Current Savings

jtoast

Forsaken_GA wrote: »

If you're going to pay for things with plastic, you should be using a debit card. Visa and Mastercard, at the least, have the same fraud protection as a regular credit card, and you can't spend more money than you have.

At the risk of parroting someone else - learn to live on less than you make, and you'll be fine, and for gods sake, cut the credits card up, they are *NOT* your friend.

I have to completely disagree with you here. Debit cards are NOT the way to go. If someone steals a credit card, you dispute it and while the credit card company investigates, all you have lost is some credit line. If someone steals a debit card, they have access to real cash and you have to fight the bank to get it back. Not a happy situation...especially if you have rent due.

As to "can't spend more than you have," that also is false. Most banks hold vendor authorizations for up to a week before they fall off. If the charge hasn't been submitted by then the hold gets released. Sucks if that hold falls off, you forget, and a month old charge causes things to bounce.

If that happens on a credit card, worst thing that can happen is an over the limit fee. A mistake like that with a debit card can cause a mortgage payment to bounce....remember YOUR real money vs the Credit card companies money in the form of a credit line. Which one would you rather have at risk?

Credit cards are, in my opinion, the absolute best way to pay for things if you are a mature, responsible individual for several reasons:

1) Rewards. 1-5% cash back (depending on the card) adds up quick. I get several hundred dollars a year in cash rewards.

2) In cases of fraud, its your credit line that takes the hit, not your bank account.

3) Because of number 2, you have more leverage in disputes. If you use a debit card, the bank can just say "no" and keep your money. The cc knows that if its really fraud, you aren't going to pay the bill so they are more likely to side with you in cases that are somewhat unclear.

4) Perks such as extended warranty and automatic theft insurance for purchases.

Now, if you are the type who blows his entire paycheck the day you get it on hookers and video games, yea...stick with a debit card. For those who have a little discipline, there is absolutely no positive to debit cards over credit cards.

Forsaken_GA

jtoast wrote: »

If someone steals a debit card, they have access to real cash and you have to fight the bank to get it back. Not a happy situation...especially if you have rent due.

3) Because of number 2, you have more leverage in disputes. If you use a debit card, the bank can just say "no" and keep your money. The cc knows that if its really fraud, you aren't going to pay the bill so they are more likely to side with you in cases that are somewhat unclear.

This complete and utter rhetoric, at least when it comes to Visa and Mastercard. I suggest you go to their website and check out the zero liability guarantees. You have exactly the same protection and dispute options available with a properly covered debit card as you do with a credit card. You should do some actual RESEARCH, rather than repeating FUD. Whether you lose a credit card or a debit card, it's a hassle. The only way this is a risk is if they get your PIN# *and* your card at the same time, and that's not exactly an easy thing to do, unless you're being *very* stupid. If all they have is your card, and they run it like a credit card through the VISA or Mastercard auth system, then the bank doesn't enter into it. The Credit Card company themselves is responsible for it.

remember YOUR real money vs the Credit card companies money in the form of a credit line. Which one would you rather have at risk?

Yeah, don't fool yourself. If you use a credit card, it's YOUR money at risk (unless you decide to visit the nice people in bankruptcy court) either way. Keeping the credit card will cost you more money in the long run than one incident of identity theft.

If you use a credit card, it's your choice. I know, I know, you're the exception to the rule. You always pay off your credit card on time, etc etc. More power to you.

Hopefully everyone else can do math.

Forsaken_GA

jtoast wrote: »

Credit cards are, in my opinion, the absolute best way to pay for things if you are a mature, responsible individual for several reasons.

I'd actually like to address this a little more, hopefully in a rational manner.
I understand where you're coming from, as I used to believe the same thing. The problem is, life happens.

I honestly hope you have cash set aside for emergencies. Life will happen, and major financial events will occur. If you have to run out and drop a five figure emergency on a credit card, and you can't pay it off entirely before the grace period is up, your responsible use has disappeared. If you end up having to pay 30% interest because you weren't financially prepared for an event, that is quite irresponsible - if you'd had the cash available, the emergency would have cost you whatever the final tally is, and ONLY that.

