[QUOTE=Athena]
I can think of a dozen reasons how I’d pay it off plus interest.
Maybe I’m getting a new job with a better salary, but I need to buy clothes now so I can dress correctly for the job.
Maybe “Big Ticket Item X” is on sale right now, I don’t have the cash at hand, and even factoring in credit card interest it’s a better deal than buying it off-sale.
[/QUOTE]
Although you are correct that clothes for a new job are not security for a debt, although Big Ticket Item X might be.
Look, you can always come up with a reason, and it might even be a good reason. But as a general principle, I repeat that “your financial life will always go better with a clear-eyed understanding of what you are paying, and what it buys you”.
[QUOTE=Shodan]
Look, you can always come up with a reason, and it might even be a good reason. But as a general principle, I repeat that “your financial life will always go better with a clear-eyed understanding of what you are paying, and what it buys you”.
[/QUOTE]
I think you, me and Athena are always saying the same thing. The two of us feel we’ve been responsible with money, even though we’ve paid that “dreaded credit card interest” because we knew exactly what we were getting in to when we ran up a little debt. Neither of us think of CC money as “free money” - more like pay more (price + interest) for what you need now instead of going without it to our own detriment. We both had a clear-eyed understand of what we were paying.
Just because I’ve paid credit card interest does NOT mean I have a house full of things I don’t need. I have a house full of second-hand furniture and a closet full of 6-year-old clothing. Just 4 months ago I got my first television - for free, from someone else who did “need” an HDTV.
I just don’t like the stigma that everyone who uses a credit card and pays interest is a chump, or is like BlinkingDuck’s wife and uses it as “free money”. I use it as a tool to financial freedom, if you can believe it.
[QUOTE=Shodan]
Look, you can always come up with a reason, and it might even be a good reason. But as a general principle, I repeat that “your financial life will always go better with a clear-eyed understanding of what you are paying, and what it buys you”.
[/QUOTE]
Sure, I agree with that. But I don’t think that it means that credit card debt is always a bad idea. Heck, I’m happier when I can pay for things with cash, and now that I’m in my late 30s I can. But it wasn’t always that way, and I don’t regret the things I bought and paid off over time, and paid a little interest on. Even now, Mr. Athena tends to buy his toys on credit card, and pay them off within 60-90 days. We have the cash sitting around for most of this stuff he buys, but he prefers to have it separate, on a card, as an “extra” expense that he can keep track of (he’s a gear head with lots of hobbies, so he tends to buy/sell his gear a lot, and he doesn’t like dipping into our joint account to fund it).
[QUOTE=Shodan]
This can hardly be over-emphasized.
Don’t do stuff just to raise your credit score. Do stuff that makes sense financially, and let your credit scores take care of themselves. This means getting one no-fee credit card, and pay off the balance in full every month. No exceptions. If you have to eat beans and rice for a week to pay it, look for Mexican recipes on the Internet.
And the instant you say “I can’t afford to make the full payment” is the instant where you lose, and the credit card companies have you by the balls. If you can’t afford to pay for it now, how are you going to pay for it at 18% interest?
The credit card companies hate this advice. They will do everything in their power to try to get you to carry a balance. One of the most common scams it to offer you a credit card with 0% interest, guaranteed. And they will follow thru, the first couple of months. But I can almost guarantee that, buried in the fine print, is verbiage that says they can change the interest rate at any time, and for any reason.
So, you build up a balance, they send you a mailing with five pages of fine print, and buried in there will be a notice that they are jacking the interest rate up to 18%. They are betting you won’t read it. Then the next month, you will get a bill with finance charges. They are betting you won’t pay off the balance. And then they got you, because the temptation is to look at the minimum payment and see that it is a hell of a lot lower than paying off the balance, and you have more in your pocket than you would if you paid in full. And they own your ass.
[/QUOTE]
Capital One is the absolute king of doing crap like that. I had a couple of cards from them, hit some bad times, and the interest rate went to 24%. And it took me a long time to get them paid off and closed.
The FICO scoring system is hideously complex. It looks for combinations of factors that, individually, it really wouldn’t care about. I’m actually in awe of how complex it is, despite my awareness that it’s a limited tool: and one that has recently gotten a ton of very smart people in industry in a ton of trouble due to their foolish decision to rely on it overmuch.
[/QUOTE]
Right. Dead on, Mr. Slant.
But Elza B, have you cleaned up your Credit Report yet? Gotten rid of all the incorrect data and Derog crap that’s too old, and stuff that isn’t even yours?
Dispute anything bad you are unsure of, isn’t yours or is more than 5 years old. It has to be taken off once it’s 7 yo (there are some exceptions), but often small stuff will get removed if it’s disputed and it’s old enough. IANAL, YMMV.
A few FICO tips- keep your oldest account. Yes, you can close some of the others, it could mean a minor temp hit, but it’s better than paying fees and penalties. Don’t have a “What’s in your Wallet” card.
