NM Grower wrote:
If you are going to be frugal, you might consider having your month's expenses earning you money in an interest bearing account, then using it to pay off the credit card balance monthly on time, and you have made money off the banks rather than the other way around.
dale hodgins wrote:
The only things I have ever used credit for are land purchases and for a work vehicle. It can also make good sense to borrow money for one's education. I can't imagine why anyone would borrow money to go on a vacation, to buy shoes or to eat at fancy restaurants. Yet that's how many people use credit, for instant gratification.
Here in Canada are former Prime Minister John Chretien resisted and sabotaged the chartered banks attempts to get in on the subprime loan bandwagon that the US was involved in. The heads of most of our banks wanted his head. When the big meltdown came in 2008 Canada's banking system was barely affected. Mr. Chretien is now retired but he does regular speaking engagements where he crows like a rooster about what would have happened if the banks had their way and lent money to people who didn't have a prayer of paying back. During his reign Canada got rid of its national debt as well. I think the old guy has every right to crow as loud as he wants . When asked why we were not sending any troops to Iraq Mr. Chretien growled in his broken English "Canada have plenty oil"
Jeanine Gurley wrote:
Dale, is that a U.S. community bank that charges this fee? I'm in Victoria British Columbia, Canada where a hot summer day is 75°F Canadian credit unions often charge a fee to nonmembers if they want to cash a check. When I receive checks from people I don't know, or if I just want the money now I go to their financial institution to cash it. That's when the fee kicks in. Most of my customers show up with cash since what I'm running is basically a glorified yard sale peddling building materials. But as time goes on I'm finding more and more people with only plastic and not a dime in their pocket. Whenever I see this I wonder how these people are ever able to seize a great deal when they see it. I always carry a couple hundred dollars just in case I see a great deal on the side of the road
paul wheaton wrote:
An odd thought occurred to me.
Does a person's credit rating actually rate how much money a bank might be able to squeeze out of somebody?
State chartered banks are not ruled by federal regulations. They are regulated by state charters and every state has a different set of rules. Some have adopted the federal rules many have not. Community banks generally speaking did not have problems when the housing bubble burst because they were over extended a la lending rules that preclude marginal lending. Not all states are the same in that respect but most have such regulations. My bank for instance never stopped providing mortgages to their customers and have not had any problems in fact have grown their assets without any bailout money. I suppose that defining what you mean by "community bank" might make a difference too. State chartered community banks cannot by regulation do business out of the state where they are chartered. That precludes any and all of that nonsense that went on and is still going on with the multinational banking practices.
Mustang Breeze wrote:
I have worked with banking systems for over 10 years. People should understand exactly what happens to a Community Bank when they get their banking charter. They, basically, hand the keys to their decisions over to banking regulators. Regulators who do or do not understand credit choices outside the boundries of the government formula. And, yes, there is a government formula... one SO powerful it FORCES banks to make loans they knew were "bad" and ones that FORCE banks to turn down loans they know are "good." Banks who resist are arm-twisted with enormous fines and down-grades.
This regulation-cramming is, directly, responsible for the mortgage crisis. It's funny how the government chose to pin the crisis on greedy Bankers (scapegoats!). Bankers have far greater intelligence and insight than to be blinded by greed.
I will use credit when I deem it necessary. I fully understand the choice I'm making and the risks. I use it sparingly and have a sound repayment plan established before we go to the bank or credit card for cash.
My opinion is: credit is a tool. The "evil" of credit can come from how a person chooses to use it. Same as a hammer, know how to use the tool before your start putting dents where you don't want them.
I use my bank for a checking account that is free so I can have a debit card. I haven't had a credit card for at least 17 or 18 years. I cut them up and paid them off and adopted the "if I don't have the money in the bank I cannot afford it" principle. I do have an exception to that rule however. I am getting a personal loan to buy a truck that will not be there if I save up for it. I need it now not in three years.
I think credit and loans are all about 'fast money'. Slow money is delayed gratification...and most can't wait - we want it NOW. We don't want to save up over time and pay cash (unless ur rich).
I stepped off the bank-consumer treadmill years ago and wish i had done it way sooner.
One of my underlying foundation principles for an IC is: No connection of any kind (even 6 degrees) to Wall Street money.
