Author Topic: Credit cards  (Read 6392 times)

Offline dcdwort

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Re: Credit cards
« Reply #15 on: September 28, 2012, 08:58:18 AM »
Joe Sr,  Now you are taking me back.....  When I was growing up in OK our local gas stations near the interstate also gave a cash discount to locals that was not available to "outsiders".  I would be 3-4 cents a gallon when gas was less than $0.60/gal.
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Offline euge

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Re: Credit cards
« Reply #16 on: September 28, 2012, 09:22:51 AM »
I remember back in the 70's my Dad had an American Express... I was very young and impressionable. He said- "it's the only one I have and can charge as much as I want but have to pay it off at the end of the month..." It was used sparingly and as we spent a lot of time overseas American Express Traveler's checks were used primarily. I remember Dad having sheaths of them. Probably he used the card when renting cars. Regardless, it wasn't until the 90's where people seemed to have more of them. Cards were still for business or for people who could afford them as a convenience as writing checks for large purchases was commonplace.

As a result it stuck with me through my 20's and 30's that credit cards are extremely dangerous so took refuge in zero credit. Which incidentally, is one way to foil identity thieves as it takes a while to establish and have decently dangerous access to credit; but, is a pain in the ass when you actually want to buy anything that requires a loan or a credit check- such as a vehicle or rental property.

When I actually established credit it was with a low-limit secured credit card and built it up quickly. I paid in full each month and my limit was extended until I hit my discomfort level. I haven't asked for an increase in 6 years- nor has an offer been extended.

All I can say in these days of easy credit it appears to me that the creditors want to hook you young and hard- deep enough to where it'll take real effort to clear the balance. My opinion is that if an individual cannot afford to pay off the card every month then it is being utilized wrong or they can ill-afford to possess the instrument.

I like the idea of loadable cards but think the fees that are charged outweigh the benefits of actually using one. A debit card linked to a separate low-balance personal expense account to which one can transfer funds to sounds like a decent alternative. Give one to each kid and put their allowance on it twice a month. Teach them how easy it is to wipe oneself out... ;D Establish discipline! BTW what is the average "allowance" these days?

Funny thing is I've gone for months and months without any cash at all. Too easy to use the card. 8)
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Offline Slowbrew

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Re: Credit cards
« Reply #17 on: September 28, 2012, 09:31:30 AM »
My high school age kids get $40/mo from Mom and Dad.  We cover the major expenses (gas, insurance, the car and such) so the allowance is so they have spending money for a movie, snack, date or some such.  I know kids who get 100-200 but they're folks expect them to cover more of the basic expenses.

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Offline morticaixavier

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Re: Credit cards
« Reply #18 on: September 28, 2012, 10:15:23 AM »
Part of your credit score is the amount of credit utilized vs available. So if you have like a $1000 limit and use 50% of that on a monthly basis and everything else is equal you will have a lower credit score than someone with a $25000 limit and using that same $500 per month.

It's the ratio between your balance and available credit it's true but if yo pay off your balance every month it doesn't really matter as the ratio between $0.00 owed and $1,000.00 available and $0.00 owed and $25,000.00 availabe is exactly the same. Now if you are carrying a balance on one card and cancel a different card then your score takes a hit because your ration has changed by the amount available on the closed card.

I just did this research becuase I finally got rid off all my credit card debt by borrowing money from family. (yeah family) one upside of the poor economic condition in the country right now is it actually makes good economic sense for my mother in law to take money out of her retirement investements and lend it to me at 5% interest over two years. She's going to make more on that couple grand than she would have leaving it in mutual funds.
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Offline Slowbrew

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Re: Credit cards
« Reply #19 on: September 28, 2012, 11:06:54 AM »
Part of your credit score is the amount of credit utilized vs available. So if you have like a $1000 limit and use 50% of that on a monthly basis and everything else is equal you will have a lower credit score than someone with a $25000 limit and using that same $500 per month.

It's the ratio between your balance and available credit it's true but if yo pay off your balance every month it doesn't really matter as the ratio between $0.00 owed and $1,000.00 available and $0.00 owed and $25,000.00 availabe is exactly the same. Now if you are carrying a balance on one card and cancel a different card then your score takes a hit because your ration has changed by the amount available on the closed card.

