topic Re: Keeping a balance on your card in Credit Cards

Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 04:07:49 GMT

I just wanted to address this topic because I know a few friends and family members who have struggled with debt. I also read about other people's horror stories with ongoing debt because they kept a balance on their card. Clearly, I'm still new to this whole credit card thing but I've caught on to a few tips and tricks in the past 5-7 months that has kept me far away from a pile of debt and I would like to share them. That being said, I currently have 1.2k balance spread across 6 of my cards. I, myself, will SOMETIMES keep a balance but only for 2 reasons. 1. The card is offering me 0% interest because it is a new card. 2. They have deferred no interest promotions. Any card that will charge me interest at the end of the month is paid off IMMEDIATELY so I don't end up paying more than I had orignally purchased. I made that mistake once with walmart because I thought my credit score would improve if I paid interest monthly. My credit score was improving monthly but I was also wasting my money because there is no reason to pay interest for a better score! That also keeps you in that violent debt cycle. I have a family member who couldn't afford her credit card payments so she just paid the minimum and eventually, the minium she was paying became the interest plus some more back on her card.

I will say this, for anyone who is keeping a balance on their cards, you need to be responsible. I learned at a young age on how to be responsible by helping my parents pay their bills on time because they were constantly late or behind on payments. To this day, I would say that I am EXTREMELY an*l about my bills. I always pay earlier and never on time or late. In fact, all of my deferred promotional deals are paid months in advance because I know that life happens, people screw up and computer's glitches.

I don't advice people to keep a balance but if you do, make sure you can pay it. I once wanted to put a motorcyle on my credit card, daydreaming about how I will keep my part time job forever and I'll be able to pay off my bike in about a year. I quit my job 4 days after working there. I am greatful I never went through with it or else I would be stuck with payments that I couldnt afford in the first place.

Last thing I wanted to say is that, credit cards are great for emergencies. It's not the most wonderful thing to owe 3k to a credit card company because you need your car fixed but that allows you to get to work which means you have income to pay your bills and debt.

I don't know everything about credit cards but I do hope this tid bit of information helps someone, even if it's just one person! If this is all old news to you then I apologize for wasting your time but hey, at least its a course refresher! Have a good evening everyone.

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 04:30:11 GMT

If you can't afford to pay for it in cash this moment, you shouldn't be buying it.

That's always been how I kept myself in check.

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 06:03:34 GMT

By all means take advantage of deferred interest financing, especially if it is 12 months or more. Even if you have a thin file a year from now it won't be being nearly as thin, and if you have any balances left over you should be in position for a quality prime card that has 0% into interest. Just be smart about it.

Carrying a balance on one card even at full APR isn't as bad as it seems. it's 2% monthly with a retail apr. If you have multiple cards doing that it gets ugly and a poor choice.

Re: Keeping a balance on your card

mjb59463 — Wed, 24 Aug 2016 06:18:15 GMT

I do my best to PIF my card now, and usually succeed. I only use one for daily spending (when the balance hits 800, I PIF) and two others are only for category spending that I know I can also be PIF'ed. Otherwise I don't do it.

Wasnt always the case. I was an idiot and still have about 15k worth of debt on 3 cards to pay off. There was a time when this amount was a LOT higher and caused me severe stress. For a significant while now, I've cut off spending on those cards, and even with interest charges, I should thankfully be debt free in just under 8 months.

If you do need to carry a balance, do it 0% interest or on a low interest card, and try to make sure it's on an ABSOLUTE necessity. If you want a new TV and your solution is to stick it on a 20% + APR card because you don't have the cash, bad idea. Firsthand experience there. If you need to replace your water heater and have no other options, put it on the card with the lowest interest that you have, but have the wherewithal to commit to paying it off and make it your primary goal no matter what. I've had to do that as well and it worked out.

Emergency funds can be valuable, but life can really throw some curveballs at you, and depending on your personal financial situation/age and circumstances in your life, the emergency fund might not cover you all the way. That's just reality.

CC's are a tool. Your success (or lack thereof) depends entirely on how you manage them.

