topic Re: Please Use Credit Responsibly! in Credit Cards

Please Use Credit Responsibly!

SnackTrader — Tue, 04 Jun 2013 02:38:56 GMT

Alright folks, this is my 1,000th post on MyFico. I didn't think when I started reading last June that I would ever post this much, but I got addicted to helping myself and helping others. It has been a blast thanks to all of you!

I want to celebrate this occasion with an accomplishment post, but since my 1 year anniversary of getting my first credit card is coming up, I will delay my accomplishment post and instead give some insight on something I think is severely lacking from some discussions on this forum. Emphasis on some, not all.

That is - Financial Responsibility!

Many who have been in credit problems before know that it isn't always their fault when the creditors come calling. Financial strain comes from illness, divorce, job loss, and so much more. But the easiest way to avoid the impact from these problems is to live within your means consistently when you have that option. And that's where credit cards come in - here are three rules I follow for myself:

1) I refuse to use the 0% interest periods on my cards (all five are in that period) because that is money I will need to pay back over time. A $120 purchase on day 1 of your 12 month 0% interest period means $10 extra per month towards your balance. That $1,200 smart TV means an extra $100. Do I have the extra discipline to save that much extra? Yes. But can I count on my car not breaking down or the health of my family members staying the same or the price of gas not going up 300%? No. So I don't use it.

2) I am careful with the size of my app sprees. Adding a card with a bonus cash back offer requires a certain level of spending within a short period of time. Adding too many of these cards will increase my spending to a level above my comfort levels. Lenders require this spending for their profitability since they are giving you cash back. If you compound this by spending too much and paying interest, or even just spending money you didn't want to spend, you just played right into their hands. Depending on your income it could set you back months financially. So I am trying to go one or two cards at a time from now on. My first app spree took way too much spending in too short a time.

3) I try to avoid paying interest. Obviously all my cards are 0%, but I haven't even carried a balance these last 12 months. Interest paid on things you don't need just reduces the amount you have to spend on things you need. It also reduces any and all benefit from rewards in the long run.

Because I don't plan to pay interest, I therefore don't plan to balance transfer. Moving around debt does not eliminate the fact that you have to pay the money someday. So I like to "forget" that BT offers even exist, and instead avoid charging anything that I cannot pay off within a month.

Sorry to sound like a broken record on all this stuff. I just want to help you all and hope this post helps each of you reevaluate if you are better off today than you were when you started reading about the wonders of credit cards.

Thanks for listening and being a great community. Let the discussion of other ways to improve financial stability commence!

Re: Please Use Credit Responsibly!

mcf — Tue, 04 Jun 2013 02:43:10 GMT

Hey Now! Thats what i call an awesome 1000 post! Congrats, and ty for the knowledge and sharing some awesome points for us all here.

Re: Please Use Credit Responsibly!

myjourney — Tue, 04 Jun 2013 02:43:45 GMT

@SnackTrader wrote:
Alright folks, this is my 1,000th post on MyFico. I didn't think when I started reading last June that I would ever post this much, but I got addicted to helping myself and helping others. It has been a blast thanks to all of you!

I want to celebrate this occasion with an accomplishment post, but since my 1 year anniversary of getting my first credit card is coming up, I will delay my accomplishment post and instead give some insight on something I think is severely lacking from some discussions on this forum. Emphasis on some, not all.

That is - Financial Responsibility!

Many who have been in credit problems before know that it isn't always their fault when the creditors come calling. Financial strain comes from illness, divorce, job loss, and so much more. But the easiest way to avoid the impact from these problems is to live within your means consistently when you have that option. And that's where credit cards come in - here are three rules I follow for myself:

1) I refuse to use the 0% interest periods on my cards (all five are in that period) because that is money I will need to pay back over time. A $120 purchase on day 1 of your 12 month 0% interest period means $10 extra per month towards your balance. That $1,200 smart TV means an extra $100. Do I have the extra discipline to save that much extra? Yes. But can I count on my car not breaking down or the health of my family members staying the same or the price of gas not going up 300%? No. So I don't use it.

