LoveToGod

Poll: What is your view about using Credit?

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If enough people respond, I will have enough numbers to run statistics and give you the stats on peoples view of statistics.

If you have not provided your input, it is appreciated. I want to do a little stat study here, but need more data.

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A few years ago I asked a stockbroker of mine what were the hot tickets in the market? Thinking he would come back with the a great stock tip, he asked: "Are you carrying credit card balances?" I said yes. Then he replied "YOU. Pay off your cards then come see me!"

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I've become so sinical about credit and interest. I don't like it and I do EVERYTHING in my power to avoid it. I feel like less of a man asking someone else to borrow money or being indebted to anyone.

Albert Einstein said that "The most powerful force in the universe in compound interest." And if you really want to get out debt remember “We can't solve problems by using the same kind of thinking we used when we created them.”...Albert Einstein.

To change your destination, you must change your path.....Me.

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I am unequivocally and unashamedly in the No. 1 camp (which should surprise no one).

That said, I do understand that most people will never want to wait for a house so, if done properly (enough cash down, a full emergency fund and low enough % of monthly take home pay) a mortgage is understandable (but still not the best choice)

Not that LTG asked…xdeadhorsex

Ultimately, debt is only good for the lender…they one being PAID compound interest will ALWAYS fare better than the one who is paying it (why do you think banks and insurance companies have the money to build those big buildings everywhere???).

Whenever a person (or a business) borrows money; they are taking on a level of risk...business usually at least have people within the organization that understand that...individuals rarely do understand it and even less rarely, take it seriously...they refuse to think that they will get sick, or have an accident or loose a job or get transferred or have some other major life event happen that throws all their "best laid plans" right into the sewer.

Deb is bad on a business level:

Deb is very often a result of a company not being willing to grow their business slowly and on a firm foundation - they don't want to build "one store at a time" when they have the cash reserves to do so; they would rather borrow their way into being a large business always figuring they can meet their debt payments from the revenues taken in by the new stores.

However, during an economic downturn (and economic downturns ALWAYS happen), the businesses with no debt load or the smallest debt load will always come through the downturn in FAR better shape than the business that has a debt load to service…when this current cycle is over (whether it meets the economic definition of a recession or not), this will be proven once again - otherwise "healthy" businesses with a manageable medical condition (debt) will find they have an incurable and fatal disease when they won't be able to meet their debt servicing requirements during a downturn…a problem they could have weathered had they built their business without debt (and therefore, without the resulting debt servicing load).

Deb is bad on a personal level:

Like a business, debt is primarily a reflection of a person's refusal to live within their means and to build wealth over time so that they can actually PAY for the things they want and need rather than actually have to wait until they can afford them….it's the "microwave" mentality that we've got to have it NOW. Consumers have forgotten how to ask "how much" and only ask "how much per month"…they don't save for retirement or for emergencies. Thus, when an emergency happens (and emergencies ALWAYS happen), debt becomes their emergency fund.

The concept of actually SAVING up for the things we need and want is considered old-fashioned…gone are the days, which weren't all that long ago, when the idea of a consumer borrowing money for anything other than a house was considered shameful (and no, I'm not kidding)...today, many actually think it's shameful (or at least stupid) to not have debt. Today, wealth is no longer defined as actually owning anything or having money in the bank…rather, in the minds of many, it's defined by how many little plastic cards you have in your wallet or purse and what color they are (and evidence of that mindset is easy to find on this and many other websites)!

The average American today can be defined as a person who gets in his bank-financed car, to drive on a bond-financed highway to go to the mall which was build with debt to buy things he doesn't need with money he doesn't have to impress people he doesn't like.

It's been said that "those who are of the opinion that money can do anything, may reasonably be expected to do anything for money"…maybe that's why people will rationalize any purchase whether they are using their own money or borrowing another's....or why, when people get into financial trouble, they see absolutely nothing wrong with doing whatever is necessary to "clean" their credit histories so that their credit histories reflect a fantasy instead of reality.

I'll leave with two more questions/observations…

Every $50 a person can save between the ages of 23 (about the time they leave college and enter the workforce) until age 60 is worth $365,298.32 (which can grow completely TAX FREE if invested in a Roth IRA)…so I ask you, how much future money are YOU throwing away $50 or multiples of $50 at a time?

Finally, how much money would you actually have to live on if you didn't have any payments on anything except the normal monthly bills we have for necessities? If you didn't have payments all over the place; how easy would it be to do some real savings???