Re: Keeping a balance on your card

galahad15 — Wed, 24 Aug 2016 11:47:36 GMT

When all is said and done, at the end of the day, the primary purpose that credit cards were designed for -- as a product by the card issuers themselves -- was to be used as a revolving loan, rewards aside (rewards are a nice feature certainly, but not what the basic and fundamental product was designed for). People seem to have no problem with taking out conventional bank loans, business loans, and similar kinds of loans, but when it comes to using a credit card as a revolving loan, people seem to have a built-in bias of "Thou shalt not carry a balance...ever! (or at least not during non-emergencies)", where carrying a balance on a credit card is always or nearly-always singled out as a bad thing, and as an anathema or taboo.

I disagree -- there is nothing inherently wrong or evil, with carrying a balance (within moderation), especially on a super-low-interest card in the single digits, if one chooses to do so willingly. If you revolve a balance, the trick is to not get over your head, and not let the balance being carried get out of reasonable and sustainable financial control. For the people who are paying AFs on their cards, I think another poster put it perfectly when s/he said that an AF (paraphrasing here) is the same as "paying the interest charges up-front anyway". Same deal with charge cards, you don't technically pay interest, you pay an AF, but the AF itself can be mathematically equivalent and converted into the same as paying interest charges, if you you divide the AF by 12 months anyway.

ETA: AFs, interest charges...pick your poison; I guess I'm just kinda tired of hearing certain posters come up with every possible reason in the world to justify paying exorbitant AFs (again, mathematically the same as interest paid up-front), only to turn around and try to criticize people who carry balances.

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 12:13:03 GMT

I dont think keeping a balance is a bad idea either. As for charge cards or credit cards with annual fees. I feel uncomfortable with those. But that's because I'm a college student with no certainty of income at the moment so that $495 fee at the end of the year would be too steep!!

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 12:29:19 GMT

I agree. I have slowly cycled out my debit cards but essentially pretend my credit cards are the same idea. Can't swipe if i don't have the money.

The only exception is making a slightly bigger purchase - through a card that has 0% or on my PayPal credit that has promo financing. But I always make sure I can make the monthly 'payments' before purchasing.

As soon as I turned 18, I applied for a few cards, not realizing how credit worked. I ended up getting a VS store card and PayPal credit, again not realizing how credit worked. I charged up about $ 600+ on BOTH accounts. Thankfully, I had a mother who could help and paid both off while I made small payments to her (interest free, of course). I quickly learned from that mistake and refuse to buy things 'just because.'

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 13:49:00 GMT

@galahad15 wrote:

ETA: AFs, interest charges...pick your poison; I guess I'm just kinda tired of hearing certain posters come up with every possible reason in the world to justify paying exorbitant AFs (again, mathematically the same as interest paid up-front), only to turn around and try to criticize people who carry balances.

You keep saying this, but it doesn't make it true! Now paying points on a mortgage, yes, that is paying interest up front (in return for a lower rate which may be a net saving). Paying an AF on the premium cards buys benefits of some valuable type, and is absolutely nothing to do with interest paid upfront.

As an example, I want to buy a new car and get financed $X at Y%. The salesman convinces me to add "Super Plasma Air Conditioning: reads your mind and adjusts for maximum comfort!!!!!" that costs $2000 more. I choose to pay this upfront rather than roll it into the finance plan. Is this "paying interest upfront"? or simply paying for a benefit I find useful.

Re: Keeping a balance on your card

galahad15 — Wed, 24 Aug 2016 14:03:26 GMT

@Anonymous wrote:
@galahad15 wrote:

ETA: AFs, interest charges...pick your poison; I guess I'm just kinda tired of hearing certain posters come up with every possible reason in the world to justify paying exorbitant AFs (again, mathematically the same as interest paid up-front), only to turn around and try to criticize people who carry balances.
You keep saying this, but it doesn't make it true! Now paying points on a mortgage, yes, that is paying interest up front (in return for a lower rate which may be a net saving). Paying an AF on the premium cards buys benefits of some valuable type, and is absolutely nothing to do with interest paid upfront.

As an example, I want to buy a new car and get financed $X at Y%. The salesman convinces me to add "Super Plasma Air Conditioning: reads your mind and adjusts for maximum comfort!!!!!" that costs $2000 more. I choose to pay this upfront rather than roll it into the finance plan. Is this "paying interest upfront"? or simply paying for a benefit I find useful.

