Credit Cards, what are they good for?

[Monte Carlo]

This is my third years sans credit cards. I used to have three, usually maxed out.

 

And I don't miss them at all. I feel astonishingly virtuous, in fact I have about 75p credit on one of them. That's right - the credit card company owes me money. Hahahahahahaa!!!

 

OK, I have a reasonably paid job but I also have a family so it's not like I'm rich. But I'm richer for not having a bloody credit card. My secret? If I can't afford something I either save for it or don't buy it. Radical, huh... it's taken me most of my life to work that one out.

 

Discuss.

[alanschu]

Useful in a bind, and okay if you don't want to carry around the cash and can't debit the expense. But pay them off ASAP.

 

I'd have no issues using my credit card except that at the moment, I have a hefty balance that I am aggressively paying off. Certainly wish it was a bit lower for sure.

 

Fortunately my student loan repayments won't be as harsh as I was anticipating. Yay. Two more weeks of grace period.

[Walsingham]

I commend your discipline in paying them off. I still have mine and regularly juggle between lenders to get zero interest rates etc. The main reason for this is that my life, while broadly fortunate undergoes periodic balls-out FUBARs. A credit card is a quick way of getting cash to smooth out the bumps.

[Gfted1]

I too have zero credit card debt but I do use them pretty extesively for my job, which is reimbursed.

[Hurlshort]

A few years ago I was debt free, but then I bought a house and had a kid and got greedy. But hopefully I'll get back to being debt free again soon. I just have one card, but it's max-ed out.

 

I'd really like to get to the point where I don't have to finance my car. Those monthly payments are definitely a pain.

[Wrath of Dagon]

Credit cards are great if you pay off your balance every month.

[Gfted1]

That reminds me, last month was the last payment on my car and Ive already received the title from the bank. Theres another $385/month in my pocket, woohoo!

[kirottu]

Aren

Edited October 20, 2009 by kirottu

[GreasyDogMeat]

Aren

[Deadly_Nightshade]

I would agree that credits cards are not a problem if you pay the statements on time.

[Enoch]

Credit cards are great if you pay off your balance every month.

Yeah, it's a free one-month loan, with an emergencies-only option to extend into longer-term credit on unfavorable terms.

 

I've never made a car payment, but I've also never bought a new car. Actually, I don't own a car at all right now-- the wife and I are a 1-car household (an '01 Corolla) and it's in her name.

 

(Note: All this rambling about my virtuous frivolity would be wholly undercut if I told you what our monthy mortgage payment is.)

[theslug]

I've been a cash basis for a long time and will continue to be until I actually have to live on my own. You shouldn't spend money that you don't have, however, studying to be an accountant teaches you that debt can be an extremely convenient and necessary thing whether your a business or just your average Joe. Doesn't really cost you anything to keep a credit card around anyways unless you got a balance, so there's no real harm to it.

[Zoraptor]

Credit cards are great if you pay off your balance every month.

Yeah, it's a free one-month loan, with an emergencies-only option to extend into longer-term credit on unfavorable terms.

CC transactions are also disputable, a major factor if buying online as well as offline. If your goods don't turn up, are broken or whatever you can (usually, so long as you haven't been stupid) get the transaction reversed if the vendor plays up. If you pay cash and the company you bought from goes bust or whatever good luck getting anything out of them.

[Matthew Rorie]

One thing to note is that credit cards are great ways to actually build credit. You might have an awesome credit score, but lenders in the future (when you want to buy a house/car/whatever) will still look for your ability to manage lines of rotating credit. So a good plan to build credit is to get a rewards card or a gas station card, use it to fill up on gas, pay it off every month, and never use it for anything else. You won't wind up spending more than you would otherwise, you'll earn a bit of cash through rewards, and you'll improve your credit score.

 

I went without credit for most of my life (just got one last year), so I can see the virtue in only spending what you have, but so long as you stick to something simple like the plan above, a credit card can really help boost your credit score, and of course can be really handy in an emergency.

