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If people managed their money wisely and didn't buy the newest television or game consoles they would not need credit cards.
Don't buy above your means people.
Some of us do not use credit cards for frivolous purchases. I had to live on a credit card after my divorce because having been a housewife for 12 years, I had no money to live on, and with no education, I could only get minimum wage jobs (and two at a time, at that). Follow that up with precancerous growths and no insurance--I had to put the costs on a credit card. For those of use with little means, who cannot save any money because we can barely pay the basic bills, a credit card is the only way to cover emergencies.
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@dave_coder: Amen brother! Debt is dumb, especially credit card debt.
Leave below your means and you'll never need a bail-out!
@dave_coder: Credit cards are good things WHEN USED IN MODERATION. As in, try to carry low or no balance, don't get suckered into using a card with an annual fee, and always finagle a low interest rate if possible. If you're smart and careful, a credit card is a godsend. If you're not careful, it is not.
I get so tired of this knee-jerk \"credit cards are bad!\" nonsense. Be careful, pay attention, read the fine print on your bills and UNDERSTAND what it all means*, and you'll be fine. Don't do these things? Well, you're asking for trouble.
* This is where most Americans fail and why personal finance 101 should be required in all high schools.
@dave_coder: I lived without credit cards for a solid decade. Can it be done? Sure thing. Does it make a lot of very simple transactions an enormous hassle? Very definitely. Upon having established for myself that, yes, I knew how to live within my means, I applied for and got a credit card that makes my life a lot easier.
The fact that some people are irresponsible spenders does not mean credit cards are the source of their problems. Irresponsible spending existed before credit cards and will exist after they're gone, just as people can spend responsibly while having credit cards.
@dave_coder: Yup, nobody needs credit cards... unless...
* They travel: many car rental companies won't take debit cards on reservations, and hotels will put large \"holds\" on reservations without warning that can cause overdrafts on debit cards
* Their company requires them to travel for business, will reimburse them after the trip, and they don't have the entire cost of the trip in cash
* They want to take advantage of the legal protections, like chargebacks in the case of incorrect or fraudulent transactions, that apply to credit cards but not other forms of payment
* Someone they love has an emergency that requires a lot of money to fix, and has nobody else to turn to
Dave, you must live in a very simple world. I'm glad you do, and hope things never get complicated for you. Best of luck.
@bobert: Don't forget being stuck in the stupid FICO game. Being \"Cash only\" screwed us big time when we went to do a refinance. My wife got hit with a collection notice for some medical bills (that should have been paid under insurance) and her FICO score dropped below 620. It lost 45 points because of ONE collection notice. Guess what? The refinance now has to go through other lenders, because even though there is no FICO requirement for FHA, the lenders have their own, and they've picked 620 as the minimum. Great. We could wait 4-6 months now that the BS collection has been removed, but then we run the risk of interest rates going right back up.
FICO = sham
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@dave_coder: Yay for ludicrous and nonsensical platitudes.
Except that credit cards mean you don't have to carry wads of cash when you go out for a nice dinner, or go buy something really expensive, or travel.
If you never ever do any of those things, I guess you don't need a credit card.
@dave_coder: Yep, because no-one's ever had to fly 6 people acrosst he country on 24 hours' notice for a funeral, and no-one's ever suffered a severe injury and had to go to the ER while not covered by health insurance, and no-one's ever had any other issues...
Why does this happen EVERY TIME credit cards come up?
@Etoiles: Because its the truth. The problem with the economy, regardless of the machinations is the fact that everyone borrowed money to purchase. Its still the problem, both parties want to get the banks lending again, so that companies can grow. No, you have a product, it sells you get money and reinvest it. You expand based on the revenue you have coming in. You dont borrow money to pay your people and debts, thats just digging a bigger hole. The truth holds true on a personal level as well. Yeah emergencies come up but if you have the wherewithal to not use credit then you probably have a savings account for those emergencies. Are credit cards a nice emergency buffer, yeah, but not a necessary one.
@Etoiles: My first thought was skyrocketing health insurance costs, out of pocket medical costs, stagnant wages, increased fuel and food costs and EVERYTHING going up in price in the last two years. Yea TVs and game consoles are the sole cause of people carrying debt. Don't even get me started on the high cost of college.
That kind of blame game is oh so easy but is rather dishonest. Our credit and debt problems are much more complex than blaming people for buying some consumer crap.
@Etoiles: You are right...many people that use credit cards either a) use them for bonafide emergencies, or b) pay off the card in full each month and simply use the card to get benefits such as rewards, chargeback protection, etc. However, there are a lot of credit card users that use their card for \"emergencies\" like buying thousands of dollars in clothes at the galleria, a brand new LCD television, and dinner at expensive restaurants.
Can you explain to me why a substantial number of Americans are in perpetual credit card debt? I can understand if someone has to pay off their credit card for an actual emergency (as previously discussed) but I don't think that people would be enslaved to their CC company if they actually did pay it off on time. If people used credit responsibly and lived within their means (and not outside their means or even on the edge of their means if possible), then we wouldn't be in this big yucky credit mess right now.