How is it not true? As I mentioned earlier, paying an AF is paying extra money to use the card, the same way that paying interest charges is paying extra money to use the card; either way, you pay more for the card. There have been actual credit calculations performed online on websites like doctorofcredit, etc. (I forget the exact web page where I last saw an article like this, atm), where they have mathematically broken down AFs into their equivalent interest rates if divided by 12 months. Come to think of it, I actually may remember one such website: on a certain web page discussing the FNBO Prime for Life card with $89 AF, I remember the person making the calculation saying that people would be better-off with a no-AF, low-APR FNBO card with a slightly interest higher rate, b/c the AF amount outweighed the amount one would have to pay in interest, for the no-AF card. To come up with the calculation, the person on the web page calculated the amount of money the FNBO Prime for Life cardholder would have to pay, taking the AF into account as if it were equivalent interest payments, and ultimately, the takeway was the card was not worth it.

Re: Keeping a balance on your card

kdm31091 — Wed, 24 Aug 2016 14:02:00 GMT

@Anonymous wrote:
@galahad15 wrote:

ETA: AFs, interest charges...pick your poison; I guess I'm just kinda tired of hearing certain posters come up with every possible reason in the world to justify paying exorbitant AFs (again, mathematically the same as interest paid up-front), only to turn around and try to criticize people who carry balances.
You keep saying this, but it doesn't make it true! Now paying points on a mortgage, yes, that is paying interest up front (in return for a lower rate which may be a net saving). Paying an AF on the premium cards buys benefits of some valuable type, and is absolutely nothing to do with interest paid upfront.

As an example, I want to buy a new car and get financed $X at Y%. The salesman convinces me to add "Super Plasma Air Conditioning: reads your mind and adjusts for maximum comfort!!!!!" that costs $2000 more. I choose to pay this upfront rather than roll it into the finance plan. Is this "paying interest upfront"? or simply paying for a benefit I find useful.

I agree 100%. Paying interest on purchases and paying an annual fee are apples and oranges. Not related whatsoever.

Re: Keeping a balance on your card

galahad15 — Wed, 24 Aug 2016 14:07:44 GMT

@kdm31091 wrote:
@Anonymous wrote:
@galahad15 wrote:

ETA: AFs, interest charges...pick your poison; I guess I'm just kinda tired of hearing certain posters come up with every possible reason in the world to justify paying exorbitant AFs (again, mathematically the same as interest paid up-front), only to turn around and try to criticize people who carry balances.
You keep saying this, but it doesn't make it true! Now paying points on a mortgage, yes, that is paying interest up front (in return for a lower rate which may be a net saving). Paying an AF on the premium cards buys benefits of some valuable type, and is absolutely nothing to do with interest paid upfront.

As an example, I want to buy a new car and get financed $X at Y%. The salesman convinces me to add "Super Plasma Air Conditioning: reads your mind and adjusts for maximum comfort!!!!!" that costs $2000 more. I choose to pay this upfront rather than roll it into the finance plan. Is this "paying interest upfront"? or simply paying for a benefit I find useful.
I agree 100%. Paying interest on purchases and paying an annual fee are apples and oranges. Not related whatsoever.

AF = paying more in $ for a card up-front

interest charges = paying more in $ for a card over time

Either way you pay more money than you would if you had a no-AF card or paid $0 in interest, so how can one say that AFs and interest charges have no relation whatsoever?

Re: Keeping a balance on your card

kdm31091 — Wed, 24 Aug 2016 14:11:05 GMT

@galahad15 wrote:
@kdm31091 wrote:
@Anonymous wrote:
@galahad15 wrote:

ETA: AFs, interest charges...pick your poison; I guess I'm just kinda tired of hearing certain posters come up with every possible reason in the world to justify paying exorbitant AFs (again, mathematically the same as interest paid up-front), only to turn around and try to criticize people who carry balances.
You keep saying this, but it doesn't make it true! Now paying points on a mortgage, yes, that is paying interest up front (in return for a lower rate which may be a net saving). Paying an AF on the premium cards buys benefits of some valuable type, and is absolutely nothing to do with interest paid upfront.