2) I am careful with the size of my app sprees. Adding a card with a bonus cash back offer requires a certain level of spending within a short period of time. Adding too many of these cards will increase my spending to a level above my comfort levels. Lenders require this spending for their profitability since they are giving you cash back. If you compound this by spending too much and paying interest, or even just spending money you didn't want to spend, you just played right into their hands. Depending on your income it could set you back months financially. So I am trying to go one or two cards at a time from now on. My first app spree took way too much spending in too short a time.

3) I try to avoid paying interest. Obviously all my cards are 0%, but I haven't even carried a balance these last 12 months. Interest paid on things you don't need just reduces the amount you have to spend on things you need. It also reduces any and all benefit from rewards in the long run.

Because I don't plan to pay interest, I therefore don't plan to balance transfer. Moving around debt does not eliminate the fact that you have to pay the money someday. So I like to "forget" that BT offers even exist, and instead avoid charging anything that I cannot pay off within a month.

Sorry to sound like a broken record on all this stuff. I just want to help you all and hope this post helps each of you reevaluate if you are better off today than you were when you started reading about the wonders of credit cards.

Thanks for listening and being a great community. Let the discussion of other ways to improve financial stability commence!

Congrats on the milestone post and great info

Re: Please Use Credit Responsibly!

Rhaeny — Tue, 04 Jun 2013 02:44:46 GMT

Great advice for sure. And as you've said, we hear about all of the approvals, but with the approvals does come a great level of financial responsibility. It just take a second to swipe but it can be difficult to pay the consequences.

Re: Please Use Credit Responsibly!

mcf — Tue, 04 Jun 2013 02:46:45 GMT

@Rhaeny wrote:
Great advice for sure. And as you've said, we hear about all of the approvals, but with the approvals does come a great level of financial responsibility. It just take a second to swipe but it can be difficult to pay the consequences.

AMEN A second can leaad to 7.5 yrs quick... been there done that!

Re: Please Use Credit Responsibly!

Anonymous — Tue, 04 Jun 2013 02:46:50 GMT

+1!!

Re: Please Use Credit Responsibly!

asphaltcowboy — Tue, 04 Jun 2013 02:49:20 GMT

Well spoken @snack, congrats on 1,000 post

You offer great advice!!

Re: Please Use Credit Responsibly!

RandomCreditDude — Tue, 04 Jun 2013 02:59:09 GMT

I agree with this in every manner, shape, and form!

Here's how I use credit: I only buy things that I can afford to pay off in full that month. I have carried a balance on zero interest, but never more than a sum that I couldn't pay instantly; I carry balances for stuff like airline tickets, using the CC as a zero interest loan with a steady payout. Basically smoothing out my cash flow.

Basically, it's a simple rule. I know how much I earn, and therefore, how much I can afford to spend. Sometimes I allow myself to spend a little more. When I say "little more", I mean buying the $250 video card instead of the $200 one; nothing crazy like buying a Camaro instead of a Honda.

I sometimes think that the easy access to credit in the US leaves some people with a sense of detachment to the value of money. I'm a recent immigrant from a country where living on credit is pretty much unthinkable (at least in my family). Everyone has credit cards, but the idea of buying stuff that you clearly can't afford just because you have credit doesn't make sense.

I hope to buy a house in the next five years, and for that, I need to have excellent credit. That's where I'm headed, slowly... it's the American dream! Work hard, and reap your rewards.

Re: Please Use Credit Responsibly!

E150GT — Tue, 04 Jun 2013 03:02:45 GMT

great post. I should have done that last year and the year before. I could have saved myself about $500 in interest charges. I got tired of it and I came a lookin for help and I found this place. Im glad I did and thank you all for your guidance. I now have a good set of cards and most have decent limits and I have not paid a dime in interest since the begining of the year! I now have two cards in the interest free period but I have no plans to revolve a balance on any of them.

I have added my little sister to two of my cards as an authorized user because I know she was itching to get a credit card, and before I think she should, she should learn to use them responsibly. I am teaching her about stuff no one else did and I think she will benefit. She has been great so far. I may even let her use some of the rewards she has earned on my cards! lol

Re: Please Use Credit Responsibly!

RSCo — Tue, 04 Jun 2013 03:07:43 GMT

@SnackTrader wrote:
Alright folks, this is my 1,000th post on MyFico. I didn't think when I started reading last June that I would ever post this much, but I got addicted to helping myself and helping others. It has been a blast thanks to all of you!