I just did this research becuase I finally got rid off all my credit card debt by borrowing money from family. (yeah family) one upside of the poor economic condition in the country right now is it actually makes good economic sense for my mother in law to take money out of her retirement investements and lend it to me at 5% interest over two years. She's going to make more on that couple grand than she would have leaving it in mutual funds.

Glad to hear I'm not the only one doing creative banking.  8^)

Last year when we suddenly needed to replace the high school car (but not the high school kids, thankfully) we were looking at financing part of the cost.  We didn't want to impact the "have money set aside to live on if you get laid off" plan but we decided to "borrow" the money from a savings account that only makes .2%.  We paid it back over 12 months at 8%.  It was the best return on a cash investment I made all year.

Paul
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Offline phillamb168

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Re: Credit cards
« Reply #20 on: September 29, 2012, 10:44:46 PM »
Something not many people outside of my (Gen Y) generation realize: our generation got screwed with a capital S on college loans. Right about 1995,98, when credit in general became more accessible, people started getting loans for college. Right about 2000, 2002, when I went to college, Universities had realized that they, too, were sitting on cash cows, and so raised tuition -a LOT- and made a big deal of how they would help you finance your education. Looking back on it, it's basically like the used car lot guy who says "don't worry, I've got a cousin at the bank, we'll get you taken care of (... for 7%)."

I came from a background of not having much money, and while I had scholarships, they didn't begin to cover the costs. I now have about $600 to pay back every month, and there's 15 years left on the damn things. I failed out, for reasons that are too complicated to go into here, and what was amazing, looking back on it, was that the school never once contacted me when my grades started slipping (some of the profs did, though) but I got about a phone call a day when I dropped out and they stopped getting paid.
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Offline punatic

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Re: Credit cards
« Reply #21 on: September 30, 2012, 01:44:35 AM »
BFI actually drove by and put up a thread with legs?

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Offline nateo

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Re: Credit cards
« Reply #22 on: September 30, 2012, 06:31:40 AM »
Looking back on it, it's basically like the used car lot guy who says "don't worry, I've got a cousin at the bank, we'll get you taken care of (... for 7%)."

Yeah, something I wish more people knew about was how college loans have gotten screwed recently. Hank Paulson fixed Stafford loans at 6.8%. Before that they were variable and capped at 8%. That happened in 2004 IIRC. The loans I took out first (subsidized Stafford with variable rates) are about 2% right now, but all the others are 6.8%.

What I don't get it is why Federally subsidized loans should even be run through for-profit banks, especially since you can't refinance them or wipe them out with bankruptcy. It's basically a no-risk cash cow for a private bank, and there's no way a no-risk loan should be 6.8%.

BFI actually drove by and put up a thread with legs?

I'm just as perplexed as you are.
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Offline euge

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Re: Credit cards
« Reply #23 on: September 30, 2012, 07:38:26 AM »
I got my student loans consolidated at 6.25% and have halfway paid them off. Was paying 3x the monthly amount until things got bad in euge's personal economy. ::)

First opportunity that particular loan is gone. Then the mortgage. After that I'm very unlikely to go into personal debt again. For business I'll possibly risk debt but owing money with interest sucks in my opinion.
The first principle is that you must not fool yourself, and you are the easiest person to fool. -Richard P. Feynman

Offline nateo

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Re: Credit cards
« Reply #24 on: September 30, 2012, 07:47:29 AM »
I got my student loans consolidated at 6.25% and have halfway paid them off. Was paying 3x the monthly amount until things got bad in euge's personal economy. ::)

First opportunity that particular loan is gone. Then the mortgage. After that I'm very unlikely to go into personal debt again. For business I'll possibly risk debt but owing money with interest sucks in my opinion.

Congrats on making headway on the debt. I'm back in school (recidivism?) and since most of my loans are subsidized Uncle Sam is paying the interest right now. I'm still making payments and trying to get my principle down in the meantime.

