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.
@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.
