I love Credix Cards

[RobertK]

Your turn to pick a topic.

[erik325i]

Co-signing... Never ever ever DO IT! Not for friends or family.. Just say no to co-signing. Discuss..

Completely agree. :)

-Erik

[RobertK]

Yeah, I understand your point too.

So uhh... Now that we both see each other's points, what do we have left to debate about? :D

-Erik

Co-signing... Never ever ever DO IT! Not for friends or family.. Just say no to co-signing. Discuss..

[erik325i]

I hope you understand mine as well.
vv

Yeah, I understand your point too.

So uhh... Now that we both see each other's points, what do we have left to debate about? :D

-Erik

[RobertK]

You finally see my point.
I was never talking about the average American or stereotypical American, but I was refering to people smart enough to handle their finances (like Fredk and I). Credit cards themselves are not bad. Irrisponsible people with credit cards are bad.

I guess this whole time I've been going back & forth with the 2 out of the 10 ;).

Like Fred, I have more than enough money in my checking account to pay for months worth of bills. I also have a savings account that pulls money automaticly from my checking account every month. I have been managing my own money since I was old enough to drive.

Again.. Awesome deal! Don't ever stop!

Blaming credit card companies for getting you into debt is like blaming your speeding ticket on the car company for making their cars too fast. Just because most people can't practice self control, doesn't meen the credit card is to blame. Just because most people speed, doesn't meen you can blame the car company...

I agree 100% there too. Self accountability is one of the major keys to becoming sucessful at anything.

I hope you all can understand my analogy.

-Erik

I hope you understand mine as well.
vv

If you are already responsible with money you have then there really is no need to use a credit card. IMHO it only adds one more bill I have to send out each month. Thus the Cash = No Hassle comparison.

[erik325i]

You can use a CC for all your purchases as well. If you are able to have self control and are responsible enough to budget and cash flow your money then you should be ok.

You finally see my point.
I was never talking about the average American or stereotypical American, but I was refering to people smart enough to handle their finances (like Fredk and I). Credit cards themselves are not bad. Irrisponsible people with credit cards are bad.

Like Fred, I have more than enough money in my checking account to pay for months worth of bills. I also have a savings account that pulls money automaticly from my checking account every month. I have been managing my own money since I was old enough to drive.

Blaming credit card companies for getting you into debt is like blaming your speeding ticket on the car company for making their cars too fast. Just because most people can't practice self control, doesn't meen the credit card is to blame. Just because most people speed, doesn't meen you can blame the car company...
I hope you all can understand my analogy.

-Erik

[RobertK]

Maybe it is just you stereotyping credit card users, but I don't speculate income. I know you've mentioned a few friends who pretty much spend 90 cents of each dollar they earn and pay their credit card balance at the end of the month with their monthly paycheck. That is certainly not my situation and likely, it isn't erik325i's either.

Good thing you're smart enough to not go that route. Most the people I know spent more than 90 cents of each dollar in the process.

Like you, I have enough cash to survive for more than six months, and should the unexpected happen, I will not be caught in the lurch.

:D - That's awesome. You would be surprised at how many people don't even have one savings account.

Plenty of people have found financial stability even while holding credit cards. Holding a credit card is NOT the sole determinant of whether you will be financially stable or not.

Your example of Billy is stereotypical, but not automatically true.

What you say is very true. And Yes Billy is a stereotypical credit card user.

IIRC 20% of credit card users are responsible enough to pay the balance off each month. That's kinda sad though if you think about it. That means statistically 8 of every 10 people posting in this thread who own a credit card have (or had) a credit card balance carry over last month.

For me personally, I guess the point I'm trying to make is that even though you can be completely responsible and have self control with a credit card. If you are already responsible with money you have then there really is no need to use a credit card. IMHO it only adds one more bill I have to send out each month. Thus the Cash = No Hassle comparison.

[FredK]

Credit Cards do not improve your cash flow. Cash flow planning maximizes cash flow. Credit Cards allow you to spend money before you really have it based on income speculation. Anytime you speculate you've added risk.

Maybe it is just you stereotyping credit card users, but I don't speculate income. I know you've mentioned a few friends who pretty much spend 90 cents of each dollar they earn and pay their credit card balance at the end of the month with their monthly paycheck. That is certainly not my situation and likely, it isn't erik325i's either.

Like you, I have enough cash to survive for more than six months, and should the unexpected happen, I will not be caught in the lurch. Plenty of people have found financial stability even while holding credit cards. Holding a credit card is NOT the sole determinant of whether you will be financially stable or not.

