First Credit Card

[Iwritecode]

The important thing is to now cancel the cards so that you don't have too high of a revolving credit line.

 

This was about 6 years ago. We've kept our credit good and have a score near 800 now.

[Iwritecode]

That's one of the best reasons to use one, that's truly an emergency.

 

Did they keep raising your interest rate?

 

No, just our credit limit so we could charge more. I think the rate on it now is like 22%, which is why we pay the balance every month now.

[Chisoxfn]

Walk into a car dealership with 20% down and you will drive off their lot. Walk into a mortgage company with a decent down payment and no credit cards and you will get a mortgage. Stable work history and a history of saving, including a positive net worth, actually has value.

 

But yes, showing you can manage a negative net worth with lots of debt also works, and there are a lot more companies advocating for that.

 

But actually saving money, putting away an emergency fund instead of relying on credit cards, saving for down payments instead of no money down instant gratification is very difficult for most people. Even if you don't go as far or as extreme as some financial advisors will tell you, being your own credit card increases your net worth and saves you money.

 

And look at who is telling you that credit is essential. Credit monitoring companies, credit card companies, credit repair companies. And we want that stuff immediatly, it's something we like, so we believe them.

 

The only time I can honestly say you absolutely need a credit card is to rent a car. If you manage to put aside an emergency fund, you can pay for those unexpected expenses like car repairs. If you can't afford to set aside the savings, how will you pay off the credit card without racking up interest payments?

 

Americans want to spend 110% of their income.

That might work for a car, but not for a house. If you are going to buy a house and have no credit, you better be prepared to put an absolute s***-ton down and that might not be a very smart investment. You might be better keeping an additional reserve in savings as opposed to everything into your house. Depends on your investment philosphy.

 

I'd say the car thing would probably work, but that is because car dealers will do anything. Regardless, no matter what, you will suffer on your rate compared to someone with a good credit history.

[Texsox]

I believe I said 15%, do you consider that a s*** load? A very simple investment strategy is to have a positive net worth. Debt for the types of things that unsecured credit is used for is not productive. As an investment strategy, why have money on a credit card being charged 20% interest? People can claim all day long that they won't carry a balance, and a few will be right. But most people will start carrying a balance.

 

The credit card and credit reporting agencies have spent millions convincing the public they need to borrow money to buy a new outfit, go on vacation, dinner, plants for the house, etc. They have to have a credit card to get more credit cards. They have to pay interest to one card to earn the right to pay interest on another card.

 

Again, an investment strategy of zero debt, especially in debt for an item that is already worthless or on it's way to being worthless, isn't very good either.

 

Just a small counter to the spend today and pay tomorrow and next week, and next month, and next year . . .

[Chisoxfn]

I believe I said 15%, do you consider that a s*** load? A very simple investment strategy is to have a positive net worth. Debt for the types of things that unsecured credit is used for is not productive. As an investment strategy, why have money on a credit card being charged 20% interest? People can claim all day long that they won't carry a balance, and a few will be right. But most people will start carrying a balance.

 

The credit card and credit reporting agencies have spent millions convincing the public they need to borrow money to buy a new outfit, go on vacation, dinner, plants for the house, etc. They have to have a credit card to get more credit cards. They have to pay interest to one card to earn the right to pay interest on another card.

 

Again, an investment strategy of zero debt, especially in debt for an item that is already worthless or on it's way to being worthless, isn't very good either.

 

Just a small counter to the spend today and pay tomorrow and next week, and next month, and next year . . .

I can't comment on other people, but I charge what I can afford and buy what I can afford. Never carried a balance in my life. Could that change. Sure, if an emergency happens and stuff comes up and I don't have enough in savings (I try to save quite a bit out of every one of my paychecks, both for current/rainy day savings + retirement) than I'll have to opt to the last resort and if I need that, I'll be sure as heck happy that I at least have access to that credit.

 

And if you put down 20% and have zero credit, you will be paying a higher rate on your mortgage loan than someone else who puts down 20% and does the same.

 

And if the 15% is an interest rate, than yes, that is a horrendous loan. Same reason why carrying a balance is a bad idea (unless it is a worse case scenario) because the rates are absolutely horrendous.

