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Credit Cards (in the US)
Fordman:
or here is another alternative:
PAY CASH!
Im on the Dave Ramsey plan, pay cash! So far, Im debt free except the house and if we stay on the plan, it will be paid off in the next 6 months. Then we work on the retirement plan!
Credit cards are for some fat cat banker getting richer while you get poorer!
I used to be in the credit card trap as well, I just got tired of working for someone else. Heard Dave Ramsey on the radio one day and from there, we have been working hard to be debt free!
Fordman
ahofle:
--- Quote from: Fordman on March 16, 2011, 02:21:35 pm ---Credit cards are for some fat cat banker getting richer while you get poorer!
I used to be in the credit card trap as well, I just got tired of working for someone else. Heard Dave Ramsey on the radio one day and from there, we have been working hard to be debt free!
Fordman
--- End quote ---
It's only a trap if you don't pay it off each month interest free. If you pay it off responsibly, then it's better than cash because you get airline tickets for expenditures you would normally have anyway.
Samstag:
--- Quote from: Fordman on March 16, 2011, 02:21:35 pm ---Credit cards are for some fat cat banker getting richer while you get poorer!
--- End quote ---
Why pay cash when the banks are willing to pay you to use their card?
I use a rewards card to pay for practically everything, including all my monthly bills. Then I pay the balance off a month later (free loan from the bank behind the card) and every time I hit 5000 points I turn it in for a $50 credit on my statement.
It's not a lot of money (1-3% depending on where I use the card) but as long as they're willing to pay me I'll keep taking it.
ChadTower:
--- Quote from: Samstag on March 16, 2011, 03:03:18 pm ---Why pay cash when the banks are willing to pay you to use their card?
--- End quote ---
Mostly because cash is a relatively zero risk proposition. You're not running up a balance to be paid at the end of the month. The risk of running that up and something odd happening so you can't pay it off within the cycle does exist.
Donkbaca:
What's the risk? Its non secured, non-recourse debt? The worst that could happen to you is that you get some collections phone calls and it hurts your credit.
But if you already have a house and a car, what difference does it make? Those are the main things you need credit for, other than those two things, who cares? Lets say worst case scenario, you over-leverage your credit cards and default. You spend 3 grand on a bankruptcy, the debt is gone, you just can't buy a house or a car for the next 3-5 years.
Only makes sense to pay cash for things you use right now, I have my car financed at 1.9% over 60 months, that's less than what inflation usually is. Instead of paying cash for the car, I financed it, put the rest of the money in an index fund where I expect it to earn between 5 and 10% a year. Its a no brainer.
Why are you paying off your house? My house is financed at like 5%, but I get a tax break for the interest I pay on it, so the effective rate is 3.25 % since I am in the 35% or so tax bracket. You would be much better off financially if you invested that money, its EASY to beat a 3.25% return, not to mention that the earlier you stock away your money, the greater the impact of compounding. People always talk about the "enormous amount of interest" you pay on a house over the course of a 30 year loan, but most people don't live in their houses for 30 years, most sell way before that time is up, and even if you DID stay in your house that long, interest rates are so low right now that you can get a fixed 4%
Leverage it awesome, if you know how to manage it.
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