Savings, finances, credit card bills...

[Randomnity]

[MENTION=2]Ivy[/MENTION] They say you should always keep a 15-30% balance on you cards to get the highest rating not pay them off in full (I keep mine at 15%). I got this info directly from experian. Of course that means the banks always will make that interest which sucks.

Edit: the reason is because creditors only report once a month (sometimes less) and they could report at the time of the month when you haven't paid your bill yet or when you have 0 balance always.

Do you have a source for that? I've heard that too, but I've never found a non-bank source to say that - and of course the banks want you to carry a 30% balance when it's so easy to get approved for thousands of dollars and many charge 20-30% interest - a good credit rating is seriously not worth paying THAT much in interest.

edit: nevermind, I can't read. no idea what experian is but I'll look into it. I still don't think it's worth the interest fees though unless you have a very low interest card.

I understand the security issues, but the problem with CC's is that they set a soft upper bound on spending that isn't reflective of the amount of money you actually have.

If you primarily use a debit card, you can only spend as much as you have, and this forces financial responsibility on the card holder (at least to an extent).

Whereas with a CC you can spend all the way up to your limit which is usually not reflective of how much $$ you have. With CC's you learn to spend as much as you can afford in monthly payments.

The problem with this is that it's exactly what the CC companies want and how people never end up paying down their CC debt. The little bit more a month you can spend a month and get away with, with CC's is offset by the fact that more and more of your $$ are going to start going to interest payments etc. and you can end up never freeing yourself to actually start saving money.

This is true for a lot of people, but I dislike the blanket statement. While I forget to pay my credit card bill on time every so often and get dinged for 10-20$, I definitely make up for it in rewards (I have a groceries rewards card so it's super convenient to redeem) since I charge absolutely everything on it. So the bank is paying me for a more convenient card with increased security, as long as I understand that it's a loan that is free if I pay it on time. Sounds like a sweet deal to me. I do agree with you that most people end up paying interest and the moment you do that, the card is a bad thing financially (well, depending on the amount I suppose).

The security is a huge deal for me - as an example, I used to play a popular online game with a subscription (not wow) and one month they glitched and charged everyone like 30-40x instead of once for the month. People who paid with a credit card like me were totally fine since the charged money was taken out of a pool of potential money that doesn't exist until you pay your bill (and it was resolved within a few days). The people who paid with a debit card had rent cheques bouncing, can't withdraw cash etc etc since their actual money was taken. Debit cards are pretty scary that way. Yes your bank will often reimburse you (although IME not as happily or as quickly as credit cards will) but that immediate loss of actual money is way more serious than a bogus charge on your credit card.

There might not be "too much to worry about" in the long term, but in the short term there can be a huge impact of having all your money locked up for even a short time, particularly if you don't own a credit card to fall back on.

 

[Giggly]

Ugh, I hate credit, it's like this maze that you have to be a certain height to navigate and I never seem to grow that high. I do my best. Thanks for the info Giggly.

No worries. Some more info to get the highest credit rating:

-Have no more than 3 hard credit inquiries at a time. More than 3 drops your score.
- Have 1 mortgage and 1 installment loan (like a car). These raise your score higher than if you had neither, provided you pay them on time.
- Get a traditional American Express card.
- Never be late on payments. 1 late payment can drop your score 20 points.

 

[SilkRoad]

Do you have a source for that? I've heard that too, but I've never found a non-bank source to say that - and of course the banks want you to carry a 30% balance when it's so easy to get approved for thousands of dollars and many charge 20-30% interest - a good credit rating is seriously not worth paying THAT much in interest.

edit: nevermind, I can't read. no idea what experian is but I'll look into it. I still don't think it's worth the interest fees though unless you have a very low interest card.

Yeah - I would have thought you could get a good credit rating just by paying off your balance in full every month, or almost? I don't know a lot about this, though...

 

[DiscoBiscuit]

So yeah, my finances could be smarter; I'm just saying that not everyone who uses a CC is spending way above their means and racking up huge interest charges, or interest charges at all. Try working in the arts in London; a lot of us are the same boat

I def understand, and didn't mean to come across like I was assuming you were racking up crazy debt.

