Do you need a credit card?

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Special K

Diamond Member
Jun 18, 2000
7,098
0
76
Originally posted by: Beattie


So, you do a lot of bookkeeping to make 3-4% and barely break even with inflation. After tax, you probably actually lose money.

Sounds awesome. Where do I sign up?

Your statement seems to be attacking savings accounts in general. Based on your statement, why ever use a savings account? After all, you're not beating inflation after taxes.

I'm not saying it's necessarily worth the effort. I'm just citing one example of how debt can be used to make money.

Are you opposed to student loans as well? Should someone be forced to work and save up thousands of dollars before they go to college, so they can pay for it in cash, all in the name of avoiding debt?
 

Xavier434

Lifer
Oct 14, 2002
10,373
1
0
Originally posted by: Beattie

I have no problem with that statement but you still need to factor it in. Higher risk things can make you more money. And investing long term in them is the correct thing to do. I don't think that borrowing money to invest in what should be a long term investment is a good idea. If you do that AOR credit surfing thing that someone suggested, that might work for a year, but your mutual fund or whatever might have lost money in a year. Many did in this previous year for example.

You disagree with borrowing money to make money through an investment? What do you think a business loan is? I realize that factoring in risks is important but just because they exist does not mean that the odds are not very much in your favor if you know what you are doing.
 

Beattie

Golden Member
Sep 6, 2001
1,774
0
0
Originally posted by: TruePaige
Originally posted by: Beattie
Originally posted by: TruePaige
Originally posted by: Beattie
So, you do a lot of bookkeeping to make 3-4% and barely break even with inflation. After tax, you probably actually lose money.

Sounds awesome. Where do I sign up?

I don't think you know how tax works then, because that made no sense. There is no way that making interest off the money saved in the FDIC account and then paying it towards what you would of paid it towards anyway would lose money. 0.o

Lets say you earn 4% on your schemes. Now you are going to be taxed at your income rate on this money. Lets say that's like 30%. So, you gain 4% then lose 30% of that. In the mean time, inflation was 4%. So, you gained less than 4% and it cost you 4%. You net loss is 30% of 4%.

You lost money.

If you can get a better rate on the money then you might start to make something. But it's very small. And anywhere you would make a good profit like the stock market/mutual funds, you have to then also factor in risk.

Okay, if you add inflation in and say that cancels out the gains, and 30% of the 4% (effectively 1.2%), then you are LOSING a LOT MORE by not doing anything with your money, because if your money is just sitting there you are losing the full 4% by not investing it.

Well, I never borrowed the money in the first place. So, I didn't gain 4%. Correct. I also didn't lose 4%. My net is 0, while yours is -1.2%.
 

Special K

Diamond Member
Jun 18, 2000
7,098
0
76
Originally posted by: TruePaige


I don't think you know how tax works then, because that made no sense. There is no way that making interest off the money saved in the FDIC account and then paying it towards what you would of paid it towards anyway would lose money. 0.o

I think he was factoring inflation into the calculation. You may not have lost any dollars, but the effective buying power of your money would have decreased over that time period.

 

jonks

Lifer
Feb 7, 2005
13,918
20
81
Man, I thought online lawyers gave bad advice in legal threads, but they've got nothing on the online credit counselors in this thread.
 

Beattie

Golden Member
Sep 6, 2001
1,774
0
0
Originally posted by: Xavier434
Originally posted by: TruePaige
Originally posted by: Beattie
Originally posted by: ducci
I agree. Though everyone here isn't claiming to spend money you don't have - quite the contrary.

Say you have $1500 in cash to purchase a TV. Let's also say you are given a $1500 12-month, 0% interest loan. You are foolish to pay the $1500 you have now rather than using someone else's money and pay the balance in full 12 months from now. You can also add in whatever cash-back rewards most credit cards today offer.

I'm not claiming using a credit card will make you rich. I am merely saying it is better than paying via debit or cash.