Now, I could quote you the studies that show that when folks use plastic, they tend to spend more, because it doesn't have the same kind of impact that laying cash down has. In fact, those rewards you quoted are actually part of the problem - you think it's ok to spend 2 grand on something that you don't really need because hey, you're getting 2% back. Rewards programs are there simply to influence you to spend more with the credit card, because they're hoping you tap yourself out and can't repay before the grace period. The credit card companies don't WANT you to pay off your balance, they make more money if you just look at it as something that's a small additional cost per month, because then you become a recurring revenue stream.

Look at it this way - most of us prepare for retirement by investing. Whether it be single stocks, or buying part of a company in return for a % of the profits, or investing with mutual funds, the idea is that we give our money to other people so that they get the temporary benefit of a cash infusion, which when it's returned to us will be increased.

By accepting the temporary benefit of someone elses money so that they can make money off of you, you're doing the exact opposite of building wealth, you've put yourself on the wrong side of the equation. Now you're the one that has to come up with money to pay someone else back, probably to their benefit, instead of letting your money multiply and come back to you.

Again, you may be the exception to the rule, and if so, that's great. I sincerely hope you've put yourself in a position so that one or two life events doesn't erase the gains you may have made with responsible use. The bottom line is that most American's *aren't* that responsible. Debt is a huge problem in this country. If there were only upsides to using a credit card, the credit companies wouldn't be in business, because they wouldn't be making any money. They prey on the laziness, pride, and sense of entitlement that infests so many Americans.

For anyone who feels the need to use a credit card, please take a realistic assessment of yourself. Ask yourself honestly if you have the discipline to pay back on time every single month. Ask yourself honestly if you can contain your purchases to only what you can actually afford. Ask your honestly if you'd be prepared to weather an emergency without using the credit card as your emergency fund.

If you cannot handle that, you are much better off paying for everything with cash, and for the few occasions where cash isn't viable as a payment method (ie, ordering online), you're better off using a debit card. If you don't give yourself any option but to live on the money you actually have, you will come out the better for it.

erpadmin

Forsaken and Jtoast, you both make excellent points. I am one of those "life happens" folks...I am also someone who hase been the victim of debit card fraud. Jtoast is 100% right in terms of going through the hassle of debit card fraud....I am living proof and am not FUD...

It was Easter Sunday, 2008. I was on my way to my sister's house when I decided to check my online banking to see if any checks went through...(before the fraud I did this every couple of days...now I do it EVERY day). Lo and behold, some genius tried to take ~$600 out of my account and wire the money through moneygram to Marion Ohio (as was found by my town's police department). Man, I called my bank as they're a 24/7 operation and they said it would take about 10-15 days to get the money back. Then I had to call the gas company and tell them they might have a bounced check because of the fraud.

Everything, and I do mean everything was cleared up, but do not think for a second it's all instaneous with Zero Percent Liability....two weeks...of having an account with negative balance! I didn't have to pay any fees and the gas company cleared my check after it was all over. Since then, I closed that account and switched banks. Also, I never use my debit card for Visa purchases anymore...I use credit cards now....and for a couple of years, it was only use it for what I could pay cash for....but then life happened....

I got into a real bad accident due to ice. Unfortunately, warranty would not cover the damage, and I did not want to use insurance....the damage was $2k...and I did not have that money available...not without liquidating retirement assets....so I had to suck it up and use the credit card....I'm now a few grand in the hole as I had to put other stuff on it....I plan on getting out of the debt with my tax refund. Then we go back to responsible use. I have also socked money away to prepare for emergencies but $--t keeps coming up!! It's rough, man....but I'm sucking it up and making due.

At the very least, I max out my 457(b)...was able to do that with the "COLA" increases we get every year....the last COLA put me at the max, so by end of 2011, I'll have contributed that $16500....and I plan on doing that for the remainder of my career.....that's what makes retirement at 55 realistic for me. The only thing I need is an emergency fund....but I'm working on it.

za3bour

Credit Cards are devils in the shape of angels.

Forsaken_GA

erpadmin wrote: »

It was Easter Sunday, 2008. I was on my way to my sister's house when I decided to check my online banking to see if any checks went through...(before the fraud I did this every couple of days...now I do it EVERY day). Lo and behold, some genius tried to take ~$600 out of my account and wire the money through moneygram to Marion Ohio (as was found by my town's police department). Man, I called my bank as they're a 24/7 operation and they said it would take about 10-15 days to get the money back. Then I had to call the gas company and tell them they might have a bounced check because of the fraud.

