Credit Card Debt

[Bishka]

I have just watched the movie "Maxed Out," which is talking about the sneaky ways that the credit-card companies work and how 'maxed out' America is. Have any of you seen it? What do you think about debt, bankruptcy, etc.

Thoughts, opinions, rants, raves.....

Edit: For anyone with NetFlix it is playing right now.

 

[MaddLlama]

I make it a point to not use credit cards. I have one card left with a balance from several years ago, and right now the only (necessary) debt I have are in student loans.
My husband and I have agreed - no credit cards.

 

[Jayhawker Soule]

I use a credit card for almost everything. I also pay it off in full each month. Avoidable debt is best avoided.

 

[kadzbiz]

There is nothing wrong with a credit card if you use them to your advantage. My wife and I live on our credit card and pay the whole outstanding balance each month, but we keep an eye on our spending with a finance program at home. We never pay any interest on our purchases because we pay the owing amount each month. We also get special reward points for using our card and redeem those points for items. We use a credit card so our money can stay in our mortgage account and once a month we just redraw from that account to pay the credit card bill. Works a treat and we're saving lots on our mortgage.

 

[Bishka]

I use a credit card for almost everything. I also pay it off in full each month. Avoidable debt is best avoided.

That's the problem for young people who haven't been taught how to pay it off, or how credit cards really work, myself included (at one time). When I first got to college I got myself into $600 in debt. Since then my husband and I only use debit cards, so if we don't have the money, we don't buy it. We've decided we will only use credit cards in the future if they are absolutely necessary.

 

[SoyLeche]

I use a credit card for almost everything. I also pay it off in full each month. Avoidable debt is best avoided.

There is nothing wrong with a credit card if you use them to your advantage. My wife and I live on our credit card and pay the whole outstanding balance each month, but we keep an eye on our spending with a finance program at home. We never pay any interest on our purchases because we pay the owing amount each month. We also get special reward points for using our card and redeem those points for items. We use a credit card so our money can stay in our mortgage account and once a month we just redraw from that account to pay the credit card bill. Works a treat and we're saving lots on our mortgage.

I agree with these posts.

I use a credit card for most every purchase. I pay it off every month.

I also check my credit report every 4 months. Since you can get a free report from each of the 3 credit bureaus each year you can stagger them and get a free one every 4 months (you have to pay for the score if you want it, but unless you are planning on needing it in the near future - what's the point?)

 

[Valjean]

I think credit cards are overused. In most situations they cost money and are slow and clumsy at the checkout counter. In most situations I can't see why they are preferred to using cash.
Credit can also lead to debt. I was taught that if you couldn't afford something out-of-pocket, you should save up till you can afford it. Buying something you can't pay for is a gamble that you will, at some future date, be able to pay it off (with interest).

I've never owned a credit card and have never experienced the need for one. Why are they so popular? What can you do with a credit card that you can't do easier, and cheaper, with cash?

 

[kadzbiz]

I think credit cards are overused. In most situations they cost money and are slow and clumsy at the checkout counter. In most situations I can't see why they are preferred to using cash.
Credit can also lead to debt. I was taught that if you couldn't afford something out-of-pocket, you should save up till you can afford it. Buying something you can't pay for is a gamble that you will, at some future date, be able to pay it off (with interest).

I've never owned a credit card and have never experienced the need for one. Why are they so popular? What can you do with a credit card that you can't do easier, and cheaper, with cash?

Credit cards, if used wisely, can be a much safer alternative than carrying around cash. As for getting into debt, one needs to stick to a budget to avoid this avenue. You probably shouldn't buy things you can't afford, but if you manage your funds correctly, credit can be an advantage. If one has a secure job, buying something on an interest-free repayment plan can be more advantageous than paying with cash in full up front. Make your money work for you and not for somebody else. Until you experience the positive sides of having a credit card, you will not know how profitable it can be for you, BUT, you must use it wisely. I have been using my current credit card for 5 years and never paid interest once. I don't have to concern myself with carrying cash, plus I get reward points for using it. Some businesses don't even like to deal in cash. Of course, cash is certainly handy when in remote places or when you need some change for the parking meter!

 

[FFH]

Credit cards, if used wisely, can be a much safer alternative than carrying around cash

I agree, I empty my wallet of any cash as often as possible ...

I use a debit card, instead of a credit card, and try to keep my wallet fairly empty of any cash..

 

[Terrywoodenpic]

There is nothing wrong with a credit card if you use them to your advantage. My wife and I live on our credit card and pay the whole outstanding balance each month, but we keep an eye on our spending with a finance program at home. We never pay any interest on our purchases because we pay the owing amount each month. We also get special reward points for using our card and redeem those points for items. We use a credit card so our money can stay in our mortgage account and once a month we just redraw from that account to pay the credit card bill. Works a treat and we're saving lots on our mortgage.

That is an excellent way to do it.... especially if you have a mortgage account.

If you have no debt and some savings, a better way is just to use a Debit card on your current account. I have a credit card but have not used it for well over a year.

 

[kadzbiz]

That is an excellent way to do it.... especially if you have a mortgage account. If you have no debt and some savings, a better way is just to use a Debit card on your current account. I have a credit card but have not used it for well over a year.

Funny you should say that. Our redrawan amounts go into our cash account, which we keep to a minimum, but for that account we have a debit card.

 

[Terrywoodenpic]

Funny you should say that. Our redrawan amounts go into our cash account, which we keep to a minimum, but for that account we have a debit card.