I will, however, agree to the claim that properly using and controlling good debt will build wealth. More so than, say, not having any debt at all.

Until that one time where something happens and you default and that $1500 tv ends up costing $2100.

What is this magic "Something" I pay my bills online and get a confirmation number 0.0

I think he is talking about some big unexpected expense, but what he is failing to realize is that those who are responsible have money saved up for just that kind of occasion. On top of that, even if the unexpected expense is much larger than your savings can handle then it makes sense that one would place the additional expenses on a CC. That CC probably has a very low interest rate because you were smart enough to call annually and ask for that rate to be lowered which they do for you because your FICO and credit history is awesome thanks to your active and responsible usage of credit over many years.

If you have the money to pay for the thing, what do you need the credit card for? Just pay cash and be done with it.
 

Beattie

Golden Member
Sep 6, 2001
1,774
0
0
Originally posted by: TruePaige
Originally posted by: Xavier434
Originally posted by: TruePaige
Originally posted by: Beattie
Originally posted by: ducci
I agree. Though everyone here isn't claiming to spend money you don't have - quite the contrary.

Say you have $1500 in cash to purchase a TV. Let's also say you are given a $1500 12-month, 0% interest loan. You are foolish to pay the $1500 you have now rather than using someone else's money and pay the balance in full 12 months from now. You can also add in whatever cash-back rewards most credit cards today offer.

I'm not claiming using a credit card will make you rich. I am merely saying it is better than paying via debit or cash.

I will, however, agree to the claim that properly using and controlling good debt will build wealth. More so than, say, not having any debt at all.

Until that one time where something happens and you default and that $1500 tv ends up costing $2100.

What is this magic "Something" I pay my bills online and get a confirmation number 0.0

I think he is talking about some big unexpected expense, but what he is failing to realize is that those who are responsible have money saved up for just that kind of occasion. On top of that, even if the unexpected expense is much larger than your savings can handle then it makes sense that one would place the additional expenses on a CC which has a very low interest rate because you were smart enough to call annually and ask for that rate to be lowered which they do for you because your FICO and credit history is awesome.

And if it were something that big, it would be great that one would have credit to carry them through that hardship in their life.

Why are you buying $1500 TVs if you have such financial hardship in your life?
 

Xavier434

Lifer
Oct 14, 2002
10,373
1
0
Originally posted by: Beattie

Well, I never borrowed the money in the first place. So, I didn't gain 4%. Correct. I also didn't lose 4%. My net is 0, while yours is -1.2%.

Money is only worth as much as you can buy with it. Your net is technically 0, but if we are talking about a 4% inflation increase then you can now only buy 96% of what you used to be able to purchase with every dollar you decided not to invest where TruePaige can buy 98.8%.
 

oznerol

Platinum Member
Apr 29, 2002
2,476
0
76
www.lorenzoisawesome.com
Originally posted by: Beattie
Originally posted by: Xavier434
Originally posted by: TruePaige
Originally posted by: Beattie
Originally posted by: ducci
I agree. Though everyone here isn't claiming to spend money you don't have - quite the contrary.

Say you have $1500 in cash to purchase a TV. Let's also say you are given a $1500 12-month, 0% interest loan. You are foolish to pay the $1500 you have now rather than using someone else's money and pay the balance in full 12 months from now. You can also add in whatever cash-back rewards most credit cards today offer.

I'm not claiming using a credit card will make you rich. I am merely saying it is better than paying via debit or cash.

I will, however, agree to the claim that properly using and controlling good debt will build wealth. More so than, say, not having any debt at all.

Until that one time where something happens and you default and that $1500 tv ends up costing $2100.

