Yet another financial question

[thectrlguy]

Incorrect...

A Bank term for debt consolidation targeted at people who are financially irresponsible.

[Turf1600]

Incorrect...

Then what is it? since you are apparently an expert on being broke

[thectrlguy]

Expert at being broke eh? That's a pretty bold statement.... And based on your profound financial advice.. you sound like the broke one

A line of credit is a flexible way to get extra funds for things like home renovations, vacations, buying a car or whatever. You can withdraw any amount of funds up to the predetermined, approved credit limit - which is based on your personal financial situation.

Basically a pre approved loan, without the need for re-applying.... For example, I've got a 50K line of credit... I use it to buy equipment for our business... it defers payment, and continuously builds credit....

So based on your logic.... which is pay your debt down as fast as possible... nothing wrong with that... What if "as fast as possible" means 12 months... does it make sense to pay a higher interest rate? Why not pay the credit card debt off immediately, then pay your line of credit down as fast as possible...

Then what is it? since you are apparently an expert on being broke

[Turf1600]

Expert at being broke eh? That's a pretty bold statement.... And based on your profound financial advice.. you sound like the broke one

A line of credit is a flexible way to get extra funds for things like home renovations, vacations, buying a car or whatever. You can withdraw any amount of funds up to the predetermined, approved credit limit - which is based on your personal financial situation.

Basically a pre approved loan, without the need for re-applying.... For example, I've got a 50K line of credit... I use it to buy equipment for our business... it defers payment, and continuously builds credit....

So based on your logic.... which is pay your debt down as fast as possible... nothing wrong with that... What if "as fast as possible" means 12 months... does it make sense to pay a higher interest rate? Why not pay the credit card debt off immediately, then pay your line of credit down as fast as possible...

Nah, I'm nowhere near being broke. The only loan I have is my home loan.

Either way you put it - it's a loan that you use to pay off debt. That's debt consolidation. You can get as technical as you like - but it is what it is.

Explain this to me: why is taking out a loan the solution to debt reduction?

Like I said before - this is a lifestyle problem not a mathematical problem. Sure, you can consolidate and get a marginally better interest rate. But there is something to be said for making measurable progress (ie paying off one or 2 smaller debts at a time). Making a final payment on a $300 card feels better than saying "looks like I only have $4,976 left". It's really easy to get deflated when you add it all together.

To the OP - before you begin paying off debt, put a minimum of 1k into a money market account with check writing abilities. The checks will be your "line of credit" until you are out of debt. This insures that you will not need credit cards. The best part is money market accounts usually beat the rate of inflation.

[thectrlguy]

Either way you put it - it's a loan that you use to pay off debt.

Sure

Explain this to me: why is taking out a loan the solution to debt reduction?

It's not a solution, it reduces the interest... What if you had, let's say $10K in CC debt... 8-9-10 percent... is a lot, case closed. If you can't see that... I don't know what else to say, you don't have much respect for money...

Like I said before - this is a lifestyle problem not a mathematical problem.

Both really, but here we are.

Sure, you can consolidate and get a marginally better interest rate.

What's your idea of marginal...

But there is something to be said for making measurable progress (ie paying off one or 2 smaller debts at a time). Making a final payment on a $300 card feels better than saying "looks like I only have $4,976 left". It's really easy to get deflated when you add it all together.

If anything, this should be a better motivator.... I think when you have 10 different charge cards, that compounds the problem... Yes, I'd rather see one large number, than 20 smaller ones....

To the OP - before you begin paying off debt, put a minimum of 1k into a money market account with check writing abilities. The checks will be your "line of credit" until you are out of debt. This insures that you will not need credit cards. The best part is money market accounts usually beat the rate of inflation.

Sure, you can consolidate and get a marginally better interest rate.

What's your logic for this? Other than the "marginally better interest rate".... does that sound familiar?

[Turf1600]

Sure



It's not a solution, it reduces the interest... What if you had, let's say $10K in CC debt... 8-9-10 percent... is a lot, case closed. If you can't see that... I don't know what else to say, you don't have much respect for money...




Both really, but here we are.



What's your idea of marginal...



If anything, this should be a better motivator.... I think when you have 10 different charge cards, that compounds the problem... Yes, I'd rather see one large number, than 20 smaller ones....





What's your logic for this? Other than the "marginally better interest rate".... does that sound familiar?

You're totally not grasping the concept. you're getting hung up on the math. with your 10k scenario - we're looking at $450 a year getting in the way of financial freedom. that is marginal.

Are you asking what is my reasoning for the 1k in a money market account? I thought i made that quite clear.

EDIT -I re-read your last question - and apparently you don't know what a money market account is. Imagine a savings account that you can write checks out of - but your interest rate (that you earn) beats inflation (4%). Once again - the idea is so that you do not have to use a credit card while paying off debt.

[thectrlguy]

How did you calculate $450?

You're totally not grasping the concept. you're getting hung up on the math. with your 10k scenario - we're looking at $450 a year getting in the way of financial freedom. that is marginal.

No, I get it.... what I don't get it is... what's the point, OTHER than the "marginal" increase in interest...