Of course it's not instant. You are going to deal with a corporate bureaucracy, and the card issuer has to do their due diligence to make sure you're not defrauding them, but you did have the same protection as a credit card, yes?

You probably already figured this part out, so I'm saying it more for the benefit of the specators, but an emergency fund (that *isnt* in an account tied to your checking account) is the proper solution for this. Having an identity theft situation is a valid emergency. If folks have cash set aside for emergencies, then you're not going to bounce bill payments.

Personally, I keep my checking account light. The only money that stays in there is what I've budgeted for. My emergency fund is in an entirely separate account, which I've declined all electronic access to. It's still liquid, I just have to go to the bank if I need to pull cash out of it (This is also a great way to resist the temptation to actually spend it). This way, if my debit card ever does get compromised, the only thing they can possibly nab is whatever is left for that month, and since I have six months of income in the emergency fund, I won't be at risk of any bills being late or unpaid.

Now maybe I'm going overboard, or maybe I've been spending too much time dealing with disaster recovery scenarios and business continuity, but to me, it's common sense to limit your liability and limit your exposure.

And thank you for illustrating my point - no matter how careful you are, life can happen, and if you're forced into a situation where you have to resort to credit as an emergency fund, you're wiping out all the good behavior you've done before. Paying 30% interest on top of the fact that it's a stressful emergency *sucks*.

I just hope everyone takes a few lessons away from the discourse here - be prepared. Have a rainy day fund, because it's going to rain. And you're setting yourself up for failure if you leverage yourself to the hilt.

All it takes is one bad day to ruin years of financial progress, so plan ahead for that bad day to try and limit it's impact on your life.

Mishra

I just signed up for a checking account that grants 3.2% interest up to 15k.

I'm moving my emergency fund to my checking account. I'll just put a withdraw limit on it. Easy enough.

MAC_Addy

za3bour wrote: »

Credit Cards are devils in the shape of angels.

Bah, credit cards are good if you spend $10 - $50 monthly and pay it back each month. That way you gain more points on your credit score. The higher your credit score the better APR you get when applying for a loan (house, car etc).

erpadmin

Forsaken_GA wrote: »

Of course it's not instant. You are going to deal with a corporate bureaucracy, and the card issuer has to do their due diligence to make sure you're not defrauding them, but you did have the same protection as a credit card, yes?

Yes, you are correct. But this is where jtoast gets his win on that point; IT'S CASH!! Losing access to hundreds or thousands of money for 10-15 days while the corporate bureaucracy is sorting the details out is very scary...especially when you had checks written out. Between the bank recognizing the fraud and moneygram NOT approving the transaction because of their own internal mechanisms is why I got the money back with no penalty. Had this happened with a credit card, it would not have been so detrimental.

Forsaken_GA wrote: »

And thank you for illustrating my point - no matter how careful you are, life can happen, and if you're forced into a situation where you have to resort to credit as an emergency fund, you're wiping out all the good behavior you've done before. Paying 30% interest on top of the fact that it's a stressful emergency *sucks*.

I just hope everyone takes a few lessons away from the discourse here - be prepared. Have a rainy day fund, because it's going to rain. And you're setting yourself up for failure if you leverage yourself to the hilt.

All it takes is one bad day to ruin years of financial progress, so plan ahead for that bad day to try and limit it's impact on your life.

This is where you win. Even though I'm currently paying interest (and it's not 30%....it's more like 14.24%), I do not pay the monthly minimum. I pay a few hundred a month so that the interest doesn't hurt as much as well as make sure I am NEVER late on any bills that could report to the credit bureaus. That's how my credit score is above 700....like it or not, credit and how it is managed and leveraged is an important part of one's financial future. Whether you're shooting for a mortgage, a car loan, or something along those lines, you want the best rates you can get, period. Responsible credit card use help build that. After I am done paying back the debt, my emergency fund will get built up. I use calculators such as those found on dinkytown.net to make sure I pay them off quickly.

In my case, I'm not financially ruined....I just have a bit of a set back. Once my taxes are done and I get back whatever the amount, I'll be back on track.

jtoast

erpadmin wrote: »

This is where you win. Even though I'm currently paying interest (and it's not 30%....it's more like 14.24%), I do not pay the monthly minimum. I pay a few hundred a month so that the interest doesn't hurt as much as well as make sure I am NEVER late on any bills that could report to the credit bureaus.