In closing and to paraphrase someone "as for me and my house; I'll always choose to own my lifestyle rather than rent it". :)

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Previous post is useful for people with self control problems, like an ex alcoholic would necessarily need to view beer.

Anyway, I neither need nor fear my credit. It is in my control, they belong to ME and behave the way I WANT them too. I want low insurance rates, utilities and services without deposits, and of course a fantastic mortgage rate.

I use my cards exlusively in place of debit only, so I never pay interest, and my money stays mine longer in my accounts until I PIF, which I have ON HAND at the time of purchase, not saved up for by the time the bill is due. In addition I accrue free money and miles or merchandise in the process by not using cash. I don't need to find "workarounds" for rental cars or stand in a convenience store for a 50 cent money order for what would be more convenient AND cheaper buying online. And most importantly I never live a paranoid lifestyle and still live firmly in the 21st century using the tools of our age properly. Everything... EVERYTHING in moderation.

I also have emergency cash on hand, and if that is not enough to get through an enduring emergency, that credit is there to save my @ss as well. Liquidity is important too.

So, #5 in order to set up favorable circumstances for #3, which is the end-game. Also if you ever wanted to start a business with a full inventory right away this would be necessary.

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Great post, Cynic. :) I'm the same way as you - as I've voiced before. I, too, use my credit cards more as "debit cards". I pay no interest, therefore the APR doesn't bother me. ;)

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Previous post is useful for people with self control problems, like an ex alcoholic would necessarily need to view beer.

Anyway, I neither need nor fear my credit. It is in my control, they belong to ME and behave the way I WANT them too. I want low insurance rates, utilities and services without deposits, and of course a fantastic mortgage rate.

I use my cards exlusively in place of debit only, so I never pay interest, and my money stays mine longer in my accounts until I PIF, which I have ON HAND at the time of purchase, not saved up for by the time the bill is due. In addition I accrue free money and miles or merchandise in the process by not using cash. I don't need to find "workarounds" for rental cars or stand in a convenience store for a 50 cent money order for what would be more convenient AND cheaper buying online. And most importantly I never live a paranoid lifestyle and still live firmly in the 21st century using the tools of our age properly. Everything... EVERYTHING in moderation.

I also have emergency cash on hand, and if that is not enough to get through an enduring emergency, that credit is there to save my @ss as well. Liquidity is important too.

Other than your preconceptions and assumptions; what makes you think all those things you mentions are problems for those who don’t use credit?

My insurance rates are quite low and I haven’t paid a deposit on a utility since about 1973.

My mortgage was as good as was offered when I took the loan and lower than what is available right now.

I travel and rent cars fairly frequently – never had a problem – don’t need “workarounds” nor do I buy money orders and I do almost ALL my shopping online these days and rarely actually go to a store to buy anything (other than groceries/staples) - I’ve never known anyone to pay more shopping online when not using a credit card.

Frequent flyer miles and OPM are pipe dreams…try to use FFM these days. When I fly I get deals that likely cost me less money actually out my pocket than most people got by “earning” the FFM. As to “money back” cards/offers; why do you think they have money to give back…it isn’t because you aren’t paying for it one way or another…show me a millionaire who earned his money from FFM, cash back on purchases or from leaving cash in a checking account for 29 days which wouldn’t have been there otherwise and then you’ll have something...one "gotchya" like an overlimit fee, late fee, jump in interst rate because somebody sneezed or any of the other myrid fees CCs charge and it will wipe out any savings gained from leaving your money in your savings a few extra days.

Nor am I paranoid but if you are referring to risk…being smart enough to know it’s there is not being paranoid; it’s simply recognizing reality. Conventional wisdom will tell you that you should always own a home and they are a good investment…more often than not, that’s true; but there are a few million families right now who bought homes in the past 5-8 years who have learned the hard way that there is always risk involved in debt…no, I’m not talking about those who got into ridiculous ARMs – I’m talking about people who got prime-rate, conventional loans on houses that are currently worth 15-30% LESS than they paid for them just a few years ago (which, oddly enough, is about what Chairman Greenspan was saying the housing bubble was inflated).

The meer fact that this and boards like it exist shoudl be an indication that living a lifestyle based on debt doesn't work...if it did, there woudl be no bad debts, no CAs and no JDBs.

I applaud you for handling debt well but just because you do, doesn't mean it's a good idea...and, if “living in the 21st century” means I have rent my lifestyle; I’ll pass…thank you very much.

