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Young Americans Are Ditching Credit Cards

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#91 AJerman

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Posted 11 July 2013 - 18:34

It's called responsibility and balance. Yes, I could throw all of my money in a high interest account and have absolutely nothing available to me and have to rely on borrowing like you suggest, or I can keep a chunk of money in accessible accounts in case of these emergencies you mention, and put the rest in higher yield investments. You should never tie up all of your money at once, that's common sense of financials. You guys all seem to have an entirely different mindset of borrowing money being the cool thing to do. That's the issue our country has today, people would RATHER borrow money than be responsible ahead of time. Like Brandon just said, it's gaming the system. In your opinions it's better to game the system for every last bit of interest rather than have the personal responsibility to know you can cover what you need to pay, when you need to pay it by yourself without having to borrow money.

 

Like I said, having a credit card just in case is not a bad thing at all. It's a valuable tool that when used right is great to have. But I wouldn't start relying on it to be my emergency fund at all. I consider that irresponsible. And you most certainly don't need to have one, nor are you handling your money wrong to not have one. Credit cards are the easy way to have backup money without actually having backup money. So what if I missed out on a couple hundred dollars in interest over time. I didn't LOSE any money though, and I have the personal satisfaction to know I can cover my own ass without having to get someone else to cover me.




#92 threetonesun

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Posted 11 July 2013 - 18:48

You may have misread. He has 30 to 55 days to pay it off without interest. The second the emergency happens, he can pay for it with the credit card and start the process of cashing in his mutual funds and stocks to pay for it. He has the money right then and there to make the emergency payment with the card, and before the credit card bill is up, has the ability to pay for it without interest.

 

Yup. Again, it's a hypothetical situation. If my AC broke at home or there's a leak in my roof, I can't wait a week for the funds to clear out of my investment accounts to my checking account. Credit cards solve that issue, and since I'll pay it off in full when the statement is due, it's a free short-term loan that reduces my stress.

 

Neither of these are an emergency situation, that's exactly how you're supposed to use a credit card.

 

The only cash I carry is enough to cover odd cash-only transactions. That doesn't mean me buying groceries is me covering an emergency on my credit card.



#93 +LogicalApex

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Posted 11 July 2013 - 18:49

It's called responsibility and balance. Yes, I could throw all of my money in a high interest account and have absolutely nothing available to me and have to rely on borrowing like you suggest, or I can keep a chunk of money in accessible accounts in case of these emergencies you mention, and put the rest in higher yield investments. You should never tie up all of your money at once, that's common sense of financials. You guys all seem to have an entirely different mindset of borrowing money being the cool thing to do. That's the issue our country has today, people would RATHER borrow money than be responsible ahead of time. Like Brandon just said, it's gaming the system. In your opinions it's better to game the system for every last bit of interest rather than have the personal responsibility to know you can cover what you need to pay, when you need to pay it by yourself without having to borrow money.

 

Like I said, having a credit card just in case is not a bad thing at all. It's a valuable tool that when used right is great to have. But I wouldn't start relying on it to be my emergency fund at all. I consider that irresponsible. And you most certainly don't need to have one, nor are you handling your money wrong to not have one. Credit cards are the easy way to have backup money without actually having backup money. So what if I missed out on a couple hundred dollars in interest over time. I didn't LOSE any money though, and I have the personal satisfaction to know I can cover my own ass without having to get someone else to cover me.

Leverage is a powerful tool. It is why Apple took out loans to pay its shareholders a dividend when they have more than enough cash on hand to do it. Ignoring the power of leverage is something the unsophisticated do while wondering why they are always a few paces behind.

 

Additionally, you're not only missing out on interest earnings, but also valuable rewards that dwarf anything you an do with cash alone.

 

Another example from my life...

 

Me and my wife wanted to go to Canada for my parents-in-law 40th wedding anniversary. With me working full time it had to be a very short trip (a weekend) so flying was realistically the only option. Except tickets were $1400 each way from PHL to YYZ. Using my Amex reward miles we saved over $4K in airfare and that was free earnings for us.



#94 AJerman

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Posted 11 July 2013 - 19:56

Leverage is a powerful tool. It is why Apple took out loans to pay its shareholders a dividend when they have more than enough cash on hand to do it. Ignoring the power of leverage is something the unsophisticated do while wondering why they are always a few paces behind.

 

Additionally, you're not only missing out on interest earnings, but also valuable rewards that dwarf anything you an do with cash alone.