As an example, I want to buy a new car and get financed $X at Y%. The salesman convinces me to add "Super Plasma Air Conditioning: reads your mind and adjusts for maximum comfort!!!!!" that costs $2000 more. I choose to pay this upfront rather than roll it into the finance plan. Is this "paying interest upfront"? or simply paying for a benefit I find useful.
I agree 100%. Paying interest on purchases and paying an annual fee are apples and oranges. Not related whatsoever.
AF = paying more in $ for a card up-front
interest charges = paying more in $ for a card over time

Either way you pay more money than you would if you had a no-AF card or paid $0 in interest, so how can one say that AFs and interest charges have no relation whatsoever?

Because you don't have to pay interest. An AF is a required part of holding certain cards. Interest is never required. You act as though interest is a foregone conclusion.

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 14:14:45 GMT

@galahad15 wrote:
@Anonymous wrote:
@galahad15 wrote:

ETA: AFs, interest charges...pick your poison; I guess I'm just kinda tired of hearing certain posters come up with every possible reason in the world to justify paying exorbitant AFs (again, mathematically the same as interest paid up-front), only to turn around and try to criticize people who carry balances.
You keep saying this, but it doesn't make it true! Now paying points on a mortgage, yes, that is paying interest up front (in return for a lower rate which may be a net saving). Paying an AF on the premium cards buys benefits of some valuable type, and is absolutely nothing to do with interest paid upfront.

As an example, I want to buy a new car and get financed $X at Y%. The salesman convinces me to add "Super Plasma Air Conditioning: reads your mind and adjusts for maximum comfort!!!!!" that costs $2000 more. I choose to pay this upfront rather than roll it into the finance plan. Is this "paying interest upfront"? or simply paying for a benefit I find useful.
How is it not true? As I mentioned earlier, paying an AF is paying extra money to use the card, the same way that paying interest charges is paying extra money to use the card; either way, you pay more for the card. There have been actual credit calculations performed online on websites like doctorofcredit, etc. (I forget the exact web page where I last saw an article like this, atm), where they have mathematically broken down AFs into their equivalent interest rates if divided by 12 months. Come to think of it, I actually may remember one such website: on a certain web page discussing the FNBO Prime for Life card with $89 AF, I remember the person making the calculation saying that people would be better-off with a no-AF, low-APR FNBO card with a slightly interest higher rate, b/c the AF amount outweighed the amount one would have to pay in interest, for the no-AF card. To come up with the calculation, the person on the web page calculated the amount of money the FNBO Prime for Life cardholder would have taking the AF into account as if it were equivalent interest payments, and ultimately, the takeway was the card was not worth it.

In that particular case, where the AF IS exactly to get a special APR, yes, that is exactly like paying points, and you can calculate whether it is worth it or not using standard assumptions.

But the high AF cards, like Amex Plat, Citi Prestige, CSR etc are very different. Assuming the benefits are greater than AF (if not, bad choice of card), if I spend $X + AF, either I end up spending less than $X (e..g fourth night free reducing total cost) or I get things I value more than $X + AF. In contrast, if I pay interest, I pay $X + interest, and get something valued only at $X

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 14:27:01 GMT

@galahad15 wrote:
AF = paying more in $ for a card up-front
interest charges = paying more in $ for a card over time

Either way you pay more money than you would if you had a no-AF card or paid $0 in interest, so how can one say that AFs and interest charges have no relation whatsoever?

Because in the AF case you are paying for a package of benefits you believe are worth more than the AF. So you are not paying "more" than an alternative, there isn't an alternative. t's not as if, for example, there is a free version of the Citi Prestige, which has a higher APR to make up for it, and then you choose which you want. The cards have benefits, and you know the price. You simply determine whether the benefits are worth the price.

. With interest, you pay more than the cost of the purchases for no extra value.

This really isn't difficult so I am not sure what the disconnect is.

Re: Keeping a balance on your card

galahad15 — Wed, 24 Aug 2016 15:00:36 GMT

@Anonymous wrote:
@galahad15 wrote:
AF = paying more in $ for a card up-front
interest charges = paying more in $ for a card over time

Either way you pay more money than you would if you had a no-AF card or paid $0 in interest, so how can one say that AFs and interest charges have no relation whatsoever?
Because in the AF case you are paying for a package of benefits you believe are worth more than the AF. So you are not paying "more" than an alternative, there isn't an alternative. t's not as if, for example, there is a free version of the Citi Prestige, which has a higher APR to make up for it, and then you choose which you want. The cards have benefits, and you know the price. You simply determine whether the benefits are worth the price.

