We charge almost everything and then pay it off at the end of the month. This is about the same as paying cash except we earn points and get a free 30 day loan. Appropriate loans for certain items work out in your favor. I was paying 4.5% on a car loan recently. With inflation of 2-3% per year, this means at the end of the loan I was really not paying any interest at all since the value of the money had eroded.
bwilk, I find there are many, many people who do not understand the very basics of how a credit card works. At the one extreme, you have people carrying balances month to month (latest figure of average credit card debt carried by a household month to month is something over $9000 - which is mind boggling). At the other end, like you say, you have folks who pay cash for absolutely everything - or better yet, use their checkbook or debit card for everything.
The banks and credit card companies have done an amazing job at marketing debit cards to people. Why anyone would use a debit card (other than not being able to get a credit card from any company) is also bewildering - again, chalk one up for the marketing machines.
We charge absolutely everything possible to a single credit card every month, collect our 2% 529 rebate, and pay the card off in full every month. One time we went in to McDonald's (where they now take credit cards), I charged the meal, and the cashier says "You're using a credit card for this? Why, that's going to make it more expensive". She couldn't understand the simple fact I explained to her that if you pay your balance off at each month there is no additional cost.
We bought my wife's car 12 years ago - when they were giving 0% loans (only for 2 years though). Like you - I'll take free money any day of the week. Of course the downpayment went on the credit card.
The exact same way we have a general lack of financial planning knowledge in our society, just the simple understanding of the basics of loans, credit cards, interest, and inflation as you've discussed is beyond most people. It's sad, but true.