[CACer55]

Totally agree with 0stones0, credit card companies don't like us zero balance card holders, but the other 90% with balances allow us the "benefit" of being a cardholder the % paybacks!

[BuddyLee]

Another way to borrow is to borrow from yourself. If your retirement plan at work allows for you to borrow up to 50% you can do that usually at 3.5% interest. You then pay this back to your retirement plan over what ever time period that you choose. Usually the interest is paid to you. So you make 3.5% or what ever the rate is on your loan. Where you will lose on this is if in the meantime your retirement plan is earning more than 3.5% because you are missing out on the compounding on the money that you withdrew from the fund. but if the annual return on the retirement fund is 5%, for example, then your loan to yourself is costing you 1.5% per year until you pay it back. Not everyone can do this, by the way. But whatever the small loss is it is still way better than using a credit card at even a low 10% interest rate to borrow the same amount of money.

[pyroguy]

Originally Posted by CACer55

Totally agree with 0stones0, credit card companies don't like us zero balance card holders, but the other 90% with balances allow us the "benefit" of being a cardholder the % paybacks!

They even love you zero balance card holders. You don’t think they let you use their cards for free do you? A credit card company charges 3-5% of the purchase price to the vendor allowing you to use a credit card. They get paid even if you pay everything off every month. That’s how they “give” you money back. The problem is that it takes $20,000 worth of spending to get $200 back. Somewhere within that $20,000 you are guaranteed to have spent in excess of $200 on unneeded items. So in the end the credit card company has still made money on the “zero balance” people.

On a side note, when I say all debt is bad I mean mortgages, student loans, car loans, personal lines of credit, home equity loans, etc. This isn’t a conversation limited to just credit cards. However, I wish that I could come up with a product so highly sought after and fought over as to why it is so great as a credit card.

[pyroguy]

Originally Posted by BuddyLee

Another way to borrow is to borrow from yourself. If your retirement plan at work allows for you to borrow up to 50% you can do that usually at 3.5% interest. You then pay this back to your retirement plan over what ever time period that you choose. Usually the interest is paid to you. So you make 3.5% or what ever the rate is on your loan. Where you will lose on this is if in the meantime your retirement plan is earning more than 3.5% because you are missing out on the compounding on the money that you withdrew from the fund. but if the annual return on the retirement fund is 5%, for example, then your loan to yourself is costing you 1.5% per year until you pay it back. Not everyone can do this, by the way. But whatever the small loss is it is still way better than using a credit card at even a low 10% interest rate to borrow the same amount of money.

I’m sorry but this is HORRIBLE advice. Please don’t borrow from your retirement account, and here’s why:
1) When you leave your job and you will whether by choice or not, your loan is due in full within 60 days from your final date. If you were fired this now turns an emergency into a catastrophe.
2) You will never catch up to the amount that you would have earned had you left your money alone. As you eluded to, compound interest is great. If invested wisely, my investment choice is a diversity of mutual funds, your rate of return should be 10-12% on average. If you unplug $50,000 at 10% (for sake of easy math) you’ve cost yourself $5,000 that year. Next year it’s $5,500, the year after that it’s $6,050, etc. In three years are you going to pay the $50,000 back PLUS the $16,550? If you are then you probably shouldn’t have needed to borrow in the first place.

The biggest problem is my first reason. Everyone is going to leave their job eventually whether it’s moving on to a better role at another company, being let go, or because you’ve left this world completely. That 3.5% interest you paid yourself is nothing compared to what your investment would have earned, but even more so is if you cannot pay the loan back in full you now have a tax bill for the remaining amount at your new tax bracket after the loan amount plus a 10% early withdrawal penalty. You could be paying north of 40% interest on that money you borrowed. A 25% credit card interest is still better than that even if it is a terrible idea to have a credit card.

[Vegas Bound]

I paid cash for my house.
I paid cash for my Silverado 2500HD.
I paid cash for my Camaro, plus all the mods.
I have a credit card with $50K+ credit limit.
I have credit score 820+.
I never carry a balance on the credit card but charge everything to it monthly.
As a result, I have 1M+ miles on American Airlines.

[0stones0]

Originally Posted by pyroguy

They even love you zero balance card holders. You don’t think they let you use their cards for free do you? A credit card company charges 3-5% of the purchase price to the vendor allowing you to use a credit card. They get paid even if you pay everything off every month. That’s how they “give” you money back. The problem is that it takes $20,000 worth of spending to get $200 back. Somewhere within that $20,000 you are guaranteed to have spent in excess of $200 on unneeded items. So in the end the credit card company has still made money on the “zero balance” people.

On a side note, when I say all debt is bad I mean mortgages, student loans, car loans, personal lines of credit, home equity loans, etc. This isn’t a conversation limited to just credit cards. However, I wish that I could come up with a product so highly sought after and fought over as to why it is so great as a credit card.

Actually, they do let me use their card for free and pay me. As you stated, the VENDOR gets charged the fee. Trust me, I buy “unneeded” items whether I use the card or cash. That’s just life. And regardless on how much I spend using their card and whatever the time frame, I get free money. Anywhere from 1% to 5%. Therefore, as little as it might be, I’m actually saving money on my card purchases. With cash, it is what it is. Works for me, your mileage may vary.

[Silver14]

Originally Posted by pyroguy

They even love you zero balance card holders. You don’t think they let you use their cards for free do you? A credit card company charges 3-5% of the purchase price to the vendor allowing you to use a credit card. They get paid even if you pay everything off every month. That’s how they “give” you money back. The problem is that it takes $20,000 worth of spending to get $200 back. Somewhere within that $20,000 you are guaranteed to have spent in excess of $200 on unneeded items. So in the end the credit card company has still made money on the “zero balance” people.