I agree re:personal debt. Taking on debt that generates revenue makes more sense than unproductive debt. Buying a big house makes no sense to me at all. Buying a big brewery however. . .
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Offline euge

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Re: Credit cards
« Reply #25 on: September 30, 2012, 08:09:21 AM »
Well getting back along to the lines of BFI's thread... When I went shopping for home-loans in 2007 it quickly became apparent that the lenders would lend me far more than I could afford to pay back. My friends counseled me to buy! Buy as much (debt) as I could afford!

Well, I actually had to calculate what I could afford, and it was far below what the banks were encouraging me to take on.

For nine months I looked at about a thousand houses in the area online; sussed out the market, settled on a quiet family/retiree neighborhood and looked at 10 houses. Picked a 34yo 3/2 ranch-style with a two car garage and a decent sized back yard. Put a bid in, my broker low-balled them a grand lower (without my knowing) and they took the offer. Without discussing the down-payment amount I can tell you what my monthly mortgage payment is: $224 a month...

The first principle is that you must not fool yourself, and you are the easiest person to fool. -Richard P. Feynman

Offline nateo

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Re: Credit cards
« Reply #26 on: September 30, 2012, 09:20:31 AM »
Well, I actually had to calculate what I could afford, and it was far below what the banks were encouraging me to take on.

I think a lot of people don't really think about what they can afford. But if they do, it's pretty hard for someone with no background in accounting to realistically calculate how much one can afford. I know I couldn't before I had wrapped my head around the conceptual framework.
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Offline bluefoxicy

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Re: Credit cards
« Reply #27 on: September 30, 2012, 09:49:51 AM »
it's basically like the used car lot guy who says "don't worry, I've got a cousin at the bank, we'll get you taken care of (... for 7%)."

No, wrong, completely.

A car loan at 11% isn't so bad.  It's not great, but it's not terrible.  You'd be stuck paying like $200/mo in interest at the beginning, which really sucks.

Let's take a mortgage though, at 3%?  For an $80,000 mortgage, 30 year, you're paying $200/mo in interest at 3%, instead of 11%.

Look at college loans now.  Tuition is going to take some time to pay off.  30, 40 years sometimes.  People go at least 20 years out.  And in the beginning, your loans sit and you don't even pay on them!  These days people go $150k, $200k in debt, at what 6%?  Think about taking a mortgage like that at 6%, and then not making payments, just let the interest accrue for 5 years or so.  Hint:  It's a lot more than $200/mo in interest accrual.

This is absolutely terrible.  I had a car loan at 10.73% and now it's like 1.99%, and I'm telling you long-term, huge loans are serious bad mojo.  Mortgages put a huge amount of interest on you--if you take a 15 year mortgage, your payment actually doesn't double (weird huh?), because you pay SO MUCH LESS in interest and yet you're paying like 2.875% instead of 3.0%.  How the heck does a $1000/mo mortgage at 15 years become a $920/mo mortgage at 30 years instead of a $250-ish/mo mortgage?

11% for 5 years and you're still not paying 73% of your payment into interest.  6% for 30 years and you're above 50%.  The higher your debt, the more interest you pay; the longer your debt, the less balance you pay down per time, which means again you  pay more interest.  Same interest rate but the payoff period is twice as long?  You're going to pay just about twice as much in interest, slightly less.

Offline narvin

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Re: Credit cards
« Reply #28 on: September 30, 2012, 02:55:51 PM »
For better or worse, credit, debt, and spending drives our economy.  If all the people complaining about thrift and personal responsibility got their wish, their favorite corporations would suddenly become a lot less profitable.
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Offline nateo

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Re: Credit cards
« Reply #29 on: September 30, 2012, 03:23:34 PM »
For better or worse, credit, debt, and spending drives our economy.  If all the people complaining about thrift and personal responsibility got their wish, their favorite corporations would suddenly become a lot less profitable.

I'm taking an MBA program right now. There's a huge emphasis on "corporate responsibility" and generating "value" for all parties involved, including stockholders, employees, neighbors, etc. rather than generating maximum short-term profits. This is all at a university in Missouri, which isn't exactly known for being "progressive." So, the times are a'changing, but maybe not very quickly.
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