PIF vs Intro APR.

[FixMyCredit1992]

Its repeated daily to always PIF, but how does that apply to purchases that exceed your monthly income?

Let's say your riding lawnmower quit, you do make $5k a month, but after expenses you only make $2k, and the mower is $5k.

If you did charge the riding mower, and took advantage of the 6 months 0% APR offer from your CC, you could pay it off slowly without being charged intrest.

While were at it, what if the big ticket item you need comes with better financing than your CC? What if the furniture store offers no interest for 12 months. What do you do then?

Seems like I never see non-credit card financing mentioned here. Is it always best to charge it on your card, or use the store's special financing? 

[red259]

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@FixMyCredit1992 wrote:

Its repeated daily to always PIF, but how does that apply to purchases that exceed your monthly income?

Let's say your riding lawnmower quit, you do make $5k a month, but after expenses you only make $2k, and the mower is $5k.

If you did charge the riding mower, and took advantage of the 6 months 0% APR offer from your CC, you could pay it off slowly without being charged intrest.

While were at it, what if the big ticket item you need comes with better financing than your CC? What if the furniture store offers no interest for 12 months. What do you do then?

Seems like I never see non-credit card financing mentioned here. Is it always best to charge it on your card, or use the store's special financing? 

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It depends on the person. You should always PIF if you can, although it is not required. Say you have 0% APR and you want to carry the balance. You can do that. However, it will impact your util and have an adverse impact on your credit score. If you have no plans to apply for CLIs or new cards/loans etc then a higher util isn't going to kill you. Do not max a credit card and then pay only the min every month. Credit card companies will freak about that. If you need to carry a balance make sure you make above the min payment each month and don't max the card all the way to the limit. I would be really uncomfortable with util over 80%. Others can chime in about how much overall util is too dangerous, since I strive to keep mine below 10% at all times. I don't do it out of necessity but its just because I am neurotic about my credit rating at the moment.

If you get better financing at the store than you would by paying with your credit card then you need to do a cost/benefit analysis. You should never put yourself in the hole trying to get rewards, because you may end up losing money in the end. If buying a big ticket item is going to max your card and you will be unable to pay it down for several months then I think that is a bad idea, unless you have lots of other cards with credit lines to use in the meantime that would bring down your overall util.   

[FixMyCredit1992]

Just looked at the Discover wally card. 0% APR for 24 months on purchases over $599.

[longtimelurker]

It depends where you are in your credit history I guess, but I agree with OP there is a lot of emphasis here on PIF and maybe too much.

To me, the goal is to minimize (preferably to 0) any interest charges.  PIF is a good way to do this if you can and has other good effects.   However, if you can't, and you have a 0% APR, then I think it is fine to pay minimum or above, planning, again if possible, to be able to pay it all by the time the 0% APR expires.  Yes, this will hurt your credit score because of utilization, but that's OK if you are not apping, and is temporary (can be cured by next statement, quicker than most issues!)   And you may not get auto-CLIs during this period, but that's OK.

If you don't have 0 APR, and the store offers cheaper financing (and it is without strings, such as charging interest on the amount if the balance isn't paid at the end of the introductory period) then yes, go for it.

Again, this is because my goal would be to minimize interest charges, others want to keep the score as high as possible and wouldn't want to carry a balance.  If the money wasn't there, I guess these people buy a cheaper mower or do without for a while  (too easy to come up with references to mower gardening, so I won't!)

[chwebb1]

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@FixMyCredit1992 wrote:

Its repeated daily to always PIF, but how does that apply to purchases that exceed your monthly income?

Let's say your riding lawnmower quit, you do make $5k a month, but after expenses you only make $2k, and the mower is $5k.

If you did charge the riding mower, and took advantage of the 6 months 0% APR offer from your CC, you could pay it off slowly without being charged intrest.

While were at it, what if the big ticket item you need comes with better financing than your CC? What if the furniture store offers no interest for 12 months. What do you do then?

Seems like I never see non-credit card financing mentioned here. Is it always best to charge it on your card, or use the store's special financing? 

