Unbelievably, “Are Credit Cards Weapons Of Mass Financial Destruction?” won CreditCardChaser's $500 AMEX Love/Hate challenge! I plan to use the proceeds to purchase toys for underprivileged youth. And in the spirit of personal finance discussions, I'm curious how you would spend $500 on kids if the choice was yours. I'll share 5 possible ways to spend the money below. And can't wait to hear your additional ideas.
There were several great entries from fellow bloggers in the contest, and we're truly honored Joel picked ours. You may not be able to tell, but hours were spent writing, re-writing, and editing the post.
One of the best comments from the entry comes from Geek, who writes, “Cash-only payers are subsidizing those who use credit cards because product prices are adjusted upwards to account for the fees credit card companies charge retailers.” This is powerful insight which we never really thought about before. Well done Geek and thanks to others for their support and insight as well.
See: The Best Rewards Credit Cards
Peter from Bible Money Matters in his entry points out that as soon as McDonald's started allowing customers to pay by credit card, the average purchase went from $4.50 to $7, a 55% increase!
Given such great insight from the community, we'd love to know how you'd spend $500 on kids in need and what would you buy them? It's important we don't just buy them what we want or what we think they want, but what they really want and need!
5 Ways To Spend $500 On Kids
Would You:
1) Buy one big present for one lucky kid or buy gifts for many? If for many, how many?
2) Pick one of these popular toys: Zhu Zhu Pets ($28), Elmo Live Encore ($60), or Barbie Twilight, Edward & Bella Dolls ($28)?
3) Focus on sports equipment gifts instead to encourage exercise and teamwork? Basketballs are only $20-30, for example.
4) Buy warm clothing given the arrival of winter? Some nice stuff from Old Navy, Gap, TJ Maxx, Ross to extend the use of the money?
5) Buy children's/young adult books such as the Twilight series to encourage reading and education in general? I remember reading all the “Choose Your Own Adventure” and “The Great Brain” books and absolutely loved them!
My wife and I are going shopping this weekend for the gifts, so thanks you guys for any input beforehand. Also, thanks again to Joel for hosting this challenge!
Related: Things To Buy With Your Massive Investment Gains
Further Reading
- Finding The Motivation To Stay In Shape: A Conversation With Big Wave Surfer Laird Hamilton
- What I Learned While On Sabbatical
- Wake Up Young People, Nobody Is Going To Save You
- Following His Dreams To New York City: A Tenant Story
- Isner vs. Mahut: The Greatest Match In Tennis History
Readers, how would you spend $500 on kids in need if the choice was yours?
Keigu (Honorable Regards),
Financial Samurai – “Slicing Through Money's Mysteries”
Twitter @FinancialSamurai and subscribe to our RSS feed.
Lean – Thanks for the heads up! Interesting datapoint. That’s great your wife and daughter went to volunteer.
Cheers
Sorry if I’m too late with this update…
For what it’s worth…
My wife and daughter just returned from volunteering at the local Marine base. They were helping to sort and organize the toys donated in the local Toys for Tots program. She shared that kids in the 0-2 & 9-12 had much fewer donations than all other age groups.
.-= LeanLifeCoach´s last blog ..A Frugal Vacation =-.
@Don@MoneyReasons
I agree. Get what they need, not what we think they need.
Great job!
I think something like a air hockey game (expensive), “CashFlow for kids” board game, Monopoly, Scrabble and a few jumpropes and whatever they need as replacement equipment (you can probably call the center and they will tell you what they desperately need).
Actually, I think I’d call first, then do the list I describe above after helping with the things they desperately need.
.-= Don@MoneyReasons´s last blog ..Don’t Be a Scrooge =-.
@MBAbriefs
Good stuff! Not too late at all as it’s still morning here in California. We’re just going to spend the money peace meal, and start off with spending around $100-150 of the $500 today for basketballs for the rec center.
Thanks again for the ideas. Will look at them more closely tonight!
Don’t know if I’m too late to put in my 2 cents but I’m a big fan of educational toys. Edmunds Scientific has hundreds of educational and fun toys in the $5-$30 range and they have a 12 Days of Christmas thing going on every day before Christmas with different discounts, free shipping, etc.