EDIT: Credit Cards are not your enemy... Please explain (in your opinion) the pros/cons of a money market account, benefits, etc...vs. the credit card

Are you asking what is my reasoning for the 1k in a money market account? I thought i made that quite clear.

EDIT -I re-read your last question - and apparently you don't know what a money market account is. Imagine a savings account that you can write checks out of - but your interest rate (that you earn) beats inflation (4%). Once again - the idea is so that you do not have to use a credit card while paying off debt.

[Turf1600]

How did you calculate $450?




No, I get it.... what I don't get it is... what's the point, OTHER than the "marginal" increase in interest...

EDIT: Credit Cards are not your enemy... Please explain (in your opinion) the pros/cons of a money market account, benefits, etc...vs. the credit card

Credit cards are my enemy. When you get down to it - there is no purpose! If you don't have the money - don't spend it! They promote an instant gratification society which in return yields major financial problems for many. However - if you insist on paying people to use money that you could have accumulated in a short amount of time anyways - so be it.

Let me get this straight though - you're suggesting having a credit card for emergencies when you're struggling to get out of debt??? That's a fast track to failure.

The purpose of the money market account is this - It's YOUR money - It's accumulating interest - and it's readily available but not TOO easy to use. It does not hurt to swipe a card. Do it a few times and the 1k is gone. You're not going to write a check for $4 of fast food when you have no cash or when you find something else you want - but it will be there when you have a real emergency.

You're missing out on the psychology of debt. The plan I have outlined will train people to be frugal and accountable. It's best to set yourself up for success - so that debt never happens again.

[Skoobeesnak]

Credit myth

One thing a lot of people don't understand is that closing out a credit card account actually hurts your credit. The reason? For every card you close that is one less resource you can tap if you need to when things get really tight. When banks look at offering you a loan they look at all available liquid assets you have and unused credit cards is considered a good thing. One other thing is keep your balances less than 50% of the credit limit on each card. This will show creditors that you can be financially conservative and not spend every penny you get and then some.

[Turf1600]

One thing a lot of people don't understand is that closing out a credit card account actually hurts your credit. The reason? For every card you close that is one less resource you can tap if you need to when things get really tight. When banks look at offering you a loan they look at all available liquid assets you have and unused credit cards is considered a good thing. One other thing is keep your balances less than 50% of the credit limit on each card. This will show creditors that you can be financially conservative and not spend every penny you get and then some.

Another Credit Myth - You need credit

Name 1 thing you need credit for that can be considered essential.

[SchnellerVert]

Guess it depends on you credit score, I have two cards both at 10.8% apr with no annual fee's and 10K limits. I pay them down after I use them. I budget what I want and what I can afford to spend and otherwise I limit what I need.

But there was times when I didn't do that and got in over my head, so I went to strictly a debit card and if I had money bills were paid, we I could maybe purchase something. That being said I don't want to be in that position anytime soon again.

[thectrlguy]

I can't believe this already..

1) How in the hell did you come up with $450 in your earlier post.

2) No credit cards aren't you're enemy.... ever travel? ever rent a car? stay in a hotel? buy something online? What I'm suggesting, everyone should have a credit card... for any of the reasons noted above..... not for some emergency fund.. did I ever say emergency?

3) Training to be frugal and accountable? What the fuck is the difference between a savings account and a market account? if you can't save the cash.. it doesn't fucking matter...

What is your plan? Keep money in the bank? don't spend any cash you don't actually have? Wow... you should write a book... solid gold my friend... solid gold....

Credit cards are my enemy. When you get down to it - there is no purpose! If you don't have the money - don't spend it! They promote an instant gratification society which in return yields major financial problems for many. However - if you insist on paying people to use money that you could have accumulated in a short amount of time anyways - so be it.

Let me get this straight though - you're suggesting having a credit card for emergencies when you're struggling to get out of debt??? That's a fast track to failure.

The purpose of the money market account is this - It's YOUR money - It's accumulating interest - and it's readily available but not TOO easy to use. It does not hurt to swipe a card. Do it a few times and the 1k is gone. You're not going to write a check for $4 of fast food when you have no cash or when you find something else you want - but it will be there when you have a real emergency.

You're missing out on the psychology of debt. The plan I have outlined will train people to be frugal and accountable. It's best to set yourself up for success - so that debt never happens again.

[Turf1600]

Guess it depends on you credit score, I have two cards both at 10.8% apr with no annual fee's and 10K limits. I pay them down after I use them. I budget what I want and what I can afford to spend and otherwise I limit what I need.

But there was times when I didn't do that and got in over my head, so I went to strictly a debit card and if I had money bills were paid, we I could maybe purchase something. That being said I don't want to be in that position anytime soon again.

Honest question: If you have the $$, what's the purpose of a credit card?

[thectrlguy]

Credit Myth? You can't be serious

One Thing? A House

Another Credit Myth - You need credit

Name 1 thing you need credit for that can be considered essential.

[thectrlguy]

Honest Answer: I buy every nut, bolt, carrot, lunch, gas.... you get the idea.. on my credit card... and pay it off (in full) every month...

EDIT:

Why you ask? 1) Credit Score 2) "Points" I use these "points" to get free flights when traveling..

Honest question: If you have the $$, what's the purpose of a credit card?