 

Another example from my life...

 

Me and my wife wanted to go to Canada for my parents-in-law 40th wedding anniversary. With me working full time it had to be a very short trip (a weekend) so flying was realistically the only option. Except tickets were $1400 each way from PHL to YYZ. Using my Amex reward miles we saved over $4K in airfare and that was free earnings for us.

Rewards are the best thing about a credit card now days, I'll definitely give you that. But the most popular rewards for a long time were airline miles, and my dad works for an airline so that doesn't really apply to me. I know they are doing a lot more rewards now though like you were mentioning earlier, and security on your spending on credit cards is good as well. Remember, I said several times that credit cards aren't evil and when used right are great, I originally was just trying to make the point that they are definitely not a necessity. What you're talking about is using them wisely, likely planning how you use them to work in your favor. That method of using a credit card still would suggest you have an emergency fund in savings to cover most random expenses that come up, and then putting planned transactions on the card to give you the best leverage. I still reject the notion of having a card with the intention of using it as your emergency fund, because you can't plan when emergencies will happen. They can certainly be there as a last ditch effort in the case of needing to free up larger chunks of money from savings, but I wouldn't consider it wise to do so as a habit.



#95 Brandon

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Posted 17 July 2013 - 14:37

Just had a good reason why credit cards are extremely useful.

 

I had a friend visit me this past weekend. He had a 93' Olds' Cutlass. Needless to say, 10 miles from my house, the transmission blew. It cost 3x as much as the car was worth to fix it, so we went car shopping. Since he didn't have his check book with him, we were able to cover the $4,000 downpayment on a credit card, and pay it off online when we got home right away



#96 suprNOVA

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Posted 02 March 2014 - 18:49

That is dumb. Like it or not you need good credit. Credit cards are a great thing, just don't be an idiot with them. Its not that hard.

That's what I've been told while growing up. It doesn't matter if you spend $20, or $200, your credit is determined by if you pay it off. Unfortunately Good Credit = almost everything in life.



#97 Fahim S.

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Posted 02 March 2014 - 19:37

You don't need a credit card to establish a credit rating. You can do the same thing by taking out a small loan and paying it back in a timely fashion, and rinse and repeat.

Take out a $500 or $1000 dollar loan.. pay on it for a good long time and you'll get good credit in no time.

 

But don't you have to pay interest on each one of those loans?



#98 XorpiZ

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Posted 02 March 2014 - 20:15

For us uninformed non-Americans - how exactly does "good credit" work?



#99 Geoffrey B.

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Posted 02 March 2014 - 20:20

i am 26, i have never had nor do i ever want a credit card. you can also used pre-paid cards to help build your credit as well as just having recurring bills in your name (like utility bills)



#100 spenser.d

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Posted 02 March 2014 - 20:36

i am 26, i have never had nor do i ever want a credit card. you can also used pre-paid cards to help build your credit as well as just having recurring bills in your name (like utility bills)

 

The bills thing will only come into play if you don't pay and they go to a collector that reports to the credit agencies.  Otherwise they typically don't appear on your credit history at all which isn't helpful.  Prepaid cards might help a bit, but they probably only count as much as having bank accounts count - they aren't revolving credit (you don't really have a line of credit with them).



#101 i_was_here

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Posted 02 March 2014 - 20:38

That's what I've been told while growing up. It doesn't matter if you spend $20, or $200, your credit is determined by if you pay it off. Unfortunately Good Credit = almost everything in life.

Was it that important to share that you bumped this thread?



#102 suprNOVA

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Posted 02 March 2014 - 20:49

Was it that important to share that you bumped this thread?

What's it to you? I'll reply freely within these forums.



#103 i_was_here

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Posted 02 March 2014 - 20:54

I was just surprised to see this thread already had 7 pages and then I noticed the date.



#104 rfirth

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Posted 02 March 2014 - 20:55

If I wanted to use my debit card how many free transactions do I get? 10

If I want to use more than 10 transactions on my debit card, what do I pay? $1/transaction.

 

That's a pretty cr*ppy bank. Change immediately. I have never heard of that.

 

My bank pays 3.01% interest on my checking account balance and refunds ATM fees, if I have direct deposit set up and do a minimum of 10 transactions per month.



#105 +MikeChipshop

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Posted 02 March 2014 - 21:03

Ditched my credit cards over ten years ago and not missed them at all. Don't need them for anything either.