Basically the crux of my argument is this, with debit it's easier to get in the habit of saving $ than it would be with credit. That's not to say it isn't possible, or that one can't only use a CC and still have very smart finances, just that it's way easier to dig yourself into a hole with CC's.

 

[SilkRoad]

I def understand, and didn't mean to come across like I was assuming you were racking up crazy debt.

Basically the crux of my argument is this, with debit it's easier to get in the habit of saving $ than it would be with credit. That's not to say it isn't possible, or that one can't only use a CC and still have very smart finances, just that it's way easier to dig yourself into a hole with CC's.

I guess that could be true, about debit. I do worry about the security implications of debit. Ie. a lot of what [MENTION=206]Randomnity[/MENTION] said. (There are also advantages to credit - when you pay it off in full - like the fact that I get air miles with my credit cards, which I wouldn't with the debit card.)

I suspect that my spending wouldn't be very different with a debit card rather than a credit card but I suppose I could give it a go for a few months - might be an interesting experiment.

 

[DiscoBiscuit]

Also to clarify, I'm not saying you shouldn't have a CC, just that in my experience, it's better to use that for emergency, special, or large purchases and take care of everything else with Debit.

But like I said earlier that is my experience, and ymmv.

 

[SilkRoad]

Also to clarify, I'm not saying you shouldn't have a CC, just that in my experience, it's better to use that for emergency, special, or large purchases and take care of everything else with Debit.

But like I said earlier that is my experience, and ymmv.

I honestly also think - beyond the whole issue of whether you're saving, or paying interest, etc. - that a lot of this is a) cultural, and b) what you grew up with. My parents told me to use my debit card sparingly, and they are wise. And I grew up in Canada and now live in the UK - it might be a bit different in different places.

 

[DiscoBiscuit]

I honestly also think - beyond the whole issue of whether you're saving, or paying interest, etc. - that a lot of this is a) cultural, and b) what you grew up with. My parents told me to use my debit card sparingly, and they are wise. And I grew up in Canada and now live in the UK - it might be a bit different in different places.

I learned everything I know about finances from my father.

And I'll say this, his record with finances warrants me listening to him and following his advice.

 

[Usehername]

FWIW, [MENTION=6724]DiscoBiscuit[/MENTION] and [MENTION=206]Randomnity[/MENTION] and [MENTION=7063]SilkRoad[/MENTION] are working from majorly different understandings of what a debit card is.

Disco is assuming that a debit card can do all the basic stuff that you need it to do, which is true in America, and I would take his advice here (and I do the same thing as him here).
But in Canada debit cards can't do anything and you genuinely need a credit card. The function of a debit card is so different between the two countries that they should really be different terms. I've got Canadian credit cards for when I'm in Canada and a singular debit card for living my daily life in America (and I genuinely don't need more than that, because it's tied to Visa so I can order stuff from Amazon, etc). I couldn't just have a debit card for Canada because it can't function for all my basic 2012 needs there. In Canada debit cards are ONLY cash in electronic form. Here they can do shit and then just remove stuff from your balance.

 

[Randomnity]

FWIW, [MENTION=6724]DiscoBiscuit[/MENTION] and [MENTION=206]Randomnity[/MENTION] and [MENTION=7063]SilkRoad[/MENTION] are working from majorly different understandings of what a debit card is.

Disco is assuming that a debit card can do all the basic stuff that you need it to do, which is true in America, and I would take his advice here (and I do the same thing as him here).
But in Canada debit cards can't do anything and you genuinely need a credit card. The function of a debit card is so different between the two countries that they should really be different terms. I've got Canadian credit cards for when I'm in Canada and a singular debit card for living my daily life in America (and I genuinely don't need more than that, because it's tied to Visa so I can order stuff from Amazon, etc). I couldn't just have a debit card for Canada because it can't function for all my basic 2012 needs there. In Canada debit cards are ONLY cash in electronic form. Here they can do shit and then just remove stuff from your balance.

Hmm, I believe you, but on the other hand the people I mentioned who were screwed over by their debit cards being overcharged were all americans (hence why they could use it to buy the game online in the first place). So they used it as a credit card basically, but it took away their actual money. Having a "credit" card tied directly to your real money is a scary thing to me, even if it is normal in the states. I have absolutely no idea what credit/debit is like in the UK, though.