[Soxbadger]

I carry a balance on my credit card but its mainly because I want to have liquid assets and not worry about stuff. My apr is under 10% and my balance isnt very high, you just have to know how to handle your own finances. A lot of the reason I do it is because I want to be able to enjoy things today even though I wont be making a lot of money for a few years. (Im not talking a huge amount of debt) It just makes no sense to me that when Im older Ill have a ton of money but didnt get to do fun things right now because of 10%interest.

 

Not everyone's financial condition is the same, but carrying a balance isnt necessarily the worst thing if you know youre own financial situation. Id rather not pay the extra 10%, but having the flexibility of that extra money is really nice.

[Rex Kickass]

Can I just say, its hard to get out of a debt cycle when you get in one. Because when you're trying to pay off debt and build a savings so that future debt isn't as necessary... when that emergency expense comes up, you just kinda end up f***ed regardless.

[Texsox]

I'm not saying that people can't manage credit and have all the good things that have been mentioned.

 

But the average American has nine credit cards and $5,000 in debt. The majority will die with that $5,000 and have paid interest for decades. Over 1,000,0000 will file bankruptcy this year because of credit cards. Many millions more will go to credit counseling services, take out second mortgages, pull from 401Ks, shift balances around, apply for more cards to keep up with the payments on their first cards.

 

On the home mortgage, steady employment, healthy savings, not being committed to making those credit card payments is going to help you way more than nine cards and $5,000 or more in debt. A positive net worth looks very nice, at least according to what I've experienced and heard about today's market.

 

If you really want to play with credit, go with something that can't be used for general expenses. A department store, finance a computer through Dell, something like that. See how fast you pay it off. But if you goal is to keep opening up charge accounts to build your credit so you can get higher and higher credit limits and to get more and more cards, well that leads to having balances and making a lot of interest payments. Why else do you want the cards?

 

I know all that sounds like work, and is not as much fun as having lines of credit equal to your annual salary. You will feel more successful opening your wallet and thinking "which card should I put this on". Soon some of you will be opening you mail thinking it is your lucky day because another bank will open up an account for you, and since you just maxed your first or second card, you will have it "just for emergencies". And as Rex mentioned, with each step the cycle gets worse.

[Texsox]

http://money.cnn.com/magazines/moneymag/money101/lesson9/

 

Other sources have credit card debt at over $10,000 for the average American.

[bigruss]

http://money.cnn.com/magazines/moneymag/money101/lesson9/

 

Other sources have credit card debt at over $10,000 for the average American.

All I know is that I've had an individual credit card since I was 19, and I've made my payments and was responsible with it. Some people will fall back on credit cards to live on debt because of the economy, but others just need to learn to be responsible spenders, which really isn't that hard.

 

I wouldn't blame the tool, rather the teacher in this case.

[StrangeSox]

http://money.cnn.com/magazines/moneymag/money101/lesson9/

 

Other sources have credit card debt at over $10,000 for the average American.

 

Mean vs. median. Yes, that's the average debt, but a good chunk of Americans have little or no debt while another chunk has very, very high debt.

 

http://www.creditslips.org/creditslips/200...am-weston-.html

[StrangeSox]

If you really want to play with credit, go with something that can't be used for general expenses. A department store, finance a computer through Dell, something like that. See how fast you pay it off. But if you goal is to keep opening up charge accounts to build your credit so you can get higher and higher credit limits and to get more and more cards, well that leads to having balances and making a lot of interest payments. Why else do you want the cards?

 

I know all that sounds like work, and is not as much fun as having lines of credit equal to your annual salary. You will feel more successful opening your wallet and thinking "which card should I put this on". Soon some of you will be opening you mail thinking it is your lucky day because another bank will open up an account for you, and since you just maxed your first or second card, you will have it "just for emergencies". And as Rex mentioned, with each step the cycle gets worse.

 

This is only true if you can't manage credit. Replace "credit" with "alcohol" here, and you could be giving this same speech to a drunk, but it doesn't apply to everyone who drinks. I've come close to maxing out my card thanks to several thousand dollars in work expenses, but I never carry a balance. My parents have been the same way for my entire life, so I was lucky enough to have a very frugal and responsible mother to pick up household finances from.

[Texsox]

You are correct. As noted a credit card is a tool, and if used properly, isn't a problem. But credit is just that, credit to be paid back later. The credit card companies and reporting companies have spent millions convincing you to buy into their customer rating program. Get yourself a high customer rating so they can sell you more products. Pay them interest regularly and you will be considered a better customer and they will sell you more stuff that you can pay them for.