I don't consider that a win.

There is no reason you can't use a credit card like a debit card. I do. I pay in full every month via online banking. Same amount spent as if I had used a debit card but without the potential liability.

There is also a third option. Charge cards such as AMEX that do not allow you to carry a balance. I use my AMEX green for all of my montly fixed expenses. I know they have to be paid by the end of the month, why not get the points?

As to the "if you can't pay the bill your screwed" argument, how is that different than not having the money in the bank? At least my way lets me buy a little time to keep the electricity on if I have to.

Worst case scenario, I keep my cash in the bank and file bankruptcy instead of making my last round of credit card payments. That's not an option when you use debit cards.

Yes I have a 6 month cushion saved. I also have a 401K (although not as big as I would like).

With that said, this is really beginning to derail the savings thread. If A mod wants to split this out (or someone wants to create a new topic) I'll be happy to participate but I will walk away from this thread and let the savings talk resume.

jtoast

Forsaken_GA wrote: »

I'd actually like to address this a little more, . I sincerely hope you've put yourself in a position so that one or two life events doesn't erase the gains you may have made with responsible use. The bottom line is that most American's *aren't* that responsible. .

I lied, one final post before I walk away from this thread.

Doing something non-optimal because most people can't is not a viable argument. If you can avoid the pitfalls, then there is no reason to follow the sheep to the slaughter.

Credit cards are a tool, no more, no less. It makes no sense to refuse to use a knife because some people get cut or to refuse to drive because thousands of people die in cars every year.

Yes, credit cards charge interest. Yes, credit cards want you carry a balance. Yes, if you don't pay attention, you can get in over your head. They also give cash back, travel points and make a nice safety net if you need money but it's not yet time to cash out that CD.

Like I said above, if I get laid off, I would rather pay my light bill and try to figure out where the money is coming from later rather than suddenly realize I'm out of cash with no heat in the winter because I used my debit card.

As to "life happens..."
Below is a post I made on another forum several years ago. I think it will shed a little light on my opinion on that subject.
Some Success Stories I Would LOVE To See Posted - CreditBoards

Devilsbane

jtoast wrote: »

I have to completely disagree with you here. Debit cards are NOT the way to go. If someone steals a credit card, you dispute it and while the credit card company investigates, all you have lost is some credit line. If someone steals a debit card, they have access to real cash and you have to fight the bank to get it back. Not a happy situation...especially if you have rent due.

Agreed. I have a Visa check card debit card, and I can still spend more than what is in the bank. My bank has always been good about working with me when something is disputed, but they didn't have to be. If my dispute had been for more than $10 they probably would have rethought that.

Not to mention, having and using a credit card is going to help you establish a credit history and help you get a loan in the future.

jibbajabba

Savings ? Whats that

Forsaken_GA

jtoast wrote: »

Credit cards are a tool, no more, no less. It makes no sense to refuse to use a knife because some people get cut or to refuse to drive because thousands of people die in cars every year.

So you would drive a car with known safety issues, just because you're a good driver and never had an accident before?

If so, I have a 2000 Ford Focus that I'd like to sell you.

Tools are something that can be used for good or ill, all depending on the will of the user. Credit Cards are backed by companies who do not have your best interests at heart. They are predatory entities who care about one thing, and one thing only - separating you from your money. There's a reason why the federal government had to pass legislation limiting what the companies can do. There's a reason why there's been a push for years to get them pushed off college campuses (hooking 'em young and early works for drug dealers too!).

As a total tangent, if any of you have ever criticized a company for it's anti-user business practices (like, oh, say Apple), and you use a credit card..... you may want to check your hypocrisy.

All in all, you're right in that this is derailing. Neither of us is going to convince the other to change our minds, so the endless repeating is of no benefit. I've made my arguments, and it's up to each individual to decide what's best for them, I don't judge.

erpadmin

jtoast wrote: »

I don't consider that a win.

There is no reason you can't use a credit card like a debit card. I do. I pay in full every month via online banking. Same amount spent as if I had used a debit card but without the potential liability.

