topic Re: Why I always PIF in Credit Cards

Why I always PIF

sarge12 — Wed, 17 Aug 2016 05:42:42 GMT

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!!!!

Re: Why I always PIF

Anonymous — Wed, 17 Aug 2016 05:54:51 GMT

Thanks sarge!

Re: Why I always PIF

CatOfSpades — Wed, 17 Aug 2016 06:11:27 GMT

I agree. Carrying balances is a bad habit to be in. Even at 0%. Because it's still debt and anything can happen. A job loss. An emergency. It happens to people everyday. People who find themselves unable to pay all of their bills because of a medical emergency or a broken down car. They think they're immune, but no one is immune.

Having no credit card debt is the best feeling.

Re: Why I always PIF

Anonymous — Wed, 17 Aug 2016 06:15:10 GMT

I use my CC for EVERYTHING.

But I don't buy ANYTHING that I don't have the cash for to pay off right now.

I get all the perks and benefits of a credit card and not pay a single cent over in interest/fees etc.

Re: Why I always PIF

Anonymous — Wed, 17 Aug 2016 08:47:09 GMT

You'd be surprised how many people here love to carry balances lol

Re: Why I always PIF

Anonymous — Wed, 17 Aug 2016 08:52:25 GMT

@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.

Re: Why I always PIF

Anonymous — Wed, 17 Aug 2016 09:00:46 GMT

I do want to point out that CC issuers can't change the APR of purchases already made.

Other than that, continue the circle jerk!

Re: Why I always PIF

Mattopotamus — Wed, 17 Aug 2016 11:05:39 GMT

Solid Advice. I never carry a balance either, so APR is irrelevant to me. I do have one card, simmons first, that has an APR of 5.25% and if there was an emergency it would be my go to.

Re: Why I always PIF

SMikulski49 — Wed, 17 Aug 2016 13:51:04 GMT

It not good to carry a balance, but lets face it, if we did not have any people carrying balances and paying companies money from interest they would never offer these great benefits we are taking advantages off.

Re: Why I always PIF

takeshi74 — Wed, 17 Aug 2016 13:57:03 GMT

@sarge12 wrote:
Used carelessly they can be a credit score destroyer.

Score is a consideration but despite the fixation over them it's not all that matters. One's overall financal health is much more important and accumulating revolving debt is a serious problem for many.

@sarge12 wrote:
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.

Be careful assuming that with CLD's. PIF'ing doesn't necessarily mean that a balance does not report and a CLD can certainly increase revolving utilization. If one PIF's before the account's report date then a balance does not report. If one PIF's after the report date then the balance will report.

@sarge12 wrote:
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.

Don't conflate revolving utilization with carrying balances. A person carrying balances would be impacted. One can pay in full and be at any % revolving utilization (see above).

@sarge12 wrote:
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!!!!

Definitely. Don't spend what you don't have. Budget and sticking to them are important. As are liquid reserves. Do not rely solely on credit for emergencies. There's a lot more to financial health than just credit score and credit card limits. Credit cards are not assets.

Re: Why I always PIF

kdm31091 — Wed, 17 Aug 2016 13:58:50 GMT

I think the other thing that is important to point out is that having many cards you are spending across (say 10 or 20) makes it more difficult to budget because you aren't seeing your total spend easily. There are apps and spreadsheets to overcome this but it's very easy to forget what you are spending and where it's going. This doesn't really relate to PIF but something to think about. Less can be more with cards/budgeting.

As far as scoring and letting cards report balances, unless something is reporting maxed out or very high utilization I don't think the average consumer needs to worry about tweaking utilization. It's something "credit geeks" in the credit world do, but for the average consumer I don't think it's necessary and just causes frustration and confusion. Use your cards and pay your bills on times; that's the most important component of credit history.

Beyond that, I always PIF, unless I'm using a 0% promo or there is an unforseen temporary circumstance. There is no reason to pay interest on everyday purchases. If you find yourself constantly unable to PIF, you should be looking at your budget, or just going back to using debit, because why waste money on interest?