This is the link for boys’ toys: https://scientificsonline.com/category.asp?c=424492
This is the link for girls’ toys: https://scientificsonline.com/category.asp?start=8&c=424493
This is the link for gifts in the $10-$25 range:
I used to run a DoD funded science and technology program for K-12 kids and worked with over 5,000 kids in a 4 year period and they all liked the science toys I bought for the program. Edmunds has stuff like smoke ring shooters, a MegaZooka, dinosaur plants, a marshmallow shooter, catapault kits, etc. Maybe you could save a trip to the mall and order $500 worth of stuff online.
.-= MBAbriefs´s last blog ..How to analyze stocks like a pro =-.
I’d buy them food and clothing.
John DeFlumeri Jr
.-= JOhn DeFlumeri Jr´s last blog ..Banks Disappear on Friday Night Again! =-.
Congratulations Sam! Lots of presents for lots of kids gets my vote. Since you are shopping for kids at the Rec Center, Im sure they will know best what their kids need, just make sure what you get them is as fun as it is utilitarian.
I have to work on Christmas and my team and I will be taking toys to kids in the hospital. We go for soft cuddly items that brighten the room and encourage imagination, while offering some comfort. Mostly, the kids seem to enjoy the attention.
@Charlie
Children’s International sounds like a great organization. Awesome you’ve been such a long supporter!
@lovingkind
Thanks for your suggestion! I think books are out because kids can just go to the library like someone said.
@Ryan
Joke and Batman huh? Haha. Quickly diminishing utility is probably true. I’m so excited to go check the needs of the rec center today and go shopping that I’m up at 4am! I was thinking of getting 3-5 basketballs today at Sports Authority and extend the use of the funds over time.
Thanks for stopping by!
Congratulations on winning the challenge!
It’s pretty evident your articles are really well thought out. – however at first glance I thought that picture was of the joker from batman! haha.
My personal take would be to try to touch as many lives as possible so spread the wealth. I think you had a great idea to promote fitness and should go with that. If basketballs really are only $20 bucks you could light up the faces of 25 little Jordans instead of just focusing on a select few kids. The economic idea of diminishing utility seems to be ringing in my ears in regards to this situation…
Have fun shopping.
.-= Ryan´s last blog ..Introducing Dollars Around the World =-.
Congrats! Books or sports equipment, either one sounds great!
Sports equipment sounds like a great idea. I also like your ideas for warm coats, gloves, or simple toys. It’s a great feeling giving back. I’ve sponsored a child through the charity Children International for almost 4 years now and it’s been really rewarding. Even a little can really go a long way with people in need. Congrats and good luck with the shopping!
@The Genius
Genius – The number of good checks may be on a precipitous decline … but I suspect that the number of bad checks has declined at a slower pace. There are quite a few “professional dribblers” operating in the country.
.-= kosmo @ The Casual Observer´s last blog ..Are College Football Coaches Worth the Money? =-.
@Financial Samurai
The key phrase is really “better off”. Do you need to be better off than (or on par with) with the credit card user – or merely better off than you would be if the credit card purchases were not made? If I’m paying $5 for an item and something can drive the prevailing price down to $4, I’m not particularly concerned with how this affects other purchasers.
We use our credit cards for almost all consumer purchases. We get extra time to pay, cash back on purchases, and it’s less work to track. We always pay off the balance at the end of the month, so there’s really not a downside. We don’t use the credit cards as a crutch to buy more – we simply buy our normal items (toilet paper, diapers, etc) with credit cards.
.-= kosmo @ The Casual Observer´s last blog ..Cameron Delivers Titanic Blow to Bay, Holliday =-.
@kosmo @ The Casual Observer
Sounds good man. I see what you’re saying with your illustration. Then it comes down to who is better off, the credit card user who thinks like a cash user (buys only what they can afford, and pays it off with never a finance or late fee) or just the cash user.
With all these perks being offered, I’ve still got to believe the CC user is better off. I use my personal CC for all expenses just b/c it helps me track things better real time, online.
Do you not use CC’s? Or, are you just playing devil’s advocate?
Cheers, Sam
CC users benefit … but cash users may also benefit, if they push the per unit cost low enough by increasing volume.
Simple example:
Widgets have a fixed cost of $1 million per year. This would be intellectual property costs and basic overhead costs (accounting, marketing, etc).
Widgets have a per unit cost of $1 (variable cost)
Acme Widget Company desires a $1 profit per widget.
Let’s say that only cash purchasers buy widgets. They buy 500,000 widgets. The price will be $4. The fixed costs account for $2 ($1M / 500K units), $1 is variable cost, and $1 is gross profit.
Let’s say that Acme decides to welcome credit cards users. They will need to tack on an extra cost of 3% to cover the credit card charges. This will be assessed to all buyers – cash or credit.
