It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong.Markets are designed to allow individuals to look after their private needs and to pursue profit. It's really a great invention and I wouldn't under-estimate the value of that, but they're not designed to take care of social needs.
Friday, April 1, 2011
The Business Antiquity!!!
Cash Is King- League of Power
The other day Mr. Patterson and I checked out a new restaurant that opened up a few blocks away from us, Elwood's Bar & Grille. It's a neat little joint that has lots of live music and a neat vintage interior. The walls are covered with old, rusty metal signs and there's an antique Coca-Cola cooler in one corner of the room. It's the kind of place those two guys from that show American Pickers would love.
We ordered a few cocktails and sampled some of their appetizers. All was going well until we got our check and tried to pay with our credit card. The man behind the bar told us they don't take credit cards, only cash. My positive feelings for the place went right out the window.
A Special yet Urgent Invitation
We haven't done anything like this before... And the time left on this invitation is running out quickly.
You see, for the last year we've been working on a very special project for helping you jumpstart your passive monthly income.
It involves the League of Power and a small circle of friends and partners. And maybe you...
Though you must hurry... Come April 2nd the doors will be closed
I couldn't believe any business existed that didn't accept credit or debit cards as a valid form of payment. How could any business be so antiquated! I mean who carries around enough cash to pay for all of the purchases one might make in a day?!
Thankfully between the two of us we had enough cash on us to cover the bill and tip. But I left vowing never to come back again. Their business model rubbed me the wrong way.
I am a faithful debit and credit card user. I only pay for things in cash every once in a while, mostly for small purchases that total less than $20. I know lots of people that live this same way. They charge mostly everything and then pay off the bill each month to earn reward points from credit card companies. It's a smart way to use credit, if you can handle it.
Some financial experts predict America is moving towards a cashless society because of the widespread use of debit and credit cards. With 73% of all American households owning at least one credit card it's not surprising they predict that. I myself don't believe that will ever happen.
We Americans tend to be a little egocentric. Sometimes we forget there are a couple billion other people on the planet that might do things a bit differently than we do. In deed credit card usage habits vary wildly around the world.
For example Americans tend to use their credit cards for everyday purchases like groceries and gas and for nonessential, small purchases like our daily lattes. This is not so across the globe. A survey by Citibank found that the Chinese mostly pay for their purchases in cash and only use credit cards on big ticket items like home electronics. While in places like Australia it's normal to use credit cards to pay utility bills.
You can also spot differences between cultures in our online shopping habits. Most Americans prefer to use credit cards to do their online shopping. While the British and French prefer to use debit cards when buying online. And Germans primarily rely on online bank transfers and PayPal to pay for their web purchases.
With credit and debit card usage so widespread here in America you might assume we use our credit cards more than any country around the globe. Not so. That honor goes to Australia. Citizens there spend on average $7,889 on their credit cards each year. Canadians too charge more than Americans on their credit cards, approximately $7,106 a year. South Koreans come in third, charging approximately $5,019 a year to their credit cards. Americans don't even come close to spending that much per year. We average only about $4,236 in credit card transactions a year, according to business intelligence firm Euromonitor International.
Other civilized nations use credit cards very little. The French only charge about $267 a year. Germans even less than that, only $158 a year. I guess that cash is still king in these countries. It might be good to remember this if traveling to Paris or Frankfurt this year.
Argentinians take the prize for most innovative credit card habits. Citizens there actually use their credit cards as saving and investment vehicles. Spending on credit cards surged 45 percent last year in Argentina according to Moody's data.
Argentina's inflation rate is estimated to be a staggering 25 percent. As a result many of its citizens are using credit cards to hedge against it. Consumers there are increasingly buying up high priced goods like cars and appliances before they actually need them. Credit cards are actually allowing citizens to save as much as 25 percent off the price of goods if they buy now as opposed to a year from now.
Banks in Argentina are fostering the idea of credit cards as investment tools too. They are encouraging credit card spending by offering such deals as 36 months of interest free repayment, which is essentially a free loan for three years. With inflation rates predicted to carry on in the years to come, credit cards seem like a powerful financial tool for Argentinians.
Research also makes an interesting connection between credit card usage and saving rates across the world. We Americans can learn a thing or two from the French and Germans. Both countries have significantly higher saving rates than we do. The French save more than 16 percent of their disposable income each year. And Germans save over 11 percent respectively. Compare those figures to the U.S. savings rate that has only hit a high of six percent since the recession hit.
On the other hand, there are lessons for other cultures to learn from us. In the United States there are more credit cards than people. In 2009, there were 686 million credit cards in the U.S. but our population count was just over 300 million. Canada and Japan are in the same boat, they have more credit cards than people.
Whereas, the ratio of credit cards to people in the U.K. is 1:1. In Germany only about 4 million credit cards exist to serve a population of nearly 90 million. And less than 15% of China's population owns a credit card.
These countries that are considered to be virtually untapped credit-wise can learn from our own credit crunch of 2007. When banks and credit card companies tightened their purse strings that year, Americans using the equity in their homes and high credit limits to live beyond their means had a harsh landing back down to reality.
Learning about the different ways in which people use credit cards around the world provides us with a powerful financial lesson. Citizens on both sides of the pond can learn from each other on when to whip out the plastic and when to pull out the cash. I certainly will be more aware of my debit and credit card use as opposed to cash.