What is this magic "Something" I pay my bills online and get a confirmation number 0.0

I think he is talking about some big unexpected expense, but what he is failing to realize is that those who are responsible have money saved up for just that kind of occasion. On top of that, even if the unexpected expense is much larger than your savings can handle then it makes sense that one would place the additional expenses on a CC. That CC probably has a very low interest rate because you were smart enough to call annually and ask for that rate to be lowered which they do for you because your FICO and credit history is awesome thanks to your active and responsible usage of credit over many years.

If you have the money to pay for the thing, what do you need the credit card for? Just pay cash and be done with it.

Money today is more valuable than money tomorrow.

I am done with this thread.

On another note - where did you get a 0% APR AMEX for 15 months? Mine was only for 6 :(.

I'd get a Chase Freedom card but they don't have a 0% interest promotion and my Discover card is giving 5% back on gas from July-September. Maybe after that.
 

Xavier434

Lifer
Oct 14, 2002
10,373
1
0
Originally posted by: Beattie

If you have the money to pay for the thing, what do you need the credit card for? Just pay cash and be done with it.

If you have the money then the odds of you ending up on top if you make the purchase via credit card is very likely. You spend the exact same amount of money and your credit gets improved.


Originally posted by: Beattie
Why are you buying $1500 TVs if you have such financial hardship in your life?

Everyone goes through times of unpredictable financial hardship. You can try to prepare for it but sometimes there is only so much you can do. It's not that one cannot afford the $1500 TV. It's that they were not able to predict that their house would be completely demolished by a CAT 5 hurricane 6 months from now or something like that. Insurance covers that kind of thing but I can tell you right now that they don't cover 100% of everything you lose in that situation.
 

TruePaige

Diamond Member
Oct 22, 2006
9,874
2
0
Originally posted by: Special K
Originally posted by: TruePaige


I don't think you know how tax works then, because that made no sense. There is no way that making interest off the money saved in the FDIC account and then paying it towards what you would of paid it towards anyway would lose money. 0.o

I think he was factoring inflation into the calculation. You may not have lost any dollars, but the effective buying power of your money would have decreased over that time period.

The effective buying power of the money went down either way..

Here let me lay it out (this is a reply to you too B person).

He spends 10,000 over the course of a year.

I charge 10,000 dollars over the course of a year with 4% cashback at 0% interest.

Both amounts are subject to inflation, but my overall buying power was increased by 4% total.

Now inflation will occur and lower the net value of the money, but inflation effects both amounts, not just the charged amount. So it would in an inflation comparison..

10,000 - minus inflation = total buying power for that year (non-credit)
10,400 - minus inflation = total buying power for that year (credit)

which isn't much, but for free I'll take a few hundred bucks.

I think what some people are thinking is that since you pay your credit amount at the end of the year, inflation hits you harder, but it's not true, in reality the credit card companies take the brunt of your inflation, because you got to have all the spending power, and they got the money 12 months later.
 

TruePaige

Diamond Member
Oct 22, 2006
9,874
2
0
Originally posted by: Xavier434
Originally posted by: Beattie

Well, I never borrowed the money in the first place. So, I didn't gain 4%. Correct. I also didn't lose 4%. My net is 0, while yours is -1.2%.

Money is only worth as much as you can buy with it. Your net is technically 0, but if we are talking about a 4% inflation increase then you can now only buy 96% of what you used to be able to purchase with every dollar you decided not to invest where TruePaige can buy 98.8%.

EXACTLY Thank you for getting it Xavier. =)
 

TruePaige

Diamond Member
Oct 22, 2006
9,874
2
0
Originally posted by: Beattie
Originally posted by: TruePaige
Originally posted by: Xavier434
Originally posted by: TruePaige
Originally posted by: Beattie
Originally posted by: ducci
I agree. Though everyone here isn't claiming to spend money you don't have - quite the contrary.

Say you have $1500 in cash to purchase a TV. Let's also say you are given a $1500 12-month, 0% interest loan. You are foolish to pay the $1500 you have now rather than using someone else's money and pay the balance in full 12 months from now. You can also add in whatever cash-back rewards most credit cards today offer.