. With interest, you pay more than the cost of the purchases for no extra value.

This really isn't difficult so I am not sure what the disconnect is.

OK so using your example of a beneficial AF, such as in the case of the Prestige, CSR, etc., where the benefit of the AF card either lowers or substantially lowers the cost of the AF -- for instance, the free hotel night you mentioned with the Prestige -- yes that is a good value for sure, if as you mentioned the benefits outweight the AF.

However, try this hypothetical scenario: instead of getting the free hotel night with the AF-based Prestige, you pay for it directly on say the 4.99% V Unify FCU card. With the Prestige, the AF is lowered; with the low-APR card, you pay for it on the card, and can revolve the balance or not. Depending on the specific cost of the hotel room you're staying at and the price you've negotiated per night at the hotel, you could possibly be better-off using either card? For instance, if you get a super-deep special discount on the hotel room by reserving it at a certain time of the year when hotels may be more likely to offer generous discounts, could there ever conceivably be a time where charging the hotel room right to the low-APR card instead of taking the free night with the Prestige and factoring in the overall Prestige AF, you might come out slightly ahead with the low-APR card?

Re: Keeping a balance on your card

sarge12 — Wed, 24 Aug 2016 15:17:57 GMT

@Anonymous wrote:
If you can't afford to pay for it in cash this moment, you shouldn't be buying it.

That's always been how I kept myself in check.

Now I agree 100% with this for wants. If however, my car breaks down at 3am and leaves me stranded...not paying for a wrecker may not be an option. In this case, I would not spend money for any wants period until I payed off the card.

Re: Keeping a balance on your card

Anonymous — Wed, 24 Aug 2016 15:19:47 GMT

@galahad15 wrote:
@Anonymous wrote:
@galahad15 wrote:
AF = paying more in $ for a card up-front
interest charges = paying more in $ for a card over time

Either way you pay more money than you would if you had a no-AF card or paid $0 in interest, so how can one say that AFs and interest charges have no relation whatsoever?
Because in the AF case you are paying for a package of benefits you believe are worth more than the AF. So you are not paying "more" than an alternative, there isn't an alternative. t's not as if, for example, there is a free version of the Citi Prestige, which has a higher APR to make up for it, and then you choose which you want. The cards have benefits, and you know the price. You simply determine whether the benefits are worth the price.

. With interest, you pay more than the cost of the purchases for no extra value.

This really isn't difficult so I am not sure what the disconnect is.
OK so using your example of a beneficial AF, such as in the case of the Prestige, CSR, etc., where the benefit of the AF card either lowers or substantially lowers the cost of the AF -- for instance, the free hotel night you mentioned with the Prestige -- yes that is a good value for sure, if as you mentioned the benefits outweight the AF.

However, try this hypothetical scenario: instead of getting the free hotel night with the AF-based Prestige, you pay for it directly on say the 4.99% V Unify FCU card. With the Prestige, the AF is lowered; with the low-APR card, you pay for it on the card, and can revolve the balance or not. Depending on the specific cost of the hotel room you're staying at and the price you've negotiated per night at the hotel, you could possibly be better-off using either card? For instance, if you get a super-deep special discount on the hotel room by reserving it at a certain time of the year when hotels may be more likely to offer generous discounts, could there ever conceivably be a time where charging the hotel room right to the low-APR card instead of taking the free night with the Prestige and factoring in the overall Prestige AF, you might come out slightly ahead with the low-APR card?

It's certainly possible that you can do better with a no AF card depending on offers and your spending pattern (and this needs to be taken into account when doing the "benefits exceed the AF" calculation. If I can get 33% off at the CHase UR portal, but the prices there are 50% higher than cheaper alternatives, not such a good deal!)

But this has nothing to do with low APR either. I can use a free 2% card with say a 25% APR and, providing I can pay in full, get the same Prestige-beating deal.

Much of your position seems to come from assuming that you will HAVE to pay interest. In those cases, getting a low APR with as low an AF as possible may make sense but you would still need to do the calculation. Assuming that there were no special deals available, we book four nights at an expensive hotel. Is charging and paying interest on a 4.99% card better or worse than paying the AF, paying 22% interest, but getting one night free (e.g. prestige)? Depends on the cost of the rooms, how long you plan to carry how much balance etc. Sometimes it will be better, sometimes worse