Re: Why I always PIF

sarge12 — Wed, 17 Aug 2016 14:20:27 GMT

@SMikulski49 wrote:
It not good to carry a balance, but lets face it, if we did not have any people carrying balances and paying companies money from interest they would never offer these great benefits we are taking advantages off.

True, if no one carried a balance we would not recieve the reward offers we now have. That does not mean I would advise people to carrry balances. If fires did not happen, the fire department would not have these nice fire trucks and well trained firemen. By that logic should we encourage people to start fires????

Re: Why I always PIF

SMikulski49 — Wed, 17 Aug 2016 14:49:50 GMT

@sarge12 wrote:
@SMikulski49 wrote:
It not good to carry a balance, but lets face it, if we did not have any people carrying balances and paying companies money from interest they would never offer these great benefits we are taking advantages off.

True, if no one carried a balance we would not recieve the reward offers we now have. That does not mean I would advise people to carrry balances. If fires did not happen, the fire department would not have these nice fire trucks and well trained firemen. By that logic should we encourage people to start fires????

haha I do not encourage people to carry balances, never have never will. I said in my post it is not good to carry a balance. Just simply saying thanks to those who do carry a balance because of them we get to enjoy the little perks.

Re: Why I always PIF

Xistaben2 — Wed, 17 Aug 2016 16:00:58 GMT

I love carrying balances!

... On 0% APR promo periods.

Re: Why I always PIF

galahad15 — Wed, 17 Aug 2016 16:28:40 GMT

I am not opposed to carrying balances on extremely low-interest, single-digit APR cards. Just for the record, almost all of my open credit cards are either PIF each month, or are carrying 0% promos that I will pay off without having paid a penny in interest.

Having said that: I do not mind carrying a balance on my FNBO Amex at 6.50% V APR for example, because the interest on the modest balance amount I'm carrying is actually neglible. If I had the 5.24% V Unify FCU Variable-Rate card (which I may be interested in acquiring at some point down the road), I would not mind paying interest on it either, in moderation of course.

Paying interest is not an evil in and of itself, again if one does so in moderation so the amount incurred is mathematically insignificant.

Re: Why I always PIF

Anonymous — Wed, 17 Aug 2016 16:32:00 GMT

@galahad15 wrote:
I am not opposed to carrying balances on extremely low-interest, single-digit APR cards. Just for the record, almost all of my open credit cards are either PIF each month, or are carrying 0% promos that I will pay off without having paid a penny in interest.

Having said that: I do not mind carrying a balance on my FNBO Amex, at 6.50% V APR, because the interest on the modest balance amount I'm carrying is actualy neglible. If I had the 5.24% V Unify FCU Variable-Rate card (which I may be interested in acquiring at some point down the road), I would not mind paying interest on it either, in moderation of course.

Paying interest is not an evil in and of itself, again if one does so in moderation so the amount incurred is mathematically insignificant.

But what is the context of "do not mind"? As in, "I make a purchase and I cannot PIF this month" or "I have an opportunity that will earn more than the interest" or "Since the amiount willl be small, I will pay less than full" (which makes no sense to me as you have to make a payment, so could just as easily be in full) or something else?

But I do agree that people can be overly prescriptive about always PIF when you can. Many people do not PIF when they buy a house (and to a smaller extent autos etc). There may be times when the immediate need for something that you cannot PIF makes sense, e.g. buying something now (when you don't have all the funds) as you know it will go up 10% next month.

Re: Why I always PIF

Xistaben2 — Wed, 17 Aug 2016 16:38:25 GMT

A lot of times, homeowners are the ones who tend to carry balances for large (and a lot of times unexpected) purchases that can't be paid in full at the time. Prime example now is my refridgerator is dying and spoiling my food, if I didn't have my 0% APR promo on my EDP, I would most likely use my Ring for such a purchase because the interest is my lowest.

Things like home repair, auto repair and other stuff are prime examples of why folks would carry. Then there is always the HELOC argument for the lower interest rate, but I would carry a balance on a credit card with 15% APR before I give up my home as collateral with a HELOC. Not a chance.

