Cash Versus Credit: Working Out How Much Cash You Should Carry In Your Pocket

The Economist looks at how much cash you should have in your pocket.

The textbook economic model says you should keep your pockets bulging with cash. According to Harvard's Greg Mankiw, given a few reasonable assumptions about how much an imaginary professor spends each day in cash, the time it takes to visit an ATM, the value of his time, and the interest rate in his account.

The Baumol-Tobin model yields a very specific prediction: The prof should take out $1200 from his bank three times a year and hold an average of $600 in his wallet.

But almost nobody does this, which poses a puzzle. According to Mr Mankiw, the fear of losing one's wallet or of getting mugged doesn't get you far. He says his students are attracted to the idea that cash "burns a hole in your pocket" while a check card doesn't. True for some people, perhaps.

Work it out. Work out what you are worth an hour and how long it takes you to get cash out of an ATM.

Then work out how often you don't have cash and a friend pays...

Via [Economist; Anorak]

Current Credit Crunch Will Hurt The UK More Than The US

The Croydonian has spotted this in Business Week, via Der Spiegel:

"Could any country be more exposed to the current credit crunch than the U.S.? You bet, and that place is Britain...."Britain is likely to suffer more severely than the U.S." if the current market turmoil continues, says Danny Gabay, director of Fathom Financial Consulting in London....As in the U.S., consumers are another key driver of the economy-and today they're among the most indebted in the world. British consumers owe $2.7 trillion on credit cards, mortgages, and other consumer loans-or more than the country's entire economic output. Household debt as a percentage of gross disposable income is 166%, compared with 127% in the U.S. So it's hardly surprising that in the past year, British banks have had to write off $18 billion in bad debts, mostly consumer borrowing.Such write-offs could be just the beginning if housing prices start to fall."

What am I bid for the Dismal One [Gordon Brown] bottling calling an election and then waking up to discover, "For they have sown the wind, and they shall reap the whirlwind: it hath no stalk: the bud shall yield no meal: if so be it yield, the strangers shall swallow it up".

Via [The Croydonian; Anorak; Business Week]

Chelsea’s Roman Abramovich Has His Credit Card Denied

They say he sleeps upside down with his head in pot of molten gold.

They say his London home is powered by 2,000 eunuchs chewing on white tigers' testicles.

They say Roman Abramovich did enter the Andrew Martin shop in Walton Street, South Kensington and try to buy a lamp.

He offered his polonium credit card. And it was declined. A witness, says the Times, saw all. They say Abramovich was “very polite about it”.

They say rivers started to run backwards and Britain’s richest man did walk on his hands in circles.

Insurance On Goods, Electronic Items & Gadgets Is A Waste Of Money

You have hammered your plastic pals and are in possession of a small mountain of tat.

Shopping for luxury goods is a mug’s game. Why buy at full price when the January and mid-summer sales sell the same thigns for much less?

Among your haul are electronic goods - DVDs, computer games, add-ons for computers and lap-tops.

These are valuable goods that need to be taken care of. So, when the shops assistant offered you insurance on your lavish purchases, you began to think.

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Compare Prices For Cheaper Credit Card Deals & Free Cedit

It’s been said that knowledge is a process of piling up facts. And over the last few weeks we’ve been giving you many facts to boost your knowledge...of credit cards. But are you paying attention?

Signs are that you’re not, as the British Bankers Association reveals some startling facts of its own. It seems we own over 59 million credit cards, 32million of which are in “active use”.

We borrow an average of £1,400 per card and owe around £45billion in total. And, most worrying of all, almost 80 per cent of us pay interest on our purchases. There is not excuse for this. You have the facts – now use them.

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Pay Your Credit Card In Full And Get Shopping Deal & Cash

In our min-series of credit card tips, we have overlooked one sphere of society – the users who pay off their bill in full every month.

Such people are a too-rare breed. Recognisable by their ironed jeans and neatly parted hair, these belts and braces merchants are a race apart. But let us not be too hard on them (it is just jealousy, after all), because not only are they paying no interest on purchases made but they’re getting perks for doing it.

Interests rate charges are clearly irrelevant for such people, so the additional benefits become more important.

Cashback cards are one route to go. One bonus is that they are easy to comprehend. Alliance & Leicester offers a Moneyback Visa, paying 0.5 per cent on spending of up to a top limit of £20,000.

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Pay Off Your Credit Card For Zero Interest

Earlier, we told you that buying on credit cards need not be a road to financial ruin. With zero per cent offers for balance transfers offered by many card providers, the advice is to shop around.

But card users can still come a cropper. Thankfully, we are on hand to help you stay in the black and keep out of the red.

The most vital thing is to try to pay off as much as possible during the period of zero per cent interest. You should take care to note what rate will be charged when the honeymoon period ends.

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How To Make Money On Your Credit Cards

How wonderful the world would be if you could make money from your credit cards. Well, you can. And here is how to do it.

Before we go on remember that if you hold debt on your cards – and you should have already transferred this debt to a card offering 0% on balance transfers – you must proceed with extreme caution. Getting rid of your debt is your prime concern. Do that first.

Also if you have been undisciplined with your cards in the past you need to change your ways. See cards as an investment. Handle them as you would cash.

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Credit Card Guide: How to Manage Debt And Save Money

Choosing the best credit card is not simply a matter of seeing which one resembles the most precious metal. Platinum may not be better than boring beige.

Try to avoid the plastic pecking order. Some of these “precious metal” cards come with a fee and offer added value, like travel insurance. But do you really need them?

Snob Value

American Express understands snob value and invites its high spenders to get one of its Centurion cards, the almost mythical Black Card. It’s available only by invitation. And very soon, as reports suggest, it will be made from titanium.

The pursuit of flashy credit cards reminds me of the story of the rich man who looked at the wealthy man stepping from his brand new Rolls Royce and said, “Oh, you still need one of those.” The truly rich have nothing to prove. Get a Tesco credit card and look eccentric.

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How to Manage Your Credit Card Debt And Get One Over the Banks

We love credit cards.

The Bank of England recently reported that consumers owe a total of nearly £57 billion on their cards.

The Office for National Statistics says that in mid-2004 the UK was home to 59.8 million people. This means that, on average, we owe just under £1,000 each on credit cards.

Getting a credit card is easy enough. And this is fine. Credit cards offer flexible spending and incentives like cash back and travel credit. If used properly credit cards can save money and earn you some extra funds.

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