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All I know is that as long as people are using their credit responsibly, per the most common definition of the word and not some misconstrued definition, I'm cool with that. :)

I don't actually know why I use my credit cards. I don't have an actual need for them. There's something somewhat satisfying (yay - three S's!) about knowing full and well that I never have to worry about overextending my credit again. I find gratification in knowing that each month I can pay my bill on time and in full. So in some sense, having credit now-a-days and using it in this way makes me feel much better about my past mistakes. I know it may sound backwards, but I'm so d@mn cheap that no matter how tempted I was to purchase something ridiculously expensive...I would literally visualize my FICO score plummeting down to the earth and suddenly cut my card up. :)

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Robert,

You have truly spoken against credit and debt in a manner that I found quite eloquent and intelligent. CC has also given a decent pro to using credit.

The thing is though, I could probably save to become a millionaire by the time I'm 70 without EVER going through this exercise, but the thing is too, I need to be comfortable now. Unfortunately, I cannot attain things like a car, house, and basically the American Dream without credit. I don't want these things when I'm near death.

What would be my plan to obtain these things without credit, save for winning the lotto? In principle, I hate credit too...I hate the fact that my life is the sum of three digit numbers....it truly makes me sick! But what can I do about it?

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Robert,

You have truly spoken against credit and debt in a manner that I found quite eloquent and intelligent. CC has also given a decent pro to using credit.

The thing is though, I could probably save to become a millionaire by the time I'm 70 without EVER going through this exercise, but the thing is too, I need to be comfortable now. Unfortunately, I cannot attain things like a car, house, and basically the American Dream without credit. I don't want these things when I'm near death.

What would be my plan to obtain these things without credit, save for winning the lotto? In principle, I hate credit too...I hate the fact that my life is the sum of three digit numbers....it truly makes me sick! But what can I do about it?

I agree with this totally. We have to work with what we live with.

Good responses from everyone here so far. After a couple of more weeks I will see how many other people contributed, and then I will start tallying the numbers and give you the stats on it.

If you have posted here and it is not clear as to with numbers you selected, please either edit one your posts to reflect that or add a post to show that.

I think it is safe to say that using credit or not using credit depends on the individual what they are comfortable with. Most people I know use credit, but I do have an uncle who is a multi-millionaire and all he uses is an AMEX card, and I think its the one you have to pay off at the end of the month as well.

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...

I mean no disrespect when I say this, AA, but when I hear someone say they can’t have the dream without debt; I hear someone who has bought the lie that you must have debt.

I personally know a couple of families who have purchased their houses with cash – yes…the houses they bought were not $500K, 4,500 Sq Ft. with a pool in the back but nice homes nevertheless. In each case, they had average incomes but lived on about half their actual take home pay for about seven years…I guess seven years sound’s like an eternity for some but it’s nothing compared to 20 or 30 or 40 years or more with no house payment.

If they just take what their house payment would have been (about $1,000/month) for the life of a 30 year mortgage, their net worth just from that transaction alone will be roughly $3.3 Million (who needs the lottery)…seems a reasonable sacrifice to me. Leave that money alone for another 10 years (not adding anything more to it at all) and it will be about $10.2 Million.

Want a nice car without debt? Buy a $1,000 car with cash and put the average car payment in this country (about $350/mo) in the bank and in a year, you’ll be able to buy a car worth about $6,000. Do it again but keep this car two years and you’ll be able to buy a car worth about $13,000. Not excited yet? Do the same thing again and you’ll be able to buy a car worth around $20K…you can get a very nice 2 year old car for $20K. Do it a couple more times and in the span of about eleven years; you’ll be driving a very nice car in the range of around $35-$40K and you can do it all with no debt at all. During that same eleven year period, if you had been paying the average car payment every month all those months, you would have shelled out in the neighborhood of $70-$80K and have basically nothing so show for it except a lot of cancelled checks.

Again, telling someone they have to wait seven years or eleven years for something sounds like a lifetime to some people and sacrifice is never easy but generally, nothing worthwhile ever is easy.

I'm also not suggesting that people life on a shoestring for their entire lives...but a fairly shot period of sacraficice will yield a lifetime of living a very good lifestyle with; far above what most people enjoy...and such a lifestyle built on cash will weather the inevitable storms a lot better than any lifestyle built on debt.

