@sarge12 wrote:
As a society we are very reliant on credit cards, and if used properly they can offer wonderful benefits. Used carelessly they can be a credit score destroyer. Credit card issuers can change terms often with little notice, they can arbitrairaly reduce credit limits, raise interest rate, or even close your account, If you carry high or even normal balances this can cause undue hardships, damaged scores or inability to meet a budget. Why would I, or anyone allow their selves to be under such an uncertain financial situation. If someone has to make a large purchase and pay it over an extended period of time...seek an installment loan, which will almost certainly be at a lower interest rate and can not be changed in the middle of the contract, If you use CC's for your everyday purchases and PIF every time you never pay any interest at all (if it is a premium card) If then a CC company decides to raise your APR or decrease your CL it will have almost no effect on your score. If however you have cards that you have say 30% utilization on and it is at 13% interest you are at the mercy of the CC issuers. If the issuer decides to cut your CL in half, that 30% util. suddenly becomes 60% without you doing a thing. If they change that 13% interest to 25%, now that minimum payment will barely cover the interest and it will take forever to get it paid off. Do not give them this kind of power over you, PIF first month, every month. If you cant afford to do this, you need to make a budget, cause you are now or have before spending more than your income, and that usually leads to disaster. Do not become a slave to your cards, make them work for you!!!!
I'd also say that for scoring reasons have at least 3 cards, and always let at least 1 card report a balnce of $5 but no more than 30%.
I am not a slave to my cards at all. I have made quite a bit off of sign on bonuses and saving money, and placing that money into high yield accounts. Now that brinks and netspend 5% is capped at 1k, I am blessed to have stumbled upon a small town bank that has 5.01% apy on up to 5k, limit 2 checking accounts per person. (not to mention a 7.5% soon to be fixed no fee Visa).
I agree wholeheartedly with your logic. It takes a lot of responsibility to not go into debt. For me, getting all these cards not only helped my credit, but it was the missing puzzle piece to my extreme couponing and travel hacking. Heck some cases I pay my charges off weekly. But I have stopped doing that. You know why? Because that card has a grace period and I am losing out on dividends.
Also I would say that is up to the consumer to educate themselves and find cards that are fixed rate with a single digit APR. I am blessed to have a credit union that has 2.9% for the first year, then 7.9% fixed, no bt or ca fees, no annual fees. And whats even more awesome is the 2.9% is for the life of the balance transfer. You can bet the bank I will be immediately taking out a $2250 advance (hopefully more if I get an increase) this october right before the 2.9% rate goes up to 7.9. I will place that 2.9% into a 5% or higher investment, and the earnings wont be BIG, but it will also demonstrate to my CU that I can handle paying off a high balance.
As long as you are doing something with a guaranteed rate of return, then I don't see the problem in doing a BT offer with a 3% fee at 0% for 18 months. And then if you needed extra time to pay then shuffle it around without opening another card.
Most installment loans I have seen have a rate based on credit, and most folks dont always qualify for that 5-8% interest rate. Discover has a great cacluator tool in their BT section that is very helpful though.
As always continue to ask for APR reductions as often as possible without looking crazy (every 90 days or so). (and increases too when appropriate) Carry at least one fixed rate card. Use shopping portals and take advantage of card perks like 24 month extended warranties or trip insurance. I certainly wouldn't carry a balance for more than a month or two on a card that had high interest, and luckily I haven't had to.
I like to mix the ideas of Suze Orman and Dave Ramsey. Have a 6 month emergency fund, and build up from there. Motif investing is a neat way to buy partial shares of stocks for a low fee. Use themanwhocan's charts as a starting point to get an idea of what cards work best for you. Pick the ones that pay you the most, so you make money from the bank, not the other way around. Open 3 or 4 checking accounts a year if they have a 300-500 sign on bonus. But keep the majority of your checking account money in at least at 1.75-2-3+% account.
It really is not that difficult to find a credit union with a 5.5% apr, just takes some research. They might be far away, but you can believe with a small donation they will accept you as a member.
Also you have to realize that some folks don't get money every 2 weeks. They may be facing a penalty to access it early. Credit cards give us flexibility and the potential to earn rewards and bonuses on top of that. I don't agree with the Dave Ramsey $100 bill method, of feeling the burn. I see spending paper money as a loss of opportunity. But that is because I am a fairly smart consumer and I know how to triple dip with rewards (or more), shop when the time is right, reuse, repurpose, or resell items. Also not living beyond my means. Of course there are costs involved with free extravagant trips, but you can use these bonuses to have life experiences you wouldn't normally get to afford!
I feel a lot of times credit cards are blamed too much in certain situations. When if you look at the individual, their motivation (or lack thereof), spending habits, buying on impulse or emotional purchases, is the very dangerous culrpit. Its like a substance abuser using a needle to inject a drug. Its a quicker faster high. Sometimes folks are shopaholics too. Maybe the credit card is the needle for their problem? Why not direct folks to some groups that offer legit debt counseling instead of being a fanatic and making what works for you an absolute for everyone.
