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I've seen a lot of threads lately where someone with existing revolving debt that they aren't able to pay off is asking whether or not they'd be approved for X credit card, if they should apply for X card, etc. I find myself often chiming in with a very conservative response, which is that if you aren't able to pay off your current revolving account balances tomorrow, you shouldn't be thinking about applying for additional credit. I think this point is worthy of a thread of it's own, so here it is. I fully understand that there are more aggressive individuals out there and that my conservative stance/approach here may not be welcomed with open arms by all. I do however think it's a very important viewpoint to consider, as giving yourself the ability to take on additional revolving debt when you aren't able to eliminate your current revolving debt isn't a sound financial move most of the time.
Good post. Some people seem to apply and spend. others like to apply/cli and pad.I am waiting for the day DW uses her Amex card to buy a new car. lol
I partially agree with the concept of not applying for more credit unless I can pay off the balances I already have. I guess it just depends on the person. For example:
I have about 12 cards. Out of those 12, the only one I ever intend to put a massive amount on and keep a balance on for any period of time is Care Credit. The other cards, I use for cash back and rewards mostly and PIF, some things like car insurance I charge and then make payments for a few months so I have the option to not pay it all at once but that's about it. When I apply for new cards, it's mostly just to obtain a new cash back card or to pad my utilization. I never apply for cards with the intention of using the whole credit limit or even close to it (except for Care Credit which I see as somewhat different because I use that to finance dental stuff that I'd never be able to afford unless I made payments). I guess for people who have the self control to not spend all of their available credit, applying for a new card isn't so bad. However I do know people who have their cards maxed out most of the time because they can't control themselves around a large credit limit so in their case, applying for new credit when they can't pay it off is a bad thing.
@Anonymouswrote:...if you aren't able to pay off your current revolving account balances tomorrow, you shouldn't be thinking about applying for additional credit...
Wise words
Credit cards to me are simply debit cards with a parachute.
Cash back, points and miles are nice but I'll never put a dollar on any CC unless I can pay it off when the statement cuts.
Almost 6 on one hand, half dozen on the other.
Some people default and spiral out of control with their debt.
Some people manage debt very wise and keep it under control.
Not paying interest is a very handy tool, and as long as peeps can
use credit but not pay interest, opening more cards have some benefits.
HOWEVER if some are trying to open new cards with already
paying interest on balances they already have....well then
it could be like handing them a shovel to dig about 5+ ft deep!
Must use common sense and apply it in all situations in life.
Same can be said about auto loan, mortgage etc.
@Gmood1I have no idea what someone else's situation is or their end game. So I tread lightly on insulting one's intelligence when it comes to matters like this.
I don't see any intellegence-insulting going on here.
I think many people simply don't see their debt as a liability for whatever reason. They think that if they're making the minimum payments or "double the minimum payment" that they're in a good place. You can see this all the time in the CC forum and application forum. I'm simply trying to create awareness for anyone that falls into that category, especially if they're starting threads asking which card they should app for next.
While I don't necessarily agree with such a hard and fast rule, I definitely agree with the general principle.
Budgeting is hard. Most people (myself included) make it to early adulthood without having any idea how to manage their personal finances. Adding credit cards into this mix is a recipe for trouble. Running up credit card balances just because your day-to-day spending is more than your income is a great way to get stuck in a feedback loop of paying tons of interest to credit card compainies for years on end while barely scraping by.
That being said, carrying a balance can be OK, as long as you have a plan to pay it to zero within a fixed amount of time, and preferably with a low promotional interest rate. For example, last year I knew I was going to have a ~$5,000 expense to deal with. Rather than deplete my liquid savings down to zero, I found an 18-month 0% interest offer on one of my cards, and used that instead. I calclulated that I would need to pay about $300 a month to pay it down to zero before the interest kicked in. I could fit a $300 expense into my monthly budget fairly comfortably, so that's what I did. I was able to add an extra $50 to $100 to my payments most months, and I ended up paying the thing off several months early. That's the kind of flexibility that credit cards are great for, as long as you manage them wisely.
@Anonymouswrote:Good post. Some people seem to apply and spend. others like to apply/cli and pad.I am waiting for the day DW uses her Amex card to buy a new car. lol
I've often considered a car purchase with a Credit Card. If you have the funds to immediately pay it off that would be a like $320 Cash Rewards with a Citi DC on like a new base model Toyota Corolla. I also believe that you can negotiate a better price negating that $320 cash rewards rate by paying cash instead.