Up until the issue with my car, me too! Dude, I have tens of thousands of dollars in credit card limits...I could get a whole bunch of laptops and still have credit to get me through for awhile. Sometimes, stuff like getting my car fixed has to be done and the only way it can is with available credit.

Don't get me wrong man, I'm not saying it's right. I needed to have cash stowed away for just this sort of contingency....this is why Forsaken gets the win on that point....(quit being a greedy bas-tid....lmao).

jtoast wrote: »

Worst case scenario, I keep my cash in the bank and file bankruptcy instead of making my last round of credit card payments. That's not an option when you use debit cards.

Yes I have a 6 month cushion saved. I also have a 401K (although not as big as I would like).

Bankruptcy....the surefire way to never see wealth. That's a nuclear bomb when only your fists would have been sufficient...

Aldur

Forsaken_GA wrote: »

If you're going to pay for things with plastic, you should be using a debit card. Visa and Mastercard, at the least, have the same fraud protection as a regular credit card, and you can't spend more money than you have.

At the risk of parroting someone else - learn to live on less than you make, and you'll be fine, and for gods sake, cut the credits card up, they are *NOT* your friend.

This is probably true for most people but to me credit cards are probably one of the best inventions of the 20th century.

In my case I had pretty crappy credit before I was married. I married my wife who had good credit and was finally able to get a credit card. We then threw everything we possible could on the credit card and paid the entire balance off weekly. Within a year I had a pretty good credit score (700s) and within two years I hit the 800 mark. And the best part, last year we received almost 800$ in cash back rewards.

So by using a credit card for everything, and using it like a debit card by paying it off weekly, I received a great credit score rating and some serious bonus cash.

Without a doubt the temptation is strong to use a credit card unwisely, and most people do just that, but if you can use self control they can be a great tool to help your financial situation.

Forsaken_GA

Aldur wrote: »

Without a doubt the temptation is strong to use a credit card unwisely, and most people do just that, but if you can use self control they can be a great tool to help your financial situation.

See, I don't really believe in this. A good credit score doesn't mean you're financially responsible, or that you're winning at building wealth. The only thing it measures is that you can borrow money, and pay it back, and borrowing money is not a good way to make money.

Since I don't do debt, a good credit score is absolutely meaningless to me. By now, I shouldn't even *have* a credit score. I may, a few years down the road, take out a mortgage, and that would be the only debt I would incur ever again. I'm still debating between doing it, or just saving up and paying cash for a house outright.

If I do decide to go the mortgage route, it will be with a very healthy down payment, and with a company that does manual underwriting, rather than just pulling my FICO score and making a decision based on that. I sat down with my credit union a few months ago to see what a mortgage would look like, and they were willing to prequalify me for a $300k mortgage, and I haven't had an open credit card for over 2 years, and my last debt was paid off about 16 months ago (my car).

It's just frustrating to see some many folks buying into the myths of debt and credit, especially after the events of the last few years.

Devilsbane

Forsaken_GA wrote: »

Since I don't do debt, a good credit score is absolutely meaningless to me.

Everyone does debt. Unless your parents happen to be rich, you are likely going to have student loans and/or a car payment and/or a mortgage.

I see what your saying here, and if that works for you, great. But that isn't going to work for everyone. Debt is a part of life for most of us, and that is ok. I also don't consider oweing the credit card company money a bad thing. As long as you are paying it off by the end of the month, who cares? If I am paying off my cards every month (and I actually do it a few times a month, whenever I get bored online I'll go pay whatever I've racked up) then there is no difference between me who uses credit and you who doesn't.

And as for the $300,000 loan, don't be getting too excited. For years my parents have been getting preapproved for $300,000 and $500,000 loans. That doesn't mean they go spend that much (which is why their house wasn't forclosed on in the past couple years). The credit union you spoke with is no different than the credit card company. They want you to have some late fees so that they can pick up some extra money.

Aldur

Forsaken_GA wrote: »

It's just frustrating to see some many folks buying into the myths of debt and credit, especially after the events of the last few years.

I don't recall saying anything that was a myth... With how I use my credit cards I don't pay a single cent to the bank and they give me about 1k in cash a year. How is that a bad thing?

Forsaken_GA

Devilsbane wrote: »

Everyone does debt. Unless your parents happen to be rich, you are likely going to have student loans and/or a car payment and/or a mortgage.