[QUOTE=ZipperJJ]
SNIP
When you get any loan, you pay interest. Why is it such a horrible thing to pay it on a credit card loan?
[/QUOTE]
You quoted me when replying, so I will respond as if you were asking this question to me directly.
I have a suspicion the actor may have been talking to the audience there, and not anyone on stage.
Paying interest is bad.
Borrowing is bad.
Sometimes, the alternative to borrowing is bad, but any time you must borrow, it is unfortunate. Had better planning been exercised, your present self would not be making your future self its slave, which is the essence of borrowing.
Buying a spiffy house in the suburbs is good, and while it’s good to be able to make a nice downpayment and get a house, it would be even cooler if you’d managed to pay cash.
Even when large companies borrow, it is unfortunate that they weren’t simply properly capitalized to expend what they needed to do in order to meet their strategic goals.
Borrowing adds risk to the life of the consumer and to the life of any cash-borrowing company.
That, ZipperJJ, is why I feel it’s bad to pay interest.
As to why the rest of the world feels it’s bad, I suspect their reasoning is similar, though not identical.
[QUOTE=FourPaws]
I assume you’re referring to the credit card processing fee / merchant fee, not the interest rate.
People may be unaware that credit card companies make a lot of money from this fee as well - not just interest, late fees, and overlimit fees.
[/QUOTE]
Your assumption is correct.
I suspect half of consumers don’t even realize the fee is there at all.
[QUOTE=Mr. Slant]
You quoted me when replying, so I will respond as if you were asking this question to me directly.
I have a suspicion the actor may have been talking to the audience there, and not anyone on stage.
Paying interest is bad.
Borrowing is bad.
Sometimes, the alternative to borrowing is bad, but any time you must borrow, it is unfortunate. Had better planning been exercised, your present self would not be making your future self its slave, which is the essence of borrowing.
Buying a spiffy house in the suburbs is good, and while it’s good to be able to make a nice downpayment and get a house, it would be even cooler if you’d managed to pay cash.
Even when large companies borrow, it is unfortunate that they weren’t simply properly capitalized to expend what they needed to do in order to meet their strategic goals.
Borrowing adds risk to the life of the consumer and to the life of any cash-borrowing company.
That, ZipperJJ, is why I feel it’s bad to pay interest.
As to why the rest of the world feels it’s bad, I suspect their reasoning is similar, though not identical.
[/QUOTE]
So, if one cannot pay cash for a house, they should pay rent, and not gain any equity or tax benefits that could offset the interest paid? And pay rent until they can save enough money to buy a house outright?
I’d rather throw my money away towards interest vs. renting, which in itself is basically “borrowing” the property. In short, not all interest is bad.
But Elza B, have you cleaned up your Credit Report yet? Gotten rid of all the incorrect data and Derog crap that’s too old, and stuff that isn’t even yours?
Dispute anything bad you are unsure of, isn’t yours or is more than 5 years old. It has to be taken off once it’s 7 yo (there are some exceptions), but often small stuff will get removed if it’s disputed and it’s old enough. IANAL, YMMV.
A few FICO tips- keep your oldest account. Yes, you can close some of the others, it could mean a minor temp hit, but it’s better than paying fees and penalties. Don’t have a “What’s in your Wallet” card.
[/QUOTE]
As well,if you are closing accounts, do NOT close accounts with unpaid balances. Meaning, if you owe BigBank 2k on your credit card, and want to close the line and still make payments, don’t close the line. You credit limit will be listed as “$0” with a balance of $2000. As well, they will often raise your interest rate as it is viewed as negative information.
[QUOTE=FourPaws]
So, if one cannot pay cash for a house, they should pay rent, and not gain any equity or tax benefits that could offset the interest paid? And pay rent until they can save enough money to buy a house outright?
I’d rather throw my money away towards interest vs. renting, which in itself is basically “borrowing” the property. In short, not all interest is bad.
[/QUOTE]
It’s still, at best, unfortunate that you find yourself in a position of borrowing.
Borrowing to buy a home is a mistake for many, but perhaps not all, consumers.
One problem is that folks tend to buy homes that are more luxurious than the apartments they’d choose to live in.
Of course, the topic of buying more home than you need is a side point with substantial potential to be its own thread.
If you choose a modest apartment while saving and investing the cost difference between home ownership (which is substantially more than just the payment itself) and rental, I suspect you could wind up with a favorable outcome for renting in most, if not all, circumstances.
I’ve never run the numbers between buying a home early and saving up for a substantial downpayment/outright purchase. It would be interesting. Perhaps you know of such a comparison?
Still, borrowing for slowly-depreciating assets certainly beats borrowing for quickly-depreciating assets.
[QUOTE=ZipperJJ]
I think you, me and Athena are always saying the same thing.
[/quote]
I think so too. Thanks for your thoughts.
That is exactly the company I was thinking about. More to the point, it was exactly the company I was thinking of when I cut that damn card in half and sent it back along with a check for the balance in full.