I'm not claiming using a credit card will make you rich. I am merely saying it is better than paying via debit or cash.

I will, however, agree to the claim that properly using and controlling good debt will build wealth. More so than, say, not having any debt at all.

Until that one time where something happens and you default and that $1500 tv ends up costing $2100.

What is this magic "Something" I pay my bills online and get a confirmation number 0.0

I think he is talking about some big unexpected expense, but what he is failing to realize is that those who are responsible have money saved up for just that kind of occasion. On top of that, even if the unexpected expense is much larger than your savings can handle then it makes sense that one would place the additional expenses on a CC which has a very low interest rate because you were smart enough to call annually and ask for that rate to be lowered which they do for you because your FICO and credit history is awesome.

And if it were something that big, it would be great that one would have credit to carry them through that hardship in their life.

Why are you buying $1500 TVs if you have such financial hardship in your life?

The 1500 TV was your example, and then you said what if something comes up unexpectedly, and so the reply was to say "at least you'd have the cash because you hadn't paid it to the cc company yet, and you could do a balance transfer / weather your hardship".
 

TruePaige

Diamond Member
Oct 22, 2006
9,874
2
0
Originally posted by: ducci
Originally posted by: Beattie
Originally posted by: Xavier434
Originally posted by: TruePaige
Originally posted by: Beattie
Originally posted by: ducci
I agree. Though everyone here isn't claiming to spend money you don't have - quite the contrary.

Say you have $1500 in cash to purchase a TV. Let's also say you are given a $1500 12-month, 0% interest loan. You are foolish to pay the $1500 you have now rather than using someone else's money and pay the balance in full 12 months from now. You can also add in whatever cash-back rewards most credit cards today offer.

I'm not claiming using a credit card will make you rich. I am merely saying it is better than paying via debit or cash.

I will, however, agree to the claim that properly using and controlling good debt will build wealth. More so than, say, not having any debt at all.

Until that one time where something happens and you default and that $1500 tv ends up costing $2100.

What is this magic "Something" I pay my bills online and get a confirmation number 0.0

I think he is talking about some big unexpected expense, but what he is failing to realize is that those who are responsible have money saved up for just that kind of occasion. On top of that, even if the unexpected expense is much larger than your savings can handle then it makes sense that one would place the additional expenses on a CC. That CC probably has a very low interest rate because you were smart enough to call annually and ask for that rate to be lowered which they do for you because your FICO and credit history is awesome thanks to your active and responsible usage of credit over many years.

If you have the money to pay for the thing, what do you need the credit card for? Just pay cash and be done with it.

Money today is more valuable than money tomorrow.

I am done with this thread.

On another note - where did you get a 0% APR AMEX for 15 months? Mine was only for 6 :(.

I'd get a Chase Freedom card but they don't have a 0% interest promotion and my Discover card is giving 5% back on gas from July-September. Maybe after that.

Hey Ducci, it's the AMEX Clear promotion currently. It's a great offer, I'm going to use it to my maximum benefit. =)
 

mchammer187

Diamond Member
Nov 26, 2000
9,114
0
76
Originally posted by: Beattie
Originally posted by: TruePaige
Originally posted by: Beattie
Originally posted by: TruePaige
Originally posted by: Beattie
So, you do a lot of bookkeeping to make 3-4% and barely break even with inflation. After tax, you probably actually lose money.

Sounds awesome. Where do I sign up?

I don't think you know how tax works then, because that made no sense. There is no way that making interest off the money saved in the FDIC account and then paying it towards what you would of paid it towards anyway would lose money. 0.o

Lets say you earn 4% on your schemes. Now you are going to be taxed at your income rate on this money. Lets say that's like 30%. So, you gain 4% then lose 30% of that. In the mean time, inflation was 4%. So, you gained less than 4% and it cost you 4%. You net loss is 30% of 4%.

You lost money.