Some one has given you some good advice along the way.
I do much the same, I draw off any excess in my current account into a high interest savings account.

But I can remember when my children were small, having to work payment timings very carefully to balance the books. I never once actually went into debt. Even when I took out a personal loan, I would have been able to cover it in some way. I never used a credit card as a way of borrowing money... it is always the most expensive option.

 

[SoyLeche]

I agree, I empty my wallet of any cash as often as possible ...

I use a debit card, instead of a credit card, and try to keep my wallet fairly empty of any cash..

From what I understand a credit card is actually a bit safer to use then a debit card. If someone steals your credit card you usually aren't liable for the charges. If someone steals your debit card they can empty out your checking account.

I could be wrong about that though.

Why do I use a credit card? A couple of reasons.

1. It's easy
2. I get an online record of all of my purchases so I can reconcile them more easily (of course, that means that the bank also has a lot of information on me and my spending patterns, so this could cut both ways)
3. Rewards points
4. I get to earn interest on my money for a few extra days each month - and it doesn't cost me anything (free loan)

 

[SoyLeche]

Just for fun:




Let's say you have $2,000 in credit card debt at 18% interest (I searched for the average debt and rate online). The minimum payment on a credit card is usually 2.5% of the balance. So -

Month 1: Beginning balance - $2,000.00​

Interest - $ 27.78​

Minimum Pmt - $ 50.00​

Ending Balance - $1,977.78​

Month 2: Beginning balance - $1,977.78​

Interest - $ 27.47​

Minimum Pmt - $ 49.44​

Ending Balance - $1,955.81​

Etc.​

Anyone want to take a wild guess at how long it is going to take you to pay off this $2,000 just paying the minumum each month?

Spoiler

17 YEARS!!! You will have paid a total of $4,187.85!!!

 

[The Seeker]

I use credit cards for nearly every thing I buy. They can be very beneficial if you use them responsibly. I have one credit card through my mortgage company which takes 1% of all of my purchases and applies it to the principal of my mortgage. I pay the balance in full every month so that I don't incur interest charges. I also have a gas card which gives me a 5% rebate on all gas purchases, which really adds up given the price of gas these days.

I really believe that all high schools should be require students to take a financial education class that would explain how credit cards, interest, bank accounts, mortgages and loans work, as well as basic financial responsibility. Many adults don't about these things and end of getting in a lot of debt or making bad financial decisions. Just look at how many people are having to foreclose on their home because they got a mortgage that they didn't understand.

 

[Terrywoodenpic]

From what I understand a credit card is actually a bit safer to use then a debit card. If someone steals your credit card you usually aren't liable for the charges. If someone steals your debit card they can empty out your checking account.
I could be wrong about that though.

Not so here, though some are not protected on the web. (mine is)

Why do I use a credit card? A couple of reasons.
4. I get to earn interest on my money for a few extra days each month - and it doesn't cost me anything (free loan)

Bank interest in a current account is only about 0.2% here, so not worth a light. that's why I transfer to a savings account (at least 5.5%)

 

[SoyLeche]

Bank interest in a current account is only about 0.2% here, so not worth a light. that's why I transfer to a savings account (at least 5.5%)

Yeah - me too. I keep most of my money in a direct savings account. I guess some of the direct companies (ING direct comes to mind) are coming out with checking accounts that get decent interest now too, but I haven't looked into it much.

 

[michel]

I have just watched the movie "Maxed Out," which is talking about the sneaky ways that the credit-card companies work and how 'maxed out' America is. Have any of you seen it? What do you think about debt, bankruptcy, etc.

Thoughts, opinions, rants, raves.....

Edit: For anyone with NetFlix it is playing right now.

I use credit cards to make money from them.........I guess I must be one of the customers they hate most.

I even had a 'phone call one day, during which I was offerred a 90 day interest free balance transfer; when I told the guy on the 'phone that I had no debts that needed repaying, he said that the money could just go straight to my bank account. No fees..nada.

Of course, I couldn't resist it; I asked how much my limit would be and was almost knocked over when I was told K£17 ($34000)....

I took them up on the offer, put the money in a high savings rate account, paid the minimum fees each month, and paid the balance back just before the period of grace was over. I had a nice little bit of interest for doing absolutely nothing.......

 

[TurtleGirl]

I took them up on the offer, put the money in a high savings rate account, paid the minimum fees each month, and paid the balance back just before the period of grace was over. I had a nice little bit of interest for doing absolutely nothing.......

Michel, you're my hero! Perhaps if more people took advantage of them like this they might be more responsible members of society. I detest predatory lending and, sadly, it's so profitable that the majority of lending (at least in the United States) is predatory.

By the way, I have no credit cards, only the debit card for my checking account. My only debt is from student loans and the car payment. That's it. I haven't had a credit card in over ten years.

 

[kadzbiz]

Slightly off tangent, but on the topic of credit nonetheless, make sure that if you ever take out one of those 6, 12, 18, etc, month interest free repayment plans that you have the item paid off before the final contact end date because even if you are $1 short, you will have to pay not only the value of the item, but the extra compounded annual interest on the whole amount for the entire contracted period, which could cost you heaps. Always ask lots of questions. Some of these contracts are deferred payment too, which can be okay as you keep your money working for your, but get in the habit of paying a monthly amount to get it paid off before time. I always pay a little extra if there is a minimum monthly payment to be sure I have the item paid off well before the final contract end date.