How long would it take you to be a millionaire…would it not be before age 70? I don’t know…I don’t know how many years you have until then but I will tell you this, this is the richest country in the world and the average person in this country earning an average income can retire a millionaire if they just want to – and, the biggest thing standing in the way of people doing just that is that all their money goes out every month in payments.

Payments can lease you a nice lifestyle…the only problem with that plan is that is only works as long as you have enough income coming in to cover those payments and sooner or later (sometimes a lot sooner than we think), that income is going to stop coming in…those are the 70 year olds we see working at McDonalds and Wal-Mart, not because they “want” to be there (although I’m sure some do) but because they either do that or they don’t eat.

Now, I don’t really think I’m going to change your mind...I'm just some guy on an internet forum; then again, I used to think exactly like you and CC so…who knows. :)++

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Guest BucFan
......

Robert, what can I say? No one could have worded that any better!

I agree with every single word... in principle.

One thing I need to add in here is the desires of our family. Most specifically our spouses.

While I may have the testicular fortitude to live in a rented cracker box for 10+ years and or drive a beater, doesn't mean my significant other would share the same enthusiasm.

So, while you are 110% correct in principle, how many young women do you know that would share and support this ideology?

IMO, There would be a lot of debt free, lonely, divorced men out there.

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Robert, what can I say? No one could have worded that any better!

I agree with every single word... in principle.

One thing I need to add in here is the desires of our family. Most specifically our spouses.

While I may have the testicular fortitude to live in a rented cracker box for 10+ years and or drive a beater, doesn't mean my significant other would share the same enthusiasm.

So, while you are 110% correct in principle, how many young women do you know that would share and support this ideology?

IMO, There would be a lot of debt free, lonely, divorced men out there.

I'm a young woman who shares that philosophy (assuming you consider 30 young). Hell, I'd ask Robert to marry me if I weren't already attached to someone!

The trick is to marry someone who shares your philosophy, not marry someone then try to make them change their mind :p

Edit: Yes, I'm aware I actually have credit. While I fully share Robert's philosophy, I also want to buy a house in two years. The quickest way to achieve that is to get something pretty on my credit reports. I'm charging, then paying off two days later (once it posts). Once I get the house, all credit cards go bye bye.

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Guest BucFan
I'm a young woman who shares that philosophy (assuming you consider 30 young).

I also want to buy a house in two years. The quickest way to achieve that is to get something pretty on my credit reports. I'm charging, then paying off two days later (once it posts).

Color me :confused: but it sounds as if you also agree in principle but not in 'real world application'. Or is it your significant other that doesn't share your passion for a wholly debt free lifestyle?

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As for Robert's car scenario, I was outlining the very same thing for my son last week with the exception being 3 year cycles. Not factoring interest on your savings, you will save $12,600 in 3 years. There is actually an '07 Grand Marquis listed for sale in my town for 12,995. In 3 years it should be worth about 9500. Plus the 12,600 saved, gives you about 22,000 for the next one. In 9 years you're holding almost $35,000 for a car. Today, that'll buy you an '07 Escalade, an '07 BMW 335i, an '06 Corvette, an '05 Mercedes S430, or an '06 Lotus Elise in my area.

Using the same 3 year cycles on financed vehicles, after 3 years your car is worth about what the payoff is. So that $360/month goes toward interest and depreciation. You trade in your financed car with just enough value in it for payoff. The finance company will want a down payment on your next car and there's about $14,000 flushed.

Not only are you flushing money away on interest, but you will always be driving a ho-hum, ordinary ride.

I carried my cycle a little farther. I am driving a '98 4X4 Dodge Durango that still get compliments about how nice it looks. I hate to see it go, but It's new owner is picking it up this Friday. It is comforting though that I'm picking up my new Jaguar XJ8 Vanden Plaus on Saturday. I'm telling you this works if you plan your work and work your plan.

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No question; your spouse has to be "on board"...as a single; I often don't mention things like that but I do very much understand.

However, given some time (and not "hit over the head with this stuff), people can and do change; even spouses. :)

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The trick is to marry someone who shares your philosophy, not marry someone then try to make them change their mind.

Here, here. I'm a young woman, ripe old age of 29, and have learned to adopt a similar philosophy about credit (similar in the respect that I have credit but no current CC debt by choice). Thankfully, I have married someone who is on the same page as me...

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Ah, another question for this poll. My wife not only would but insists on it.

That question would be would your spouse share your view or hold out?