If you can get a better rate on the money then you might start to make something. But it's very small. And anywhere you would make a good profit like the stock market/mutual funds, you have to then also factor in risk.

Okay, if you add inflation in and say that cancels out the gains, and 30% of the 4% (effectively 1.2%), then you are LOSING a LOT MORE by not doing anything with your money, because if your money is just sitting there you are losing the full 4% by not investing it.

Well, I never borrowed the money in the first place. So, I didn't gain 4%. Correct. I also didn't lose 4%. My net is 0, while yours is -1.2%.

how is your net zero unless the money you had lying around did not inflate at the same rate

you are actually losing MORE money

 

sactoking

Diamond Member
Sep 24, 2007
7,582
2,817
136
This thread has been full of win for horrible advice. Keep it coming peeps, I'm WAY entertained!
 

Beattie

Golden Member
Sep 6, 2001
1,774
0
0
Originally posted by: mchammer187
how is your net zero unless the money you had lying around did not inflate at the same rate

you are actually losing MORE money

Yea, you and TP are right. I messed up on this tangent.

Anyway, to get back on topic and reiterate my points

Originally posted by: SleepWalkerX
I'm 18 and have never owned a credit card. I only own a debit card in my name. I can't stand the idea of debt so I make I have the money before I buy anything.

One of my friends suggested that I'm going to have a harder time in the future because if I want to get a loan, a car, or a mortgage or whatever then people will look up my credit score and it might show that I don't have anything listed.

This is why he sometimes buys small things on his credit card just to build his credit score up. Is this true? Am I screwing myself to some extent by not having a credit card?

1) Debt is dumb

2) The only thing you really might need to borrow money for is a house and you can do that without a fico score

3) Credit cards and check cards are functionally equivalent

edit=
4) If you do decide to get a credit card be responsible and careful to make sure it's always paid in full every month
 

sactoking

Diamond Member
Sep 24, 2007
7,582
2,817
136
What?!?! NO! I waited 3 hours and Beattie came back reasonably and in a reconciliatory tone. I'm so disappointed. I had hoped for much more goading and baiting........
 

jlee

Lifer
Sep 12, 2001
48,517
223
106
Originally posted by: Beattie
3) Credit cards and check cards are functionally equivalent

Porsche 911s and Dodge Neons are also functionally equivalent. ;)
 

spidey07

No Lifer
Aug 4, 2000
65,469
5
76
Originally posted by: sactoking
What?!?! NO! I waited 3 hours and Beattie came back reasonably and in a reconciliatory tone. I'm so disappointed. I had hoped for much more goading and baiting........

nah, he still thinks debt is dumb while others are making money off of debt and enjoying super low rates thanks to their excellent credit. Plus with a credit card you don't lose money temporarily that could be making you MORE money so they aren't even close to being the same.
 

Bignate603

Lifer
Sep 5, 2000
13,897
1
0
I've had my student credit card for about 3 years now, I haven't paid a dime in interest, and have gotten about $200 in cash back. Even without considering my credit score I came out way ahead.

To the OP, get a credit card if and only if you are willing to pay it off every month. No matter what some people here are saying you should start building your credit score as early as possible. Yes, you can get a loan without a credit score, but you can get a much better loan when you have a solid credit history.
 

njdevilsfan87

Platinum Member
Apr 19, 2007
2,331
251
126
Man, I applied for my first credit card today (I'm 21, yeah I waited just a little bit long)... but I have...

- No annual salary
- Negative annual income because of student loans
- No credit history

And I got denied, for not having enough credit references. I just laughed... I'll have to call them up, because there's obviously nothing I can do about the credit references. I just want one just for the sake of having one. Just for emergency. I've never really wanted one, and still don't really care for one, but I just want to get this over with.

I mean come on. One year from now I will be starting out at $50-60k a year. As if I'll be a liability. Let's just get it over with! I really don't plan to use it (in the bad sense)... I mean it!