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@Etoiles: @MostlyHarmless: I don't need the so-called \"benefits\" of credit cards. I live within my means and have tens of thousands of dollars in savings. Don't you think that's a damn sight better than being thousands of dollars in debt? And you call me irresponsible. I call you a marketing-brainwashed fool.
@speedwell, avatar of snark: Who's talking about going into debt? Pay that sucker off every month, no problems.
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So it's a choice between either having money in savings, or having the same amount in debt? How did you figure that one out? You're also equating credit with debt, as so many do.
Oh, and YAY YOU!!! for your tens of thousands of dollars in savings. Congratulations, and well done for bringing them up.
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@speedwell, avatar of snark: Thanks for making assumptions about me.
I have >10K in savings too (in just a year of working), save 1/3 of my paycheck every month (and i dont really even make that much), and I will be buying my next car in cash. I have never paid a penny in CC fees or interest and I always save for a big ticket item before buying it (with a CC, i might add), and my credit utilization is under 20%.
And YET I use credit cards every time I can, because it has so many more advantages over using a debit card, or cash. bobert has a good list. Or you could search Lifehacker and Consumerist for educating yourself a bit more about the benefits of credit cards.
Yes credit cards make it extremely easy for dumb/careless people to get neck deep in debt. And yes is it very difficult to get out of it. But that does not imply that everyone who uses a credit card is \"sheeple\" brainwashed by the companies.
We just know how to work our way through the system without screwing ourselves up.
And given your attitude, here is the obligatory xkcd link:
No, no, MostlyHarmless. You have just admitted to having credit cards, and therefore you must, surely, be tens of thousands of dollars in debt.
Usually when I see the posts about how evil credit is (and the people who post \"I don't need a credit card, blah blah blah\" comments on any and all stories that mention them) I assume that they must either:
a) know - from bitter experience or otherwise - that they can't trust themselves to handle credit sensibly, or
b) not yet figured out that credit can and does have its uses, can be very profitable if used wisely (see: the $600 cashback I've earned on my American Express card this year, all without paying one cent in interest), and is pretty much essential when renting cars, making hotel reservations and, of course, buying houses.
I should shut up now, because I know I'm part of the \"credit is great if you know how to use it\" faction that is no doubt every bit as annoying as the \"credit cards are evil and ONLY used by gullible, greedy idiots to buy giant flat-screen TVs they can't afford\" faction.
\"Credit is good if you know how to use it\" is in fact, quite a reasonable statement. The problem is that there are many people, a number of them here on this blog, that over-use it mercilessly.
Plastic of either stripe should not be used for every little thing. Absent unusual circumstances, day-to-day stuff should generally be done with cash. On this scale, plastic is only reasonable for \"Oops! I'm out of cash!\" moments.
Credit is reasonable for larger purchases where cash is impractical or hazardous. Debit can be used for this also, as long as the debit card is tied to a dedicated account that is not used for paying household bills.
Then there are those moments like I had a few months back, where a car repair and the need of new tires required credit that I'll be paying off for a while yet. I may rebuild my emergency fund some day, but it kept me from getting even deeper into the hole.
In addition to large numbers of transactions making it harder to track it all, excessive use of plastic increases the probability of intercept and fraudulent use of your information.
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@MikeVx: In addition to large numbers of transactions making it harder to track it all...
That doesn't make any sense at all. How many purchases are standard for a given month, 50? That's probably twice what I make in a given month, but even estimating high the statement doesn't make any sense.
You can either have one line item \"withdrew $60\" for example, and not really be able to track that back to every purchase you have made, or you can see individually what you spent on each and every transaction.
My credit card provides a year end report that actually details how much I spent on retail, food, travel, etc by every month. It's incredibly useful and would not be possible if you just say \"withdraw from atm\" every month.
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@MikeVx: \"Absent unusual circumstances, day-to-day stuff should generally be done with cash.\"
Why?
I haven't routinely carried cash since about 1996.
@Eyebrows McGee (now with more baby!): Because the merchant fees create additional hidden costs in everything we buy. At least, that's the reason I'm cutting back on credit card use. I've heard the rewards card situation called \"regressive\", a term which makes some sense to me -- if I, as a middle-income person, charge everything to maximize my cashback rewards/miles/whatever, I singlehandedly impose costs on merchants and drive the price of everything higher than it would otherwise be. Not just for me and other card users, but for cash and debit users too. Merchant fees even reduce the value of WIC cards, if you think about it.
Plus, I make an effort to patronize the mom & pop shops that give my neighborhood character, and I've always thought the high transaction fees charged to small businesses are indecent. I want my money to support the merchants that serve my community, not some faceless fatcats.
I think both of those things suck a lot, and not encouraging them is worth the couple hundred bucks in rewards that I might lose. I can't honestly say I'd stop if I was realizing $1000/yr or more in cash rewards like you are, though.
... and if by some accident they don't have all the necessary credit card-making ingredients on hand, they order one from their friendly local Mom & Pop credit card company. Not as good as making their own, obviously, but forgivable in a pinch!