 

So yes, a credit card can be a great tool for some people, most people wind up becomming a tool for the credit card companies.

 

I am certain there is a terrible problem with saving for something and paying cash. I am certain therwe is some problem with putting large down payments on major purchases, with having an emergency fund to pay for stuff. But I can't see how paying cash and not using credit is going to be so terrible. We want stuff now, not in three month when we can save for it. We have been sold on instant gratification and spend now and pay later.

[IlliniKrush]

Tex you are right, it's about instant gratification, now now now now society.

 

The majority of people here are fine with CC's, I get that. But I'd say the majority of Americans are not. A CC has taken away many people's notion of "I can/will buy what I can afford" because they don't have to try to save for anything. This is true for smaller purchases and larger ones - people buy more expensive homes and cars than they should just because they think they can afford it, because when they run their finances, they don't really consider their thousands in CC debt, just how their minimum payment works into their monthly budget.

 

I understand some people have claimed bankruptcy because of emergencies, but CC debt is right at the heart of the matter for most.

[Capn12]

It's funny, some of you make it sound like its a dilemma only those in this country face. Surely, you aren't so naive to think that the credit card impact isn't felt in MOST countries, not just here?

 

It is a tool, not the cause, as was already said. If you suck at money management, then yeah, you're gonna f*** it up and hopefully learn from your mistakes.

 

There aren't many large (read: home, car, investment property, etc) purchases that CAN be made without a pretty lengthy credit history existing. Thats just how it is.

[Chisoxfn]

You are correct. As noted a credit card is a tool, and if used properly, isn't a problem. But credit is just that, credit to be paid back later. The credit card companies and reporting companies have spent millions convincing you to buy into their customer rating program. Get yourself a high customer rating so they can sell you more products. Pay them interest regularly and you will be considered a better customer and they will sell you more stuff that you can pay them for.

 

So yes, a credit card can be a great tool for some people, most people wind up becomming a tool for the credit card companies.

 

I am certain there is a terrible problem with saving for something and paying cash. I am certain therwe is some problem with putting large down payments on major purchases, with having an emergency fund to pay for stuff. But I can't see how paying cash and not using credit is going to be so terrible. We want stuff now, not in three month when we can save for it. We have been sold on instant gratification and spend now and pay later.

Tex, you are right. But if you use the tool wisely, I can actually make a float on my interest for 30 days (e.g., earn interest on my cash, even a small sum) plus get cash back on the deal. By paying card, I tend to save between 1 and 5% on all of my purchases, plus a little additional savings. On top of it, by paying credit, I have a hell of a lot more protection if something goes wrong.

 

Say I lose a receipt, no problem, they can credit it back to my CC and verify my purchase using that. Plus, if its cash, say your wallet is stolen cause you buy everything in cash, well, cash is gone, I have no protection from that.

 

Ya, those might not happen, but I feel safer using my card, which has a lot of built in protections (plus depending on the card you have, you can get extended warranties, price matching, etc) than cash. In fact, I only carry enough petty cash for minor emergencies or situations where places don't take card.

 

And I never have to debate which card to use and I could care less if I had 1000 in available credit or 100K in it. I only spend what I can afford and if I couldn't afford it due to an emergency, I'd only buy what you need.

[Chisoxfn]

It's funny, some of you make it sound like its a dilemma only those in this country face. Surely, you aren't so naive to think that the credit card impact isn't felt in MOST countries, not just here?

 

It is a tool, not the cause, as was already said. If you suck at money management, then yeah, you're gonna f*** it up and hopefully learn from your mistakes.

 

There aren't many large (read: home, car, investment property, etc) purchases that CAN be made without a pretty lengthy credit history existing. Thats just how it is.

And if you spend in cash and just blow all of your cash, you still are going to be stuck. And if you have no card, what is to prevent you from instead going to those paycheck advance places, etc.

[Iwritecode]

Say I lose a receipt, no problem, they can credit it back to my CC and verify my purchase using that.

 

I actually really like that stores can do this. Target does and I think Menards might as well. I'm horrible at keeping track of receipts when I need to return something.