I want to celebrate this occasion with an accomplishment post, but since my 1 year anniversary of getting my first credit card is coming up, I will delay my accomplishment post and instead give some insight on something I think is severely lacking from some discussions on this forum. Emphasis on some, not all.

That is - Financial Responsibility!

Many who have been in credit problems before know that it isn't always their fault when the creditors come calling. Financial strain comes from illness, divorce, job loss, and so much more. But the easiest way to avoid the impact from these problems is to live within your means consistently when you have that option. And that's where credit cards come in - here are three rules I follow for myself:

1) I refuse to use the 0% interest periods on my cards (all five are in that period) because that is money I will need to pay back over time. A $120 purchase on day 1 of your 12 month 0% interest period means $10 extra per month towards your balance. That $1,200 smart TV means an extra $100. Do I have the extra discipline to save that much extra? Yes. But can I count on my car not breaking down or the health of my family members staying the same or the price of gas not going up 300%? No. So I don't use it.

2) I am careful with the size of my app sprees. Adding a card with a bonus cash back offer requires a certain level of spending within a short period of time. Adding too many of these cards will increase my spending to a level above my comfort levels. Lenders require this spending for their profitability since they are giving you cash back. If you compound this by spending too much and paying interest, or even just spending money you didn't want to spend, you just played right into their hands. Depending on your income it could set you back months financially. So I am trying to go one or two cards at a time from now on. My first app spree took way too much spending in too short a time.

3) I try to avoid paying interest. Obviously all my cards are 0%, but I haven't even carried a balance these last 12 months. Interest paid on things you don't need just reduces the amount you have to spend on things you need. It also reduces any and all benefit from rewards in the long run.

Because I don't plan to pay interest, I therefore don't plan to balance transfer. Moving around debt does not eliminate the fact that you have to pay the money someday. So I like to "forget" that BT offers even exist, and instead avoid charging anything that I cannot pay off within a month.

Sorry to sound like a broken record on all this stuff. I just want to help you all and hope this post helps each of you reevaluate if you are better off today than you were when you started reading about the wonders of credit cards.

Thanks for listening and being a great community. Let the discussion of other ways to improve financial stability commence!

Hi Suze, I watch you every Saturday night.. Well, not really, I tivo you then watch you Sunday mornings as I recover from my hangovers..

Re: Please Use Credit Responsibly!

SnackTrader — Tue, 04 Jun 2013 03:20:06 GMT

LOL - You caught me, RSCo!!!

I'm glad the post sat well with so many of you, and it's great to hear the success stories about financial stability so keep those coming too!

Thanks for all the support!

Re: Please Use Credit Responsibly!

Anonymous — Tue, 04 Jun 2013 04:06:52 GMT

grats on your achievement!

Re: Please Use Credit Responsibly!

Anonymous — Tue, 04 Jun 2013 05:20:15 GMT

@E150GT wrote:
great post. I should have done that last year and the year before. I could have saved myself about $500 in interest charges. I got tired of it and I came a lookin for help and I found this place. Im glad I did and thank you all for your guidance. I now have a good set of cards and most have decent limits and I have not paid a dime in interest since the begining of the year! I now have two cards in the interest free period but I have no plans to revolve a balance on any of them.
I have added my little sister to two of my cards as an authorized user because I know she was itching to get a credit card, and before I think she should, she should learn to use them responsibly. I am teaching her about stuff no one else did and I think she will benefit. She has been great so far. I may even let her use some of the rewards she has earned on my cards! lol

It's always good when you can teach someone to use credit responsibly. That's what caused the meltdown a few years ago. People living beyond their means

Re: Please Use Credit Responsibly!

indiolatino61 — Tue, 04 Jun 2013 10:59:43 GMT

Congrats on your 1,000th!!!

Re: Please Use Credit Responsibly!

navigatethis12 — Tue, 04 Jun 2013 13:22:44 GMT

I'm not understanding what you mean about the $120 and $10 thing. If it's a 0% interest period, where is the $10 coming from.

With the multiple cards, I just think people get excited and before they realise it, they have $15,000 to spend in three months. There are some easy ways to do that, but you should never spend money that you wouldn't have spent anyway.