Your example of Billy is stereotypical, but not automatically true.

[mtechnik]

whao this discussion has really TAKE OFF. Educational guys :D

[kylebes1]

This is major debate.

I am not blaming the card company at all. I just forget to pay it, period. I always spend very little, and make plenty. I just flat out never know what day of the week it is, or even what day of the month it is. :)

[RobertK]

I use credit cards for almost everything. Not because I don't have the money to pay for things now, but because if a bank wants to lend me their money for free, I will use it. Just like Fredk stated, you can be earning interest on your money every month.

Please don't tell me you really believe you are getting FREE use of their money.. You missed my point. If you are already being responsible then you have no reason to need to borrow the banks "free" money and the person who chooses not to carries less risk. Even responsible CC users get hit by these companies. (ie. Reporting a late payment when you really sent it in on time.) It happens all the time. Spending my own cash = TRUE NO HASSLE.

BTW FredK was wrong. You are not earning any interest on your money each month. That is a ridiculous CC holder myth.

And saying a credit card proposes an added risk is incorrect. Let's say I lose my wallet with a couple hundred dollars in cash, and 4 credit cards. All I need to do is call the bank to tell them that I lost my cards, and they will freeze the account and send me new cards right away. Even if someone were to find your card and use it before you called the bank, they will not charge you for those fraudulent purchases.
What about those hundreds of dollars you had that you were going to buy groceries with? They are lost forever.

-Erik

That's why I said carry a debit card. It has the exact same protect your credit card has. I usually recommend that everyone carry a debit card instead of actuall bills. Cash is term I use loosely for spending actual money in your posession.

Let me put it this way.

There is not one reason a credit card can beat my debit card. It has no added value over my debit card. I've heard a lot of myths and I can debunk everyone of them. Everything I buy is with cash (debit) and I save for every purchase I make. I don't care about building a credit score because I would only need that if my plan was to continually borrow money and be in debt the rest of my life.

You can use a CC for all your purchases as well. If you are able to have self control and are responsible enough to budget and cash flow your money then you should be ok. But I'm not one to base my finances on a best case scenerio. I budget and save based on Murphy's Law.

[RobertK]

Your example assumes that the determining factor of consumer behavior is owning a credit card. Billy will automatically not shop around, and on top of that spend $1.20 for every dollar he has of discretionary income.

Actually my example is based on what studies have shown in consumer behavior when using credit instead of cash. This is why most all store now have their own branded card.

Tell me when is the last time you went to a store and they didn't try to get you to sign up for a new store branded card with the "15%-20% Off" taunt? Because marketing studies show that over 90% of the people who fall for this spend on average 20% more even with the discount.

The fact is, a credit card improves your cash flow, and allows a lag time of around 30 days to pay off your debt. In that time your money could be working for you in a high yield money market account or other liquid investment. Say you bought a $1000 item. You would have earned $4 in interest (assuming 5% in a high yield MM) in the 30 days you get from the credit card company. Yeah, sure it's not a BFD, but I like to collect what is coming to me.

False.

Credit Cards do not improve your cash flow. Cash flow planning maximizes cash flow. Credit Cards allow you to spend money before you really have it based on income speculation. Anytime you speculate you've added risk.

Also.. your MM analysis was wrong. Ask any financial adviser if this is a good idea and they will laugh at you. Why? You are only considering exact interest based on speculation. Most professional financial advisers know that when calculating investment you have to also subtract the rate of inflation (4%) and then offset risk. So really your gain is not worth the rationlization.

Believe me. You're not the first person to try to use that rationalization.
Not trying to give you hard time but I've worked for a big bank before and you seem to forget the part about credit card companies exactly100% honest.

I knew a guy who thought it would be a good idea to max out 10 credit card and put all that money into a high yield savings account. He took on about $175,000 in CC debt and made about $800 month on the interest. The way he saw it was that it was free money for writing a check each month. Until 2 companies claimed his credit risk was too high and by contractual agreement jack his interest to 23% after that the other CC companies eventually noticed the risk flags and followed suit. Bankruptcy soon followed.

[erik325i]

Credit Card Debt = What You Spend > What You Make

Ironically the people I run into that don't like using cash or debit are those who don't like living by budgets or restrictions. In the end if you are responsible and budget your money to only spend what you make then a Credit Card has no real purpose other than to present added risk.

All of your scenarios are true for the average American, but you fail to see my point Ritalin Kid.