[alanschu]

My roommate was explicitly told that his credit score was good because he always aggressively paid off his credit card.

 

Mine should be amazing in a few months HAHAHA.

[Humodour]

This is my third years sans credit cards. I used to have three, usually maxed out.

 

And I don't miss them at all. I feel astonishingly virtuous, in fact I have about 75p credit on one of them. That's right - the credit card company owes me money. Hahahahahahaa!!!

 

OK, I have a reasonably paid job but I also have a family so it's not like I'm rich. But I'm richer for not having a bloody credit card. My secret? If I can't afford something I either save for it or don't buy it. Radical, huh... it's taken me most of my life to work that one out.

 

Discuss.

 

I'm 21 and I finally got a credit card.

 

The catch? It's attached to my savings account so it's actually just a debit card with the MasterCard brand on it that works for any credit transaction. Basically so I can do online shopping.

 

I'm like you: I can't really conceive of buying something I don't have the money for.

 

Luckily credit scores aren't as important in this country (transactions only last on your record for 5 to 7 years too) and seem to be based on other factors besides credit cards. This caught my eye though:

 

In the United States insurance, housing, and employment can be denied based on a negative credit rating.

 

Insurance and employment being based on credit rating seems disturbing.

[theslug]

I'm 21 and I finally got a credit card.

 

The catch? It's attached to my savings account so it's actually just a debit card with the MasterCard brand on it that works for any credit transaction. Basically so I can do online shopping.

 

I'm like you: I can't really conceive of buying something I don't have the money for.

 

Luckily credit scores aren't as important in this country (transactions only last on your record for 5 to 7 years too) and seem to be based on other factors besides credit cards. This caught my eye though:

 

In the United States insurance, housing, and employment can be denied based on a negative credit rating.

 

Insurance and employment being based on credit rating seems disturbing.

Yeah I have a debit card as well but I never use it except when I make large purchases like books and the rare sushi outing.

 

As for the credit ratings influencing employment and what not obviously you can get into a real viscous cycle but it seems like a reasonable measure to me. Someone who is unable to control their finances is generally irresponsible, likely uneducated (or over educated), and has a proven track record of financial instability. All in all a relatively decent indicator imo.

 

Edit: though of course you have plenty of people who get into debt because of bad luck but still mostly due to irresponsible spending and risk.

Edited October 20, 2009 by theslug

[Humodour]

As for the credit ratings influencing employment and what not obviously you can get into a real viscous cycle but it seems like a reasonable measure to me. Someone who is unable to control their finances is generally irresponsible, likely uneducated, and has a proven track record of financial instability. All in all a relatively decent indicator imo.

 

So credit rating is a measure of education and ability to hold down a job?

[alanschu]

I can understand insurance (you're a risk), but the employment one surprises me.

[Hiro Protagonist]

I only use debit cards which I have three as I have three bank accounts. One account where my pay goes in from my normal job, another account for my investment property and the third account is linked to my home loan and ebay account. The last time I used a credit card was around 1995/96. I would never use them again. I find it easier to keep everything separate to manage my finances, instead of throwing everything into one account.

 

I think it's easier to get into debt with a credit card than using a debit card. I found I was able to save more using a debit card. I found there was a never ending vicious cycle with credit cards in having to pay them off and them using them again, month after month and getting nowhere financially.

[Hiro Protagonist]

One thing to note is that credit cards are great ways to actually build credit. You might have an awesome credit score, but lenders in the future (when you want to buy a house/car/whatever) will still look for your ability to manage lines of rotating credit. So a good plan to build credit is to get a rewards card or a gas station card, use it to fill up on gas, pay it off every month, and never use it for anything else. You won't wind up spending more than you would otherwise, you'll earn a bit of cash through rewards, and you'll improve your credit score.

 

I went without credit for most of my life (just got one last year), so I can see the virtue in only spending what you have, but so long as you stick to something simple like the plan above, a credit card can really help boost your credit score, and of course can be really handy in an emergency.

