Emil Ronchi, a financial planner in Salem, agrees with that premise. "If you are always aware of every transaction there, that adds a cost to you. It's a mental cost, and you are going to do less, just because it's more painful."

Some consumers are going too far, however. Financial planners say giving up the use of credit totally can harm your financial health over the long term. The goal, they say, is to use plastic wisely.

Ronchi says, "The credit card companies are pretty smart so you have to be a little bit smarter than the average customer that they have. You have to take advantage of their point systems, their rebate programs, all the while avoiding to the extent possible, any fees or interest charges."

The best scenario is to use a card with no annual fee that you can pay off in full each month. Then, Ronchi says, "The benefits of a credit card become very real."

An example is when you make a major purchase, according to Consumer Reports Finance Editor Anthony Giorgianni. He said, "The problem with cash is once you have given them the money, if there is a problem, even if they've violated the law, you have to go after them. With a credit card, you can dispute the charge."

And you get a record of all your charges, which can provide valuable insight into how you spend your money. Ronchi said, "Credit cards, especially today, with these personal finance softwares, you can really track and cut up your spending and understand it to whatever level you care to."

Your credit score is another consideration. It is linked to how you use your credit cards, and your score could suffer if you're not active. Ronchi said the rating services want to know, "Are you using your credit? Are you paying your bills? All that sort of thing, so no, you don't want to completely disappear from the environment."

For someone who wants to curb his credit and use more cash, Ronchi has this advice: "Don't try to do everything by cash, but just certain types and then you become more aware of those, and you may find your overall spending comes down." And that could put you on the road to balancing your budget.

He does have one final warning for consumers who decide to use their debit card instead of cash. You have to make sure that you don't lose track of your balance and start over drafting your account. That's when many people get zinged with some hefty fees from their bank.

(© MMX, CBS Broadcasting Inc. All Rights Reserved.)

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