Re: Why I always PIF

Thomas_Thumb — Wed, 17 Aug 2016 16:58:00 GMT

@kdm31091 wrote:
I think the other thing that is important to point out is that having many cards you are spending across (say 10 or 20) makes it more difficult to budget because you aren't seeing your total spend easily. There are apps and spreadsheets to overcome this but it's very easy to forget what you are spending and where it's going. This doesn't really relate to PIF but something to think about. Less can be more with cards/budgeting.

As far as scoring and letting cards report balances, unless something is reporting maxed out or very high utilization I don't think the average consumer needs to worry about tweaking utilization. It's something "credit geeks" in the credit world do, but for the average consumer I don't think it's necessary and just causes frustration and confusion. Use your cards and pay your bills on times; that's the most important component of credit history.

Beyond that, I always PIF, unless I'm using a 0% promo or there is an unforseen temporary circumstance. There is no reason to pay interest on everyday purchases. If you find yourself constantly unable to PIF, you should be looking at your budget, or just going back to using debit, because why waste money on interest?

Good reasons to PIF all cards:

1) You don't have any 0% interest cards

2) Because it is a good habit and you can make the payment(s)

Financially it's beneficial to let all charges report on statements and then PIF each one 2 or 3 days before its due date. Simple, no hassle approach which works well if aggregate credit limits are more than 10x typical monthly spend.

If CLs are low relative to spend, then mid cycle partial payments may be needed (in addition to statement PIF) to avoid adverse action due to excessive utilization. Those new to credit may need some time to build up CLs thus, the "double payment per billing cycle".

Re: Why I always PIF

Anonymous — Wed, 17 Aug 2016 17:07:13 GMT

This won't probably be a popular opinion, but I do think it is healthy to carry a balance in other situations. I carry a few 0% intro APR balances that I have the ability to pay off because I want to show some of my new lenders that I can consistently pay my bill well above the minimum payment. So far, 3 of the 4 lenders I've carried with in that way have all provided 6 month auto CLIs.

I know that we always say that nothing is set in stone and we assume too much about lenders based on our sample size of experiences, but I think what we primarily do here is track patterns and that's what I look for here. I pay attention to lender reputation. There's a few here that will always slap your hand for that statement, but I believe that reputations and cliches often become so because there is some merit there. For example, I'll always PIF AMEX because I've read one too many times that among listed denial reasons for CLIs, not making high enough payments when those people barely carried a balance.

Re: Why I always PIF

galahad15 — Wed, 17 Aug 2016 17:10:22 GMT

@Anonymous wrote:
@galahad15 wrote:
I am not opposed to carrying balances on extremely low-interest, single-digit APR cards. Just for the record, almost all of my open credit cards are either PIF each month, or are carrying 0% promos that I will pay off without having paid a penny in interest.

Having said that: I do not mind carrying a balance on my FNBO Amex, at 6.50% V APR, because the interest on the modest balance amount I'm carrying is actualy neglible. If I had the 5.24% V Unify FCU Variable-Rate card (which I may be interested in acquiring at some point down the road), I would not mind paying interest on it either, in moderation of course.

Paying interest is not an evil in and of itself, again if one does so in moderation so the amount incurred is mathematically insignificant.
But what is the context of "do not mind"? As in, "I make a purchase and I cannot PIF this month" or "I have an opportunity that will earn more than the interest" or "Since the amiount willl be small, I will pay less than full" (which makes no sense to me as you have to make a payment, so could just as easily be in full) or something else?

But I do agree that people can be overly prescriptive about always PIF when you can. Many people do not PIF when they buy a house (and to a smaller extent autos etc). There may be times when the immediate need for something that you cannot PIF makes sense, e.g. buying something now (when you don't have all the funds) as you know it will go up 10% next month.

Thanks for your feedback. In response to the question above, I don't mind interest for a few reasons: thus far this year, I have earned more in rewards on the FNBO Amex than I have paid in interest charges; also by the end of the year based on interest accrued so far and taking into account the rewards that have off-set interest charges, I will have paid less than $100 in interest by the end of the year. So all in all, it is a relatively insignificant amount, or proverbial "pennies on the dollar", so to speak.