Not paying interest is a brilliant thing, but many people don't seem to care about paying $300 for something that should've only cost $200. No card that I know has a low enough interest rate to be tolerable. I could see if there was a card that was below the % you could get on a savings account, but I've yet to see one that low.

Re: Please Use Credit Responsibly!

thom02099 — Tue, 04 Jun 2013 14:05:24 GMT

Congrats not only on your 1000th post but also on your (continuing) excellent advice! ! !

Only thing I would add for others to contemplate is, consider those credit limit increases objectively and wisely. Do you really REALLY need to get that 3X CLI at the stroke of midnight on the 61st day? Is it a sporting event or is there a real need to jump to >$25K CL....whether it be AMEX, BofA, Chase, CITI, Discover...whomever.

Re: Please Use Credit Responsibly!

navigatethis12 — Tue, 04 Jun 2013 14:54:50 GMT

@thom02099 wrote:
Congrats not only on your 1000th post but also on your (continuing) excellent advice! ! !

Only thing I would add for others to contemplate is, consider those credit limit increases objectively and wisely. Do you really REALLY need to get that 3X CLI at the stroke of midnight on the 61st day? Is it a sporting event or is there a real need to jump to >$25K CL....whether it be AMEX, BofA, Chase, CITI, Discover...whomever.

This is kind of what I am concerned about. I have high limits on cards that I do not use very much and that could be a hinderance at some point. I have never had any negatives, but I am only 22, and I wonder if at some point I will start getting questioned on someone my age needs more credit with more than 100,000 available. I thought about closing Discover and another few cards or at least asking for limit reductions on them, but thought that multiple closed accounts/limit reductions would look bad to current lenders.

Re: Please Use Credit Responsibly!

HiLine — Tue, 04 Jun 2013 15:15:27 GMT

Some people do not need more discipline than others. I like your conservative approach. It suits best those that are new to credit or have shaky financial habits. Way to go!

Re: Please Use Credit Responsibly!

Anonymous — Tue, 04 Jun 2013 15:24:47 GMT

@thom02099 wrote:
Congrats not only on your 1000th post but also on your (continuing) excellent advice! ! !

Only thing I would add for others to contemplate is, consider those credit limit increases objectively and wisely. Do you really REALLY need to get that 3X CLI at the stroke of midnight on the 61st day? Is it a sporting event or is there a real need to jump to >$25K CL....whether it be AMEX, BofA, Chase, CITI, Discover...whomever.

Unfortunately, by and large this site encourages this sort of behavior. Whenever someone posts "I got approved for card X" or "Got my CLI" lots of posts just saying "Congratulations" etc, in the total absence of any knowledge if this really was a sound financial decision. Yes, it's nice to be supportive, but only if the underlying action makes sense.

( I would prefer a "like" mechanism, so people who want to can still congratulate, while decreasing the number of posts in a thread that don't add info apart from "Congratulations")

Re: Please Use Credit Responsibly!

HiLine — Tue, 04 Jun 2013 15:35:08 GMT

@Anonymous wrote:
@thom02099 wrote:
Congrats not only on your 1000th post but also on your (continuing) excellent advice! ! !

Only thing I would add for others to contemplate is, consider those credit limit increases objectively and wisely. Do you really REALLY need to get that 3X CLI at the stroke of midnight on the 61st day? Is it a sporting event or is there a real need to jump to >$25K CL....whether it be AMEX, BofA, Chase, CITI, Discover...whomever.
Unfortunately, by and large this site encourages this sort of behavior. Whenever someone posts "I got approved for card X" or "Got my CLI" lots of posts just saying "Congratulations" etc, in the total absence of any knowledge if this really was a sound financial decision. Yes, it's nice to be supportive, but only if the underlying action makes sense.

( I would prefer a "like" mechanism, so people who want to can still congratulate, while decreasing the number of posts in a thread that don't add info apart from "Congratulations")

At the same time, this site encourages healthy credit usage habits such as always paying in full and abstaining from applying for credit if you're looking for a big loan in the near future. As long as you build up a healthy system like this, it doesn't do harm to apply for the cards that benefit you and increase the total available limit for emergency situations. What concerns me is people having issues with controling their spending but still applying for new credit. What concerns me even more is those people rarely post on here about how they use the credit. Normally people only post about their overspending issues when they have stepped down the bankruptcy path and go straight to the Rebuilding forum.