My rules for using credit cards.....

[DI]

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@Anonymous wrote:

I think your rules are kind of draconian, but good for someone with no discipline.

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Actually those rules are just common sense.  Anyone who disagrees probably is carrying a load of debt. 

[Anonymous]

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@DI wrote:

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@Anonymous wrote:

I think your rules are kind of draconian, but good for someone with no discipline.

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Actually those rules are just common sense.  Anyone who disagrees probably is carrying a load of debt. 

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Nah, that other poster made a good point about annual fees. Unless you have an awful profile, you often are not paying for credit, you're paying for certain benefits or privileges attached to cards.

Also on the topic of debt - many people seem to fear leverage, either because they don't understand it or they don't trust themselves to manage it. I'm not advocating unnecessary debt, but it can be very beneficial and efficient in many circumstances. Think of the largest household name corporations (blue chip investment grade), and I guarantee you many carry at least some level of debt. Obviously this does not pertain to reckless people who consistently over consume worthless goods/services, but more for making use of cash through investments or growing assets. I realize you are referring to revolving debt, which I agree there are usually less reasons to justify (as opposed to term debt).

Finally, #5 may be good, but without more context it's kind of pointless. It makes sense if this mean you are charging a substantial % of a $50K limit to justify having it, or because you intend to make large purchases in the future. Otherwise what's the point, and more importantly why would banks extend credit with nothing in return (either in interest or ancillary business)? That's a committed line, and banks reserve capital at cost even against the most prime borrowers.

[Wolf3]

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@DI wrote:

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@Anonymous wrote:

I think your rules are kind of draconian, but good for someone with no discipline.

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Actually those rules are just common sense.  Anyone who disagrees probably is carrying a load of debt. 

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I think that is a ridiculus assertion.  Care to explain the rationale?

[scottwagnon]

i don't agree with the original poster, lenders like to see responsible patterns of debt. always carrying a zero balance is great (ideal) if you are going to apply for credit, but pointless if you want to show that you can handle it. always carrying a zero balance only shows lenders that you are timid, and cautious, but also shows lenders that you lack confidence in borrowing money or that you may not be able to manage money as well as your ability to be prompt and timidly cautious. there is a time to be a bear and a time to be a bull.

what is the point of having huge lines of credit if you dont see the point in occasionally using them.

one can always create their sort of secured line of credit by only using credit if you have the equal amount in the bank. to banks you are entrusted to unsecured lines of credit, but you personally rely on money you already have to back you up. so in a way you are not really in debt at all, but the banks don't have to know that.

[llecs]

#whatever: CCs are NEVER an emergency fund. If in a financial situation, lock them up or tear them up and let the situation pass before using them again.

[lenz99]

No need to play the util% game if you're not about to apply any new credit. Otherwise, pay down the util% on the previous 2 months(give CC some time to report) and thats enough. Remember, FICO don't have memory on util%.

Also, I see no problem for carrying balance with 0% or some low APR promotion, one can use the money to invest and get better return than paying it off instantly.

And, I don't get the rule #5, "Your goal should be to keep enough cards open to reach 50k in available revolving credit (with zero balances.)" so if I always PIF before the statement cuts  why shall I need such a high CL? I think the ultimate goal for credit, besides the benefits from CC itself, should be low APR for future finance needs.

[scottwagnon]

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@llecs wrote:

#whatever: CCs are NEVER an emergency fund. If in a financial situation, lock them up or tear them up and let the situation pass before using them again.

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i think it depends. if your car breaks down or a victim of minor catastropies or unplanned expeses, (robbed, bleach spill on suits, lightning, tv breaks, hurricanes, tornadoes, floods, kid needs stitches, cat vet, etc.) just make sure that this is something that is important enough to justifing the expenditure.

if for any reason, your current income is unstable and you are unsure of your future income, all of the above is null and void, except the kid that needs stitches. go to the bike store and use your card for the last time on a 400 dollar bike instead of fixing your car. or walmart bike if you are really desperate. get thick tires too if you have to trudge through the snow.

[Anonymous]

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@DI wrote:

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Actually those rules are just common sense.  Anyone who disagrees probably is carrying a load of debt. 

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Wow, what an arrogant and egotistic generalization, DI.  "Anyone who disagrees..." Seriously?

Disgusting attitude aside, even the content of the "rules" isn't even close to "common sense" when it comes to the world in general.  Like others have pointed out, rules for managing credit for one person may make no sense for another person (besides paying on time)...

Never apply for a card with an annual fee?  Besides the obvious rewards conversation, which has been covered, what about those who are rebuilding credit and have no other option?  Do you recommend that they go without a credit card to avoid the annual fee, and thus continue to live in FICO misery as they have no revolving tradelines reporting, helping build their credit to make them eligible for non-AF cards? 

No inquiries for 2 years?  as a rule?  What if i want to buy a house?  "Sorry, I can't apply for my mortgage.. my rules state that I still have 3 months remaining on my mandatory two years before I can allow an inquiry"

50k in credit lines?  For who?  A single 25 year old woman living with her parents with a 60k income and with no kids?  a 50 year old account executive making $250k a year who is a father of four?  A 19 year old high school drop out with no income?  How on earth could you possibly establish a numerical value for all people to rule their credit lives?

[Walt_K]

I'll also throw my hat in the ring with those disagreeing about annual fees.  Annual fees can make a lot of sense. 

And never close a card with a balance?  What if the lender is going to raise your rate and the only way to keep the rate is to close the card.

[stan_the_man]

@Walt_K --

I think one of was rules was, or at least should be, never charge what you can't afford to immediately payoff. If your bank raised your interest rate, who cares if you PIF every month.