Tuesday, June 21, 2011

A question about Credit Cards‏

Hello Ferfal
I purchased your book and have enjoyed it immensely. It has a wealth of information that I have needed. Thank you.
My question is about the ‘corallido’ (sic). When they limited the amount of withdrawals, was that also limit against credit or debit purchases? For example, could you use your debit card to pay for something i.e. transferring money from my account to the grocery store account?
On another note, I agree with the guy from Sacramento on how your book has changed his thinking. I was going down the same road of buying land away from everyone to build my own safe place. I read your book and decided it wasn’t the best thing to do.
Many thanks

Jeff Williams

Hi Jeff, I’m glad my book helped in your preparedness.

Yesterday I was reading an old book, written by Hugh McManners, called “Backpacker’s Handbook”. It’s a nice book about backpacking and in one chapter it explains the contents of what would be a typical survival tin kit. In that same section the author reminds people that a credit card may as well be the most compact, useful piece of kit you can have. I thought this was interesting coming from a more wilderness oriented book. But it is indeed true, that just as it is useful on daily basis it may be a valuable survival tool as well, from getting cash or buying whatever you need, renting a vehicle for mobility or a room after leaving a disaster area. Cash is important too but today many companies have a policy about demanding credit cards to customers.

Even if you use mostly cash so as to control your expenses, its still smart to have one or two cards. The trick is not having to pay as much for them. AS with everything else, shop around. Some cards have hidden fees or fixed expenses that other cards don’t. Its smart to invest some time to see what other options you have. These fees add up and a few years down the road you’re talking about thousands of dollars.

About your question. At first cards weren’t being accepted at all so you were stuck with cash and the 300 per week ATM limit. That´s why I recommend a month’s worth of expenses of emergency cash, so as to deal with this first stage until things settle some. When banks closed and the “corralito” officially started, most of the big chain supermarkets started accepting “debit cards”, money you had in the bank. This worked well for groceries and such, and later you got a 5% tax return so it was a way saving a few bucks as well. The point of the “corralito” was to keep people from closing their accounts. By using “debit cards” the money was still in the system and they promoted this attitude after the corralito was lifted with the 5% discount which was returned to you at the end of the month. This continued after the corralito was gone for a few more years. What I would do was keep my money out of the bank, but make the deposit a day or two before making the bigger monthly supermarket purchase. This combined with an occasional 15% discount certain days of the week added to a 20% discount, much appreciated during such hard times.

As for “credit cards” it took longer for them to be accepted again. A few months after the corralito you started seeing more of them, but it took over a year before you could expect credit cards to be accepted in most stores you walked into. Even today many shops don’t accept credit cards. Especially gas stations, in many cases they work with cash only or debit cards.

As usual there’s no simple answer, you need to balance your preps. The cash stash, precious metals for hyperinflation and worst case scenario and a credit card which in my case I only use for emergencies or when there’s no other way around.
Hope that answered your question, take care!

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Anonymous said...

why not combine the two?
plastic AND cash?

Emmanuel M said...

Slight remark for shopowners.

Doing most of your business by credit card hugely limits your exposure to robberies.

A few years ago, I accessed a very intersting note about correlation between the decrease in gas station robberies (in France) and the fact that most of them converted to "credit card as primary payment method", sometimes eclusive payment method.

Reducing criminal risk was one of the main motives behind this move. Including the risk of employee theft and unpaid cheques.