I was saying that IF you are responsible and have self control, credit cards are no worse than cash or debit.

Obviously if you are spending more than you make, you are NOT being responsible and are lacking in self control.

I use credit cards for almost everything. Not because I don't have the money to pay for things now, but because if a bank wants to lend me their money for free, I will use it. Just like Fredk stated, you can be earning interest on your money every month.

And saying a credit card proposes an added risk is incorrect. Let's say I lose my wallet with a couple hundred dollars in cash, and 4 credit cards. All I need to do is call the bank to tell them that I lost my cards, and they will freeze the account and send me new cards right away. Even if someone were to find your card and use it before you called the bank, they will not charge you for those fraudulent purchases.
What about those hundreds of dollars you had that you were going to buy groceries with? They are lost forever.

-Erik

[FredK]

Ironically the people I run into that don't like using cash or debit are those who don't like living by budgets or restrictions. In the end if you are responsible and budget your money to only spend what you make then a Credit Card has no real purpose other than to present added risk.

I don't understand why I am presented with added risk if I carry a credit card. If you mean there is a risk I will overspend, that is not really even on my radar. I am thrifty by nature, and I have a credit card to establish a credit history, and to avoid carrying around cash. That is probably not the norm, but in terms of American consumer behavior and obesity / eating habits, just because it is, doesn't mean it has to be. And that is a huge difference.

Your example assumes that the determining factor of consumer behavior is owning a credit card. Billy will automatically not shop around, and on top of that spend $1.20 for every dollar he has of discretionary income.

The fact is, a credit card improves your cash flow, and allows a lag time of around 30 days to pay off your debt. In that time your money could be working for you in a high yield money market account or other liquid investment. Say you bought a $1000 item. You would have earned $4 in interest (assuming 5% in a high yield MM) in the 30 days you get from the credit card company. Yeah, sure it's not a BFD, but I like to collect what is coming to me.

[RobertK]

Alright, good example Josh. I understand your point about how cash is more likely to keep you from overspending if you have limited funds.

But Ritalin Kid, you need to explain how using a debit card is better than using a credit card... You can't use the situation that Josh used because we'll assume you have more than a hundred dollars in your checking account.

You actually answered your own question.

The amount of money you make is finite. This means that you if you overspend with cash or credit you will be in the same CC hole with most people. Since you are paying your CC with the same earning you would use to buy the item in cash it's all the same.

Here's a better example.

John makes $1000 a month and only makes purchases with cash (or debit). After he pays all his monthly bills John has $100 left for extra spending money each month. John decided he wants to buy a video game. MSRP for the game is $99.95. Not wanting to spend his entire months spending money on one thing John shops around for a good deal and finds a used copy for $60 (lets say it's missing the original case and booklet). In the end all of John's bills are paid and he has an extra $40 to either spend on something else or put in savings.

Billy makes $1000 a month and buys everything on his credit card each month then pays it off when he gets paid. He too only has $100 of extra spending money each month and wants to buy the same video game. Billy goes to the store and buys it off the shelf for $99.95 and while he's there decides that he better buy the $20 strategy guide too. Swipes his card. And when the bill comes he finds that his paycheck isn't enough to pay the entire bill.

Now $20 is not a big deal but this is how it starts. What happens to most people is they will use it CC to get them past the store register and get the item into their possesion and in the process are more likely to ignore their actual budgets.

Thus overspending on credit or with cash correlates the same consequence. With cash or debit you can't make a mad dash for the cash register unless you KNOW you have the money to buy it.

Charge Card > Credit Card (aka AMEX). Responsibility is the key.

Yeah... That's like saying for Americans the key to not getting fat is to not eat too much and exercise.

Has more to do with self control than it does responsiblity. I guess the bottom line is that cash / debit requires self control because the limit is your paycheck.

Credit Card Debt = What You Spend > What You Make

Ironically the people I run into that don't like using cash or debit are those who don't like living by budgets or restrictions. In the end if you are responsible and budget your money to only spend what you make then a Credit Card has no real purpose other than to present added risk.

+1, if controlled, they're a great way to increase your credit rating.

To be completely honest. That is a very bad way to rationalize using a credit card. A credit score is only needed to continually borrow money and be in debt. Which is only a good plan for the bank.

The only thing you should ever really borrow money for is real estate and you can have NO credit score and still get prime rate lending through an underwriter. Ironically Credit Cards (paid off or not) can work against you when trying to get prime rate lending through a FICO only lender.