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@speedwell, avatar of snark: The point being made is that people who think it's either savings or debt don't understand credit cards.
I get that not everybody wants to deal with them; that's fine, they don't have to. I get that some of my best reasons for using credit cards are going to begin to disappear. But, like many of us here, I use credit cards extensively and I don't have credit card debt. None. Not thousands, not hundreds, not any. It's not hugely uncommon. And I have more money in savings, to the tune of about $1k a year, because of the cashback rewards I've gotten from cards.
I get you don't like cards, but the only reasons you're offering for users of them having to be \"marketing-brainwashed\" are pretty easily refutable.
@Etoiles: Because without narrow self-righteous opinions, the internet would have many fewer words on it?
@Eyebrows McGee (now with more baby!): Eyebrows, have I ever told you how much you rock? I grin damn near every single time I read one of your snarkyesque replies.
@Eyebrows McGee (now with more baby!): Funny how people who actually have good advice to give are so often given the label of self-righteous on the web, while those who have nothing but disdain for wisdom consider themselves witty.
@Eyebrows McGee (now with more baby!): Actually I have decided to just ignore the whole \"CREDIT CARDS ARE TEH EVIL!! YOU ARE TEH N00BZ FOR USING IT!!\" drivel. People who claim that the only way to live is without credit cards, and that having a credit card automatically means that you are neck deep in debt have prettymuch no idea what they are talking about.
And the \"I do not use credit card. I am a responsible person with a simple lifestyle who does not buy crap\" line. Well, if you really were responsible and knew what you were doing, you'd know the benefits of using credit cards for purchases.
@MostlyHarmless: I get most of the same benefits using my check card as a credit transaction. Part of this is due to having a bank that has a better than average plan for their cards.
The supposed benefits do not outweigh the actual hassles so I opt to not use one. I have never had an issue renting a car or a hotel room. Life is just too short to waste time dealing with the crap most of these card companies put people through.
All the stories of card accounts that can't be closed, lowered credit lines or closed accounts hurting people's credit score and the tales of fighting a card company just to make a payment on time. I can do without the frustration. It doesn't make me a n00b.
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@bohemian: I've been using credit cards for about 8 years. I just pay my bill off each month in full and have never had an issue. Oh, and I've scored about $500 in cash back of that time.
CCs also give you better protection than a card tied to your bank account. I've found an extra degree of separation between people and your money in the bank is a good thing.
@bohemian: Fair enough, if that is what you believe. Though banks can be equally problematic.
The reason I try not to use the debit card EVER is because if someone makes a mistake somewhere ($23Quadrillion transactions, Bluehost Incident) , the cash in my bank is locked/gone till the time it is resolved, and meanwhile it is very likely that other automated transactions might fail (home mortgage/rent), leaving me to sort out shit at many different fronts.
@MostlyHarmless: At last! Someone who gets it.
The habit of using a debit card tied to your household account is what gets a lot of people into trouble. I don't eschew debit cards entirely, the two I have are on accounts that are used to give the cards something to draw on. My household account only has an ATM card attached to it. If someone scams one or both debit cards, my regular payments are still safe.
@Eyebrows McGee (now with more baby!): Without narrow self-righteous opinions, the internet would not have a reason to exist.
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@iam118: Well, Porn without narrow self-righteous opinions, which means fewer words in it?
Sounds fine to me.
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@Eyebrows McGee (now with more baby!): The problem is most people NEED a credit card or two for FICO reasons. You just can't avoid it.
@dave_coder: I do just fine without credit cards, thanks. If I made any less, I'd be afraid I couldn't pay back what I owed. If I made any more, I would be able to cover my fairly modest needs even more easily. (\"Fairly modest\" means my most extravagant expenditures are living alone in a two-bedroom apartment with three cats, having a fully-paid-for compact car, having more kitchen equipment than should be legal, shopping at Costco and Whole Foods, and eating out when I don't feel much like cooking.) I also have a six-month-plus savings cushion for emergencies.
@dave_coder: Yeah. These things sound bad but they're only going to weed out those who should not be using credit cards the way they do. The only people I know who have any sort of credit card debt are those who are irresponsible with money.
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I've had a card through MBNA since 2005, and during this time I have not paid a single penny in interest and have had my limit raised twice. A few days ago I called to have my APR lowered - something I've never asked - and they denied me.
@1stMarDiv: MBNA??? ... my awesome MBNA card turned into a shitty B of A card in 2005. :(
@1stMarDiv:
Well, I've been able to manage my money so far by avoiding big purchases and spending within my limit, but I'd like the APR to be lower just in case I do end up in a bind and end up owing on my card. Seems rational to me.
And yes, MBNA makes plenty of money off my card. Though I pay it off in full every month, I make virtually all of my daily purchases and pay every bill with it. On average I put about $1,600 a month on it, so to say that MBNA has no incentive to lower my APR is incorrect.
@1stMarDiv: You need to consider the fact that you haven't really given them a cent since you've had the account, so they don't have much of an incentive to help you.
@1stMarDiv: Not to ound crass, but if you've never paid a penny in interest, why do you really even care what your rate is?