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Color me :confused: but it sounds as if you also agree in principle but not in 'real world application'. Or is it your significant other that doesn't share your passion for a wholly debt free lifestyle?

Oh no, I totally agree with the principal, as does my SO. We budget carefully and live within our incomes. When I charge something on the card, it's paid off the moment it posts to the card. He won't even carry a credit card to look pretty for the mortgage we want in two years. His FICO score is zero. I chose to get a couple credit cards to make my FICO look pretty (even though you don't really have to), but I'm not getting into any debt with them. I'm using them like debit cards and only charge what I have cash in hand to pay for. Neither one of us finance a car nor will we ever. He drives a 1993 Olds and I drive a 2000 Hyundai I bought for cash. We're buying a modest ($75k-$100k) house in 2010 with 6-10% down. The only reason we're not waiting even longer to save more cash up front is because my kids are currently 11 and 9 and have never lived in anything but an apartment where they share a room. I want to give them the experience of living in their own house with their own room, so I made the choice to buy sooner with less cash up front. I'll still be aiming for a 15yr fixed mortgage.

We've both made bad mistakes in the past and either have paid or are paying for them. Both of us have come to the conclusion that the only way to truly live comfortably is to live within our income. Sure, it's nice to have expensive things, but nothing beats the stress free living of having all your bills covered and then some, AND having the knowledge that you have an emergency fund that can absorb the shock of life's inevitable problems. I've lived on the edge of my money and beyond. Living within your income is just a whole different life than living paycheck to paycheck knowing that one missed work week can be the pebble that starts the avalanche into bankruptcy.

Edit: Another thread made me think of cell phones, another source of financing. We have cell phones (me and my daughter), but no contract/debt on them either. We use Cricket, which is a local pay-as-you-go type deal. $76 (with tax) a month gets me two phone lines with unlimited calling (including long distance) and text messaging. No frills (voicemail/caller ID etc), and we can't roam, but for local cell phone service you just can't beat that deal. Plus, there's never any extra charges since you literally can not do anything you haven't paid for.

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It is comforting though that I'm picking up my new Jaguar XJ8 Vanden Plaus on Saturday. I'm telling you this works if you plan your work and work your plan.

Very nice ride…I’m not sure what model year you are buying but I do know those vehicles are well in the upper end of the five-figure range brand new…and to think you are doing it without using debt to do it!

Guess that sort of puts a big, gaping, hole in the theory that a person can’t do such things without using debt to do it.

You are very, very weird. :)

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Oops, sorry, it's a 2005.

What do you mean wierd??? My wife says the same thing, but she knows me.

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I mean no disrespect when I say this, AA, but when I hear someone say they can’t have the dream without debt; I hear someone who has bought the lie that you must have debt.

...

Now, I don’t really think I’m going to change your mind...I'm just some guy on an internet forum; then again, I used to think exactly like you and CC so…who knows. :)++

I found NOTHING disrespectful in your response, and I would concede that perhaps I did buy into the lie. I was also of the impression that Good Credit was Sexy because hey...I bought the book! LOL

I am 30. I am still a bit young enough to try putting $350 a way after I am done with certain obligations. In fact, the only thing stopping me from getting a luxury car isn't so much the money, but even if I had it, I don't have access to a driveway. And I would hate to see my BMW get all dinged up like I see other cars parked on my street (parking is really a pain in my neighborhood).

My parents bought their house for abuot $30k (mortgaged) back in '84. They sold it at about $150k in 2000. They were able to get a small house paid for cash money and live off their retirement/pension after the mortgage was paid off. My parents are nowhere near millionaires, but they are very comfortable. My dad drives a 98 Thunderbird. He was always into big cars....they live like kings and queens. That's pretty much what I aspire to....I'm not trying to own the town, I just want to be able to live comfortably...then and now.

I don't necessarily disagree with you, Robert, in deed or in principle. I just personally find it difficult to do what you suggest right now. Does not mean I will dismiss it outright; you threw out a very doable general plan. I just need to repair the stupidity of my youth right now as well as insure that I can manage whatever credit I can muster. It does not mean that I will spend $200k in credit at one shot...but I just want to have it to make sure that if I ever need it, it's there for use.

But you do speak a truth sir...while I'm not sure it's the only truth....it is a truth nonetheless.

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Hey that is a cool title, "Good credit is sexy." :)

As far as cars go, I like the Honda Accords 1986-2003 The new ones are junk.

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