Originally created 08/12/01

On the money



NEW YORK - A southern Pennsylvania community named Cashtown lived up to its name recently.

More than 550 people from the town and surrounding area pledged to go 100 hours without using their credit cards. The back-to-cash experiment was part of a publicity event sponsored by a mortgage company that was also intended as a means of drawing attention to how consumers manage - and mismanage - their money.

A survey conducted by the company, Champion Mortgage, in advance of the event indicated consumers could use some help:

Nearly one in five doesn't bother to balance his checkbook each month.

About one in seven admits to overdrawing a checking account at least once in the past year.

Twenty-two percent haven't set up retirement savings accounts.

More than 24 percent pay just the minimum due on their credit cards each month, and about the same percentage don't know how much debt they've got outstanding.

Harriet Cameron, a secretary at the Franklin Township Elementary School in Cashtown, was among those who put away her credit cards for more than four days.

"It's so easy when you're shopping to buy things with credit cards," Ms. Cameron said. "If you're dealing with cash, you have to think, 'Do I really need this?' A lot of times, you don't."

She also said the experiment brought home to her just how much credit can cost. If you charge a $100 item on a card that carries 18 percent interest and don't pay it off immediately, you'll end up with a bill of $118 or more for that item at the end of a year.

"We've become very casual about it, but it's like taking out a loan," Ms. Cameron said.

Durant Abernethy, president of the National Foundation for Credit Counseling, a nonprofit organization that helps families with debt problems, said that going "cold turkey" with credit cards is among the first steps a consumer can take to begin getting out of debt.

"Cutting up your credit cards is a symbolic way of getting into debt management," he said. "A lot of people have to commit to a cash budget for three or four years and stay away from any new borrowing."

Mr. Abernethy agrees that credit cards used properly have real value because of their convenience. He recommends consumers keep no more than two - as opposed to the seven or eight most Americans carry - and watch their balances carefully.

Signs of credit trouble, he said, include not knowing how much you owe, needing cash advances to make it to the next paycheck, borrowing from one card to pay another, late payments, missing payments and more arguments over money with spouses.

"When those things start happening, you need to sit down and evaluate where you are," Mr. Abernethy said. "If you're in trouble look for free or low-fee credit counseling, and the sooner the better."

In Cashtown, Eileen Hoover, the owner of the Cashtown Inn, said she participated in the 100-hour event "because I thought it would be an interesting experiment."

Her only problem during the week came when a catalog arrived and she found that a swimming suit she wanted was marked down.

"I signed the pledge (not to use credit), so I have to wait until the weekend to try to buy it. By then, the clearance swimsuits may be gone," Ms. Hoover lamented.

Still, she said she thought the experiment was a good idea "because it got people talking about credit card debt, the proper use vs. the misuse of credit cards, and I think it's something worth talking about."

Local lore holds that the village has long been a cash-conscious place. Ms. Hoover said Cashtown got its name because Peter Mark, a local businessman who built the inn there to attract stagecoach traffic in 1797, "made it clear from the start he would take cash only."