Blatantly incorrect. I paid cash for school (with an assist from the state of Georgia), I pay my bills in full each month with cash, and my vehicle is paid for. The idea that everyone does debt and you should accept it as a way of life is one of those things that makes me want to find a puppy and kick it.

And as for the $300,000 loan, don't be getting too excited. For years my parents have been getting preapproved for $300,000 and $500,000 loans. That doesn't mean they go spend that much (which is why their house wasn't forclosed on in the past couple years). The credit union you spoke with is no different than the credit card company. They want you to have some late fees so that they can pick up some extra money.

Oh, dear lord no. I'm single, I would never buy a $300k house, that's too much space and maintenance. When I finally decide to buy a house, it'll be something small and likely not more than $150k.

Believe me, I am well aware that the banks aren't any better than the credit card companies, which is why this is a careful consideration for me. If I can pay cash, I will, all depends on a few other factors.

My point is that the fact that you need good credit to get a loan is an absolute fallacy. Alot of loan companies are simple pull your FICO and judge on that, but there are still some banks around that believe in doing their homework before they hand out a loan. These are the banks that didn't get themselves into trouble and need a bailout.

Forsaken_GA

Aldur wrote: »

I don't recall saying anything that was a myth... With how I use my credit cards I don't pay a single cent to the bank and they give me about 1k in cash a year. How is that a bad thing?

Credit cards do absolutely nothing to enhance your financial situation that you couldn't do on your own, and they represent a large degree of risk for very little gain.

Again, I'm not looking to convert anyone. Folks will make up their own mind. You are entitled to your opinion, and I respect that, but the same goes for me!

Devilsbane

Forsaken_GA wrote: »

Blatantly incorrect. I paid cash for school (with an assist from the state of Georgia), I pay my bills in full each month with cash, and my vehicle is paid for. The idea that everyone does debt and you should accept it as a way of life is one of those things that makes me want to find a puppy and kick it.

If I am so blatantly incorrect, how come 86% of TE users (and yes I realize this is a very unofficial poll) report having over $1,000 of debt?
http://www.techexams.net/forums/off-topic/62157-how-much-do-you-owe.html

I paid cash for school as well, I also pay my bills in full each month, but I wasn't afraid to take out a loan when I needed to buy a new reliable car (and if I remember correctly, you had a loan on your car as well).

So yes, I still contend that the mass majority of people (including yourself) will have debt in their lives and that it is acceptable. That doesn't mean rack up a ton of credit card debt that you can't pay or to go out and buy a porche. It means I understand that I don't happen to have $100,000 just lying around and that when the time comes to buy a house I will accept that I need to take out a loan and will accept that I am going to end up paying more than twice what the house is worth before it is finally mine. But in the end, the house is mine. That is still a much better investment than paying rent to a landlord the rest of my life. I'd rather take out a loan and start owning at least a small fraction of something than to sign away a check each month with no expectation that any of it will ever be mine.

Aldur

Forsaken_GA wrote: »

Credit cards do absolutely nothing to enhance your financial situation that you couldn't do on your own, and they represent a large degree of risk for very little gain.

Again, I'm not looking to convert anyone. Folks will make up their own mind. You are entitled to your opinion, and I respect that, but the same goes for me!

No financial gain, how about a pain in the butt? Albeit true that you can get financing with no credit, most places won't give it. And if they do they give it with the requirement of a large deposit or high interest rate. Take getting a cell phone for example. Back when I was young and wild I attempted to get a cell phone, I had no credit, the cell provider required a 200$ security deposit on top of everything else. I came up with the money, but it kinda hurt, not to mention that I didn't get the money back for a year, and then they gave the money back by giving me credit to my cell account...

Also, I call getting about 1k in cash back rewards a serious gain.

Agreed, we are all entitled to our own opinions, and I'm just talking about my personal experiences.

Note: I can see this thread turning into a flame war real quick, lets keep it civil everybody.

Forsaken_GA

Devilsbane wrote: »

If I am so blatantly incorrect, how come 86% of TE users (and yes I realize this is a very unofficial poll) report having over $1,000 of debt?
http://www.techexams.net/forums/off-topic/62157-how-much-do-you-owe.html

Come on, you should know better than to make sweeping statements like everyone has debt. Using the poll as a guide, at least 14% have under 1000, and if you check the comments in that poll, I specifically said that I cannot answer it because there is no option for debt free.