I have seen and heard of too many good ICs have incredible problems and issues with financing, banks, loans etc. Why put it at risk this way? Why not a co-op, Timebank model and sweat equity? and slow... slow permie
There's a great new book...'sacred economics' by Charles Eisenstein.
You can read the text here (and contribute what you want, or read it for free, or go to Amazon)...
Dave Bennett wrote:
I haven't had a credit card for at least 17 or 18 years. I cut them up and paid them off and adopted the "if I don't have the money in the bank I cannot afford it" principle.
jacque g wrote:
My debit card works just fine for all the above. I just don't think the little bit of money I might earn by doing as you suggest is worth being caught up in the credit card system. YMMV, obviously.
I have been a victim of identity theft not once but twice. Both times my bank gave me back all of my money and bank charges immediately. Fraud is just that, fraud and as long as that VISA logo is on that card THEY are responsible for any fraud tied to my account. I have no use for a credit card. I do have two different checking accounts though. One is only used for internet purchases and is only funded when I make a purchase. As for living from paycheck to paycheck? That has been going on in my life for over 10 years. My bank account getting hit by identity theft could be a problem but not bouncing checks. I never write checks. I stopped using checks at least 15 years ago. I only use my debit card or cash.
Jeff Mathias wrote:
Hi Dave/jacque g,
While I do agree with these ideas, there is one thing you might consider. Credit cards have much better fraud protection. With a credit card they are extending you credit and so your actual cash is safe and they are much more proactive in dealing with fraud. A debit card on the other hand is tied directly to your cash. In the event of fraud the money is gone/tied up until the bank returns it to you after investigation. Sometimes this happens quickly but sometimes you bounce checks or cannot make a needed payment as the cash you thought you had is not available. This can really hurt a person living paycheck to paycheck.
The key to credit usage much like any other potentially dangerous tool is personal discipline; you only charge what you can pay off. Same as the debit card but you have some cushion for emergencies when you are cash low.
If you do prefer debit cards I suggest opening a second account that you can keep a small balance in and transfer money to for larger purchases if necessary, that way should the card get hit with fraud your main working account (cash) is still safe.
Suki Leith wrote:What gets me is the debt-to-income ratio.
So I can't get a mortgage, which would be less than what I would spend on rent by about $200 a month, because of my debt-to-income ratio. How's that for logic? Because if you manage what pencils out as impossible to others then that means you're a risk. And because the poor can't be trusted, the poor must spend more to live. And why are we poor? Why do we have an impossible debt-to-income ratio? Because we're paying education loans...
I am going to have to get a high interest low balance credit card and build my credit worthiness. Since I have no needs and don't buy anything, I'm just going to have to charge groceries. Pay interest on groceries so I can get a mortgage. The world is insane...
If you pay the card in full each month you pay no interest usually.
Troy Rhodes wrote:The FICO score is an "I love debt" score (another Dave Ramsey reference). It says very little about winning financially. It says everything about how much you like to borrow money and pay it back.
If you stop borrowing money, because you have/make/own/win ten million dollars, your credit score will drop to zero within a couple years.
When mine hits zero, I will be a proud proud man.
Note that there is a big difference between "bad" credit, and no credit. Bad credit shows specific history of not making payments on time, or having a car repo'd, or a foreclosure on a house.
No credit, a literal score of zero, means they don't know what the hell you're up to. But whatever it is, it doesn't involve borrowing money. Drives them crazy I'm sure.
This is so deeply ingrained in the culture, and so intentionally pushed by the credit vultures, that many people are shocked when they find out what a "good credit score" really means.
A good friend of ours at church was bragging about how his banker had checked his credit score, because he wanted to borrow some money for a motorcycle, and the banker had commented that he'd never seen a credit score that high. He was PROUD of his high credit score, thinking this made him look astute and sophisticated with his money handling.
I felt obligated to point out that a very high credit score often means a very poor financial plan. Bigger house than you can easily afford, many credit cards, a long series of car loans, etc. He just looked dumbfounded when I told him a "great" FICO score is often a bad thing, and don't go bragging about it. It just means you like to borrow money. Scads and scads of millionaires have a FICO score of zero. He was incredulous, and I'm still not sure he is convinced.
This is NOT a sign of winning financially.