 

I agree that it can help build up your credit rating. It can also go against you as well. A lender might see that you have a $5000.00 limit on a credit card and ask you to have the limit lowered to say $2000.00 before they give you a loan for a car. I've seen this happen. Once you do have that credit card. It's really important to pay on time. What the banks don't tell you is that for every late payment, a point is marked against you. Too many points against you and you have a bad credit rating. And if you want your bad credit rating to be wiped, you pretty much have to hand in your credit cards, wait about 5 or 7 years depending where you live and start over again.

[Theseus]

I absolutely hate paying bills So I have one credit card which is connected to my bank. I direct all bills to that credit card and every time i go into the bank I make a payment. I haven't had an overdraft fee in a couple years. So now I only have one bill, my credit card, which makes paying my bills easy breezy! Credit cards FTW!!!

[Zoraptor]

My roommate was explicitly told that his credit score was good because he always aggressively paid off his credit card.

Funny thing is, I was told the exact opposite of that- the way to improve your credit rating was to not pay off in full every month. My own experience supports this as the only times I've ever been offered limit upgrades on my card was immediately after the very rare occasions I didn't pay it off fully.

 

I had a credit limit of $500 for five years for that reason. I couldn't work out why my sister who didn't even have a job for most of that time kept on getting credit upgrades when I didn't and I was eventually told that because I had no loans/ HP agreements etc. they didn't know whether I was capable of paying off more (that's despite having a five figure sum in the issuing bank at the time).

[Theseus]

Same here. I've had the same $750 credit limit for ages, never had a credit limit upgrade. I've NEVER missed a payment and nearly everytime its in full.

[alanschu]

Funny thing is, I was told the exact opposite of that- the way to improve your credit rating was to not pay off in full every month. My own experience supports this as the only times I've ever been offered limit upgrades on my card was immediately after the very rare occasions I didn't pay it off fully.

 

 

First off, I didn't say he paid off his credit card full every month. I said he aggressively paid it off. This means payments far exceeding the minimum required.

 

As a personal note, I believe that your situation has nothing to do with your credit rating, but the credit card company specifically. They don't extend your limit because there's no reason for you and the potential to make money is limited. The reason they gave you is quite simply bull****. They extended your sister's credit because they saw a potential to make money. Your sister's lack of fully paying off the credit card absolutely does not demonstrate that she is capable of paying off more, but it is making the credit card company more money and the fact that she was (presumably) able to make some payments made it less risky but particularly fruitful for them. The same thing happened to me with my credit card. For the first couple years I had a $1000 limit while I hardly used the thing, and the very first month I held a balance they upped it to $2000, and it slowly made its way up to $8500. It's only go up though, if I was close to the limit.

 

 

The credit card companies report your payments (or lack of payments) to credit bureaus and are exceptionally diligent at doing so. This was explicitly told to my roommate for someone NOT working with the credit card company, but rather a financier at a bank (not even his bank, nor the one that the credit card company was through) when my roommate expressed his disbelief that he had good credit (since all he had ever used was a credit card).

 

No offense, but since I was there with him when this was explained, I'll take their word for it.

 

 

The funny thing was, when I had a full time job and decent income, I was routinely denied a credit card. When I became a student, and in my application up front stated I was a student and unemployed I was suddenly able to get a credit card. I was not getting student loans at this time either, so my source of funding was purely money I saved up. The credit card companies have some reason for setting up a whole load of kiosks during the first week of school enticing students to apply for credit cards and even ensuring application success. I'd be surprised if it was that they believed we were all capable of immediately paying off any credit card debt we may have incurred.

 

 

Same here. I've had the same $750 credit limit for ages, never had a credit limit upgrade. I've NEVER missed a payment and nearly everytime its in full.

 

Your credit rating is not correlated with your credit limit on your credit card. My credit rating is worse than my roommates, but I have twice the credit card limit than he does.

Edited October 21, 2009 by alanschu