I paid cash for school as well, I also pay my bills in full each month, but I wasn't afraid to take out a loan when I needed to buy a new reliable car (and if I remember correctly, you had a loan on your car as well).

So yes, I still contend that the mass majority of people (including yourself) will have debt in their lives and that it is acceptable. That doesn't mean rack up a ton of credit card debt that you can't pay or to go out and buy a porche. It means I understand that I don't happen to have $100,000 just lying around and that when the time comes to buy a house I will accept that I need to take out a loan and will accept that I am going to end up paying more than twice what the house is worth before it is finally mine. But in the end, the house is mine. That is still a much better investment than paying rent to a landlord the rest of my life. I'd rather take out a loan and start owning at least a small fraction of something than to sign away a check each month with no expectation that any of it will ever be mine.

You're right in that I did indeed have a car loan. I was younger, and stupid. I wrecked my car, had nothing in savings, had just moved and had just changed jobs. I couldn't get a loan on my own, so I had to have family cosign for it. Even with a cosigner, I was only able to get a 9.5% interest rate, on a used car loan. I thought it was the only option available to me, and I was desperate, so I took it.

A few years ago, back when all the FUD about the recession started, I sat down one day and asked myself what would I do if I walked into work that day and found out I didn't have one anymore. The answer wasn't a good one. I had very little in the way of savings, had debt, and I wouldn't have been able to pay my bills. So for the next couple months, I started tracking my spending, and started learning a thing or two about personal finance. I was disgusted by how much money I was hemorrhaging. In particular, the car loan was a huge ripoff. Shortly thereafter, I picked up Dave Ramsey's Total Money Makeover, and it pretty much confirmed what i'd already figured out - I was a moron, and having a negative net worth was not a good thing. (Please note that Ramsey is not my only source - I could give you my full reading list if you'd like)

So I cleaned up my act. I reined in my spending, found out I could easily live on less than half of what I make if I stopped buying crap I didn't need. I cleaned up all of my debts, started proper savings, and my financial picture is much different these days. I could take a year off work if forced to and not have a problem paying the bills, and I'm preparing to replace my car, this time paying for it in cash up front. I will agree with you in that the majority of people in this country have debt, and will continue to have debt. I may rejoin them when it comes to a mortgage at some point, but as I've already mentioned - I'm wary of it, and my decide against it entirely. Beyond that, I will not borrow money. Period. I'm to the point of building wealth where I won't *need* to. I also disagree that while debt may be a societal norm, that it's far from acceptable. 'Everyone is doing it' does not automatically mean that it's right, unless we've already degenerated into mob rule.

Forsaken_GA

Aldur wrote: »

No financial gain, how about a pain in the butt? Albeit true that you can get financing with no credit, most places won't give it. And if they do they give it with the requirement of a large deposit or high interest rate. Take getting a cell phone for example. Back when I was young and wild I attempted to get a cell phone, I had no credit, the cell provider required a 200$ security deposit on top of everything else. I came up with the money, but it kinda hurt, not to mention that I didn't get the money back for a year, and then they gave the money back by giving me credit to my cell account...

Again, it depends on the bank and whether they're willing to do manual underwriting. It would have been a sheer pain in the ass to gather the amount of documents my credit union wanted if I hadn't learned to keep good records, but beyond that, they were willing to give me 4% in the interest rate. I didn't even think to ask what the minimum would have been, as I stated up front I would be putting at least 20% down to avoid PMI. Every single one of my friends that has gone with less than 20% on a down payment has expressed regret at it, PMI is just throwing money away.

As far as the cell phone goes - AT&T (then Cingular) tried the same crap with me. So I went to T-Mobile, who was more than happy to give me a phone without a deposit. There's almost always a better option.

Also, I call getting about 1k in cash back rewards a serious gain.

When put up against the risk that a credit card represents, I have to disagree (and for those who may be of the inflammatory mind, I'm not saying he's wrong. It's his opinion that it's worth it, it's my opinion that it's not - we're both entitled).