[Balta1701]

And if you spend in cash and just blow all of your cash, you still are going to be stuck. And if you have no card, what is to prevent you from instead going to those paycheck advance places, etc.

Those payday loan places make the Credit Card industry look like shining examples of well behaved honest corporations.

[Texsox]

I agree with all of your best case scenarios. But that isn't reality for the majority of the population. The credit card industry has advertised the hell out of what you need to do to be a good customer of theirs. They assign a rating system and people start jumping through hoops to make certain the credit card companies think they are good customers. The goal seems to be to have a pocket full of credit cards with higher and higher lines of credit that you will only use from one payday to another because you will never carry a balance or pay interest. Then you can qualify for larger and larger car and home loans.

 

That is a nice goal.

 

Forget about paying cash for stuff. Having an emergency fund to where you don't even have to use a credit card from payday to payday. Forget about putting large down payments on purchases. That's just crazy talk and would never work.

 

 

[Texsox]

And if you spend in cash and just blow all of your cash, you still are going to be stuck. And if you have no card, what is to prevent you from instead going to those paycheck advance places, etc.

 

I believe this is called having savings, having an emergency fund. Are you suggesting people replace savings with a credit card? If you can't save to build up the fund, how is the person going to pay off the card when the bill comes in?

[Heads22]

I went with Discover for now.

 

FWIW, I am not in debt, nor am I close. I've had a credit card for about 5 years, only it is in my dad's name, as well as mine. This is simply to build credit, for emergencies, and for anything over my debit limit.

[Capn12]

I went with Discover for now.

 

FWIW, I am not in debt, nor am I close. I've had a credit card for about 5 years, only it is in my dad's name, as well as mine. This is simply to build credit, for emergencies, and for anything over my debit limit.

 

Not a bad choice at all. Discover will treat you well, as long as you return the favor. They won't ever lead the world in Credit Lines given out (in terms of how much credit), but they never did me wrong when I carried one.

[Chisoxfn]

I believe this is called having savings, having an emergency fund. Are you suggesting people replace savings with a credit card? If you can't save to build up the fund, how is the person going to pay off the card when the bill comes in?

My point is, paying in cash doesn't ensure a savings. And just because you pay in cash, doesn't mean you can't go into debt (due to alternative methods). And no, I'd never say a CC is a form of savings. I'd also say if you have CC debt, you should be paying that off as opposed to putting anything into savings and than re-evaluate your spending habits (if possible).

 

And people need to look at there finances and ensure they can put a respectable amount into long term savings (401K, etc) plus funds into your actual savings account (which can be divided up into additional LT purchases you might plan on making, plus your emergency fund).

[Texsox]

My point is, paying in cash doesn't ensure a savings. And just because you pay in cash, doesn't mean you can't go into debt (due to alternative methods). And no, I'd never say a CC is a form of savings. I'd also say if you have CC debt, you should be paying that off as opposed to putting anything into savings and than re-evaluate your spending habits (if possible).

 

And people need to look at there finances and ensure they can put a respectable amount into long term savings (401K, etc) plus funds into your actual savings account (which can be divided up into additional LT purchases you might plan on making, plus your emergency fund).

 

You did a great job of explaining the best possible scenario involving credit cards. I was offering balance. The CC industry spends millions and millions in a marketing campaign convincing Americans that you can't be successful unless you their best customer. I find it funny that people think there is no other way to live than to have credit cards. They trap a large number of the middle class.

 

Even you said "what if there is an emergency, it is better than a payday loan". Think how many times you have heard someone say, I need a credit card for emergencies, now think about how many people have said, I need to save some money for emergencies. Which is better financial planning? If you start advocating for savings and paying cash for those emergencies, people will jump in immediately to defend the card as a tool to handle emergencies.

 

For most people what is an emergency starts out high, but becomes "it's Thursday and I am getting home late and don't want to cook, swipe the card". It becomes a way to get stuff or to do things that their current income does not allow.

 

If you are going to have a card, the best way to assure it is a tool that serves you and you don't become the tool for the credit card industry is to have savings equal to the card limit. The first time you can't pay off the balance at the end of the month, freeze the card in water to make it harder to use. Rex posted about the credit cycle that catches people. That is reality for the majority of people with credit cards. Obtaining financial independence is not built on lines of credit, but savings and investments. Don't be trying to make your money work for you on one side of the ledger and paying credit card interest on the other.