Cash buyers still buy 500K units, and credit card buyers also buy 500K units, for a total volume of 1M units.
What’s the price of each widget? $3.09. The $1M fixed cost is now spread across twice as many units, and now is just $1 per widget. Variable costs remain at $1 per widget, as does profit. That’s a $3 costs before taking into account the extra charge to recoup the credit card fees. $3 X 103% = $3.09
Who wins? Everyone.
– Cash buyers save 91 cents per widget
– Credit card buyers get a month to pay
– Acme Widget makes $1M in profits instead of $500,000
Would it be better for the cash users if they didn’t have to pay the extra 9 cents? Sure … but without the extra purchases by the credit card users, the fixed costs would be spread across a smaller base. The credit card users are effectively paying less than the cash users, but the cash users are still in a better place than they were before.
Note: This is an overly simplistic example to illustrate a point. I’m not suggesting that this sort of result is ALWAYS the case.
.-= kosmo @ The Casual Observer´s last blog ..Bull =-.
@The Genius
Thanks man, and thanks again for your support and analysis. Another vote for sports. Nice.
@Kosmo @ The Casual Observer
It’s not that simple, I agree, but it does make sense what Geek writes. If CC user’s increased volume spreads out costs and counteracts the fees, and cash buyers bring nothing to the table, then net net, credit card users benefit, if they pay on time.
@Credit Card Chaser
Ahh, the nostalgia of The Great Brain series.. as well as Hardy Boys for that matter! Love those books! Guess the Twilight series is this new generation of Great Brains.
Yes, checking out a bunch of kids books all googly eyed my catch some stares!
@Kosmo @ The Casual Observer
Good point about the bounced checks. Do people really write checks nowadays still?
.-= The Genius´s last blog ..Ashley Pinney ’08: ‘Having a blast’ while teaching across the world =-.
My vote would be for many smaller presents for many kids rather than one large present.
I also just had to say that I used to love the Great Brain books and as soon as you mentioned them I now actually might have to go to the library and get one just for old times sake :)
Although, since I was (and am still) such a bookworm I just hope I don’t get hooked on grabbing some more old books that I used to read while I was a kid and look ridiculous checking out a bunch of old kids books for nostalgias sake. :)
.-= Credit Card Chaser´s last blog ..Usury & Interest Guide: Usury Definition, Usury Rates, and is Your Credit Card Usurious? =-.
“Cash-only payers are subsidizing those who use credit cards because product prices are adjusted upwards to account for the fees credit card companies charge retailers.”
On the flip side of this, bounced checks also cost retailers a chunk of change.
Additionally, allowing use of credit cards often boosts the volume of sales (because of people spending money they don’t have), allowing a store (or manufacturer) to spread the fixed costs over a larger number of units.
There’s probably still some subsidization, but it’s not as simple as saying that cash purchasers are subsidizing the entire amount of the credit card fees.
.-= Kosmo @ The Casual Observer´s last blog ..A Crazy Plan =-.
Yo Sam! CONGRATS on th win man! That’s huge!
I’d break up the gift into 10-20 options. Don’t go for books, as they can go to the library and read and check out for free.
Long sleeve clothing and sports equipment at your local rec center sounds the best!
The Genius
.-= The Genius´s last blog ..Eye on the Bay: W&M geologists look at riparian buffers =-.
@Valentina
Great idea Valentina! In fact, I DO have a community recreation center in my neighborhood! It’s where I play basketball every week, and where I sprained both my ankles and my right risk trying to take it to the hole earlier this year!
This is a great idea. Jeff and you are both rooting for sports, and now so am I.
Gracias
Congratulations on winning!
Now how to spend the win?
I like the idea of sports … do you have to spend it on children directly, or can it be done so that children benefit from the “gifts” directly? What I am thinking is maybe there is a team or community center in a disadvantaged part of SF where by donating say some sports equipment the kids of today and tomorrow would continue to benefit from the gift?
best……………valentina
.-= Valentina´s last blog ..Reflections On 2009 and On Things Yet To Come =-.
Ninja throwing stars, even better. Probably only 15 bucks per set.
@Jeff
Awesome dude. May have to go for $20 gifts for 22.5 kids since there’s a 10% sales tax here in San Fran. Nice!
Samurai sword? Nah, maybe one of those toy smoke grenades you throw on the ground which allows the protagonist to disappear? Nah, I’m thinking ninjas. :)