Cash has it's advantages as well. I saved a bit more than 1k between two stops last year. When you lay out cash in front of a salesman, and explain that you're willing to pay such and such, and you're perfectly willing to take Uncle Benjamin and his twin brothers to their competitor down the street, they're willing to listen. Apparently furniture and appliance stores have some margin to work with, especially if they're still hurting from the recession.

Agreed, we are all entitled to our own opinions, and I'm just talking about my personal experiences.

Note: I can see this thread turning into a flame war real quick, lets keep it civil everybody.

Yup, this subject can quickly get religious

The thing is, even if you guys are the exception to the rule and manage your debt perfectly, even to a gain, that's not normal. I'm not struggling against the fact that you guys are ok with debt - as I've said, your choice. I'm more struggling against the idea that this is something everyone does and comes out ok on the other end of, because that's simply not true. There is alot of risk involved in playing with debt, and I think folks need to walk into that with their eyes open and aware of the risks and the consequences and make a conscious choice, rather than do it just because everyone else is.

Aldur

Forsaken_GA wrote: »

... as I stated up front I would be putting at least 20% down to avoid PMI. Every single one of my friends that has gone with less than 20% on a down payment has expressed regret at it, PMI is just throwing money away.

I can't agree more, somebody should stay away from PMI at all costs. That is literally throwing money away.

Forsaken_GA wrote: »

As far as the cell phone goes - AT&T (then Cingular) tried the same crap with me. So I went to T-Mobile, who was more than happy to give me a phone without a deposit. There's almost always a better option.

True, there typically is another option, but keep in mind that you were lucky that there was another good option. I've seen plenty of times where the other option is a horrible option and if the person had good credit they wouldn't have to consider the other option.

Forsaken_GA wrote: »

The thing is, even if you guys are the exception to the rule and manage your debt perfectly, even to a gain, that's not normal. I'm not struggling against the fact that you guys are ok with debt - as I've said, your choice. I'm more struggling against the idea that this is something everyone does and comes out ok on the other end of, because that's simply not true. There is alot of risk involved in playing with debt, and I think folks need to walk into that with their eyes open and aware of the risks and the consequences and make a conscious choice, rather than do it just because everyone else is.

It is very true that a larger percent of the population has problems with credit and can't manage their debt then those who don't go into debt with eyes wide open will get into trouble. This all boils down to personal responsibility, if somebody is responsible enough to manage their credit then they can get ahead, pay very little interest, and get some nice kick backs in return.

Devilsbane

Forsaken_GA wrote: »

As far as the cell phone goes - AT&T (then Cingular) tried the same crap with me. So I went to T-Mobile, who was more than happy to give me a phone without a deposit. There's almost always a better option.

I also went with T-Mobile for my first sole cell phone plan. They ran my credit and I didn't pass. Being 18 I had no credit history and got put on flex pay or whatever they call it. Basically this meant that I had to prepare each month rather than at the end of the month like most people do. Whatever, that's fine. I have a phone

So I am paying $65 a month for a phone that really doesn't do anything other than make phone calls and text. I had some basic internet on it, but it was limited and at 2G didn't really get me anywhere. 300 minutes, myfaves, and unlimmited texting. (Now I'm with Sprint paying $50 with more minutes, no limit on internet, and it's 3G). So they took me for quite the hike already, but it gets better. Where I was working, I got 10% off with T-Mobile. Pretty sweet deal, so I went to sign up and find that because I prepay they can't determine what my bill is going to be and thus can't take 10% off. So that is $6.50 a month I'm getting screwed out of. $156 over the course of my 2 year contract.

So I know for a fact that having poor credit costs money. Not to mention I had set up automatic payments and my prepayment for the next month went through the same day I signed my contract with Sprint. They claimed the $65 would be prorated. (what is 12 hours prorated) but that it would take 3 months to process. Check back, nothing. Check back, nothing. It is now a little over a year later, and T-mobile still sends me a bill every month for -$1.80. I contact them, but they just keep sending it. Should I be sending them a check for a negative amount? And what the hell happened to my $64 refund?

Yes, that was mostly a rant on T-Mobile. But if that was the only option out there, I probably paid them $460 more than I should have over my 2 year contract. Now that is certainly not a good way to be making money. (and actually more because I stayed with them for 3 or 4 months after my contract was up waiting for my parents contract with Verizon to be up so that we could all move to Sprint)