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I personally ignore 0% APR offers since that's gotten me into a little bit of trouble in the past (nothing major, just took 8 months to pay off), and PIF all of my cards, even the ones at 0%. But as far as what to use, use the card that gives you the highest rewards or longest interest free period. I'd likely use an existing account so that you don't have to take a HP/New account.

[ForMyBiz]

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@chwebb1 wrote:

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@FixMyCredit1992 wrote:

Its repeated daily to always PIF, but how does that apply to purchases that exceed your monthly income?

Let's say your riding lawnmower quit, you do make $5k a month, but after expenses you only make $2k, and the mower is $5k.

If you did charge the riding mower, and took advantage of the 6 months 0% APR offer from your CC, you could pay it off slowly without being charged intrest.

While were at it, what if the big ticket item you need comes with better financing than your CC? What if the furniture store offers no interest for 12 months. What do you do then?

Seems like I never see non-credit card financing mentioned here. Is it always best to charge it on your card, or use the store's special financing? 

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I personally ignore 0% APR offers since that's gotten me into a little bit of trouble in the past (nothing major, just took 8 months to pay off), and PIF all of my cards, even the ones at 0%. But as far as what to use, use the card that gives you the highest rewards or longest interest free period. I'd likely use an existing account so that you don't have to take a HP/New account.

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This x100.  It's too easy to get in over my head.  So charging only what I can afford to pay immediately is a good way to manage finances and prevent bills from stacking up.  It can be really frustrating if you have multiple cards and can't afford to pay more than the minimum on any of them, so the bills start stacking up, but you're only treading water instead of truly paying down balances.

That said, we put my DW's tuition on a 0% card and will pay it over about 60 days, but it's kind of a unique situation, because she's an intern, but still had to pay for school (without the benefit of Financial Aid) this semester.  In this situation, I don't mind stretching it out because we have a very specific plan to get it paid quickly, and it's 0%.   interest.  Rather than tie up our cash in her tuition, it makes sense to stretch it over a couple of months.  Plus it shows good usage on a new card IMO.

[Open123]

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@FixMyCredit1992 wrote:

Its repeated daily to always PIF, but how does that apply to purchases that exceed your monthly income?

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There aren't any absolutes.

PIF, if the cost for carrying a balance is greater than the roe (return on equity) you can achieve if diverted elsewhere.  Given the high rates associated with CCs, PIF is almost always preferrable, since it's virtually impossible to realize a return greater than the interest (for CCs, usually 13% - 18%) with any kind of acceptable risk.

On the other hand, if it's a 0% interest, it would be more financially prudent to pay the minimum, and divert monies elsewhere, since it's quite easy to find a roe greater than 0 with virtually no or little risk.  

In either case, do what is best for you financial situation, and not your Fico score.  

[longtimelurker]

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@Open123 wrote:

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@FixMyCredit1992 wrote:

Its repeated daily to always PIF, but how does that apply to purchases that exceed your monthly income?

---

There aren't any absolutes.

PIF, if the cost for carrying a balance is greater than the roe (return on equity) you can achieve if diverted elsewhere.  Given the high rates associated with CCs, PIF is almost always preferrable, since it's virtually impossible to realize a return greater than the interest (for CCs, usually 13% - 18%) with any kind of acceptable risk.

On the other hand, if it's a 0% interest, it would be more financially prudent to pay the minimum, and divert monies elsewhere, since it's quite easy to find a roe greater than 0 with virtually no or little risk.  

In either case, do what is best for you financial situation, and not your Fico score.  

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+1, and this also applies, to a smaller extent, to PIF before statement cuts.  By paying earlier than needed (at least two weeks early and more in most cases) you are losing either interest or incurring an opportunity cost, in exchange for an improved FICO score that month.   I think the improved score has VERY little value, except in the case where you are about to apply for a mortgage or a large loan (in which case the value can be very big).   But in most cases, maximizing FICO this way is a loss maker from a financial view.  

And yes, maximizing might get you a CLI, but no-one has been able to explain the real value of a CLI for most people.  There is a time saving gain on very low CLs that are constantly being maxed out, but many of the CLIs are "just because", where people are using nothing like the existing limit.   And yes, CLIs may help utilization, but that just goes back to the value of an improved score!