On a side note, when I say all debt is bad I mean mortgages, student loans, car loans, personal lines of credit, home equity loans, etc. This isn’t a conversation limited to just credit cards. However, I wish that I could come up with a product so highly sought after and fought over as to why it is so great as a credit card.

1% cash back or rewards isn't a great deal, lots of cards are way better than that, 3-5% isn't uncommon. Some people have the financial discipline where your guarantee may not apply to them, but I admit most do not .

I'm ok with a credit card company making money off a merchant and not me. If the merchant is going to discount that fee to me, maybe cash makes sense for the transaction, maybe not. Consumer protection, security, convenience, extended warranties - there are benefits credit cards can have over cash. Lots of people get into trouble with them but they can be a good financial tool to have.

Agreed borrowing from retirement is usually a bad approach.

[0stones0]

Originally Posted by Vegas Bound

I paid cash for my house.
I paid cash for my Silverado 2500HD.
I paid cash for my Camaro, plus all the mods.
I have a credit card with $50K+ credit limit.
I have credit score 820+.
I never carry a balance on the credit card but charge everything to it monthly.
As a result, I have 1M+ miles on American Airlines.

+1

[KenKat]

I like the Proverbs quote - this describes a lot of people who have too much debt.

That said, I think debt is just a tool in the financial toolbox. Use it wrong and you can cut off a limb; but used correctly, debt can make sense sometimes.

I have a mortgage, currently at 3.39%. This used to be tax deductible for me until the standard deduction increased and now I don’t itemize anything. It will be paid off fairly soon anyway.

I bought my Camaro with my home equity line - I just paid this off recently. The current rate on that is 2.25%.

I see people carry credit card debt at 16% or 22% and that is just crazy. But if you can put money into an IRA or your 401(k) before tax and invest in something at 7% or even higher long term, it makes sense to do that in my opinion even if it means having a mortgage or a low interest car loan.

So no, not all debt is bad.

[BuddyLee]

Originally Posted by 0stones0

Actually, they do let me use their card for free and pay me. As you stated, the VENDOR gets charged the fee. Trust me, I buy “unneeded” items whether I use the card or cash. That’s just life. And regardless on how much I spend using their card and whatever the time frame, I get free money. Anywhere from 1% to 5%. Therefore, as little as it might be, I’m actually saving money on my card purchases. With cash, it is what it is. Works for me, your mileage may vary.

It will work this way. For a business to purchase inventory with a cash back card during the month and then sell that inventory at a profit and then use that money to pay back the card at the end of the month and collect the cash back is coming out well ahead of the cash and carry method.



For the consumer who pays the card n full each month they are money plus from whatever cash rewards they get from those purchases.

[Iron Lung Jimmy]

Originally Posted by pyroguy

I fortunately didn't trash my credit when I was younger, but ultimately I'm aiming for a zero credit score. The only real "need" for a credit score is to borrow money. I'd rather just not borrow money. As soon as my house can be paid off I'll be happy to be done with debt.

First off, I'm in 100% agreement with your outlook on debt but...

Your credit score is, unfortunately, used for more things than just borrowing money. Insurance companies look at it... that is the big one. Also, some utility companies and places like that. Details aside, a zero credit score is a really bad idea. You have to work within the system.

So there is smart debt.

Example - Instead of completely paying off your house maintain a small balance. You get the benefit of maintaining a payment history plus the bank deals with the insurance payments. Win/win. The negligible amount of interest you pay is totally worth it.

Finance a new car then pay it off really quickly. Whatever interest you pay is buying you a payment history and keeping that credit score high. Money well spent.

Stuff like that.

Research the subject and decide for yourself what's best for you.

[mlee]

Originally Posted by Iron Lung Jimmy

First off, I'm in 100% agreement with your outlook on debt but...

Your credit score is, unfortunately, used for more things than just borrowing money. Insurance companies look at it... that is the big one. Also, some utility companies and places like that. Details aside, a zero credit score is a really bad idea. You have to work within the system.

So there is smart debt.

Example - Instead of completely paying off your house maintain a small balance. You get the benefit of maintaining a payment history plus the bank deals with the insurance payments. Win/win. The negligible amount of interest you pay is totally worth it.

Finance a new car then pay it off really quickly. Whatever interest you pay is buying you a payment history and keeping that credit score high. Money well spent.

Stuff like that.

Research the subject and decide for yourself what's best for you.

+1 and if debt free it's not hard to keep a 800+ score with just some small activity going.

[FarmerFran]

It be really neat to know what some of you do for a living or how you came about your money.

To say carry no debt is quite an interesting concept and for some that have the cards land just right for them it is ok. But society needs people of all types to do all jobs.

Simple example, how do you pay cash for a house? Live with your parents rent free? Win lottery? Pay rent and save for the house?

[mlee]

Originally Posted by FarmerFran

It be really neat to know what some of you do for a living or how you came about your money.

To say carry no debt is quite an interesting concept and for some that have the cards land just right for them it is ok. But society needs people of all types to do all jobs.

Simple example, how do you pay cash for a house? Live with your parents rent free? Win lottery? Pay rent and save for the house?

Fair Question and lots of different answers, situations for this one. Getting older, empty nester and staying in the same house 20 years definitely helped. I don't buy a car until I have at least half down and then pay it off quickly after that. Interest payments drive me nuts. Once you get there you find lots of extra cash due to not paying interest.