 

[DiscoBiscuit]

I'll always be more afraid of interest rates than I am of hackers.

 

[Randomnity]

I'll always be more afraid of interest rates than I am of hackers.

Oh, absolutely. 100% chance wins over much smaller chance, so debit card wins over paying interest every time. That said, it's extremely easy to avoid paying interest if you are sufficiently motivated to do so (especially if you're less careless than me). So I'm not very afraid of hackers, but I'm more afraid of that possibility than I'm afraid of myself.

 

[Ivy]

Has anybody ever used a prepaid credit card? I'm honestly asking. I am always suspect of things I see advertised in certain markets, e.g. daytime TV alongside ads for sweepstakes clubs and payday loans. But I honestly don't know if there's any tangible reason not to have one, besides only financial doofuses needing them. If you use one does it send a secret "hey, this person's a financial doofus" message to your credit report?

 

[JocktheMotie]

I'd generally rather pay off CC debt immediately rather than pad savings while incurring late fees, as those savings don't mean too much when your debt is ballooning. That just seems dumb.

I use my CC exclusively for purchases of any kind, and only carry my Debit Card for ATM withdrawals if I absolutely need cash. My CC has better security features, I earn miles and points, and there's no direct access via my CC to any liquid asset. Debit Card, if I didn't need it for emergency cash withdrawals if I'm out somewhere I'd never even carry it on me. I pay my CCs off every month, so interest rates are never a worry.

If anything, cash is my least favorite thing in the world. Hate it, and its ugly bastard children, spare change.

 

[Ivy]

I'd generally rather pay of CC debt immediately rather than pad savings while incurring late fees, as those savings don't mean too much when your debt is ballooning. That just seems dumb.

I use my CC exclusively for purchases of any kind, and only carry my Debit Card for ATM withdrawals if I absolutely need cash. My CC has better security features, I earn miles and points, and there's no direct access via my CC to any liquid asset. Debit Card, if I didn't need it for emergency cash withdrawals if I'm out somewhere I'd never even carry it on me. I pay my CCs off every month, so interest rates are never a worry.

If anything, cash is my least favorite thing in the world. Hate it, and its ugly bastard children, spare change.

I like money.

 

[DiscoBiscuit]

All my business expenses go on the CC though for the rewards others here have mentioned.

 

[Giggly]

Has anybody ever used a prepaid credit card? I'm honestly asking. I am always suspect of things I see advertised in certain markets, e.g. daytime TV alongside ads for sweepstakes clubs and payday loans. But I honestly don't know if there's any tangible reason not to have one, besides only financial doofuses needing them. If you use one does it send a secret "hey, this person's a financial doofus" message to your credit report?

I think those are just like the cards you can buy in your local drug store and they don't report to credit agencies.

If you want something that still reports but is prepaid check with the banks to see if they offer a secured credit card.

All my business expenses go on the CC though for the rewards others here have mentioned.

Experience has taught me that the only rewards I'm interested in are cash or air miles. The other ones I ignore.

 

[Ivy]

I think those are just like the cards you can buy in your local drug store and they don't report to credit agencies.

If you want something that still reports but is prepaid check with the banks to see if they offer a secured credit card.

You smart lady. Smart lady help, make Ives feel good. Thanks smart lady.

 

[prplchknz]

Has anybody ever used a prepaid credit card? I'm honestly asking. I am always suspect of things I see advertised in certain markets, e.g. daytime TV alongside ads for sweepstakes clubs and payday loans. But I honestly don't know if there's any tangible reason not to have one, besides only financial doofuses needing them. If you use one does it send a secret "hey, this person's a financial doofus" message to your credit report?

my mom gave me a prepaid one in highschool to purchase gas. but once I reached adult hood i use a real credit card. also for a christmaspresent i got a pre paid one. But i think that was when I was also in highschool. so not sure if that counts because they were never in my name.

 

[Ivy]

Yeah.. the main goal for me would be to have something to use that isn't connected to my bank account, but isn't racking up interest, either. It wouldn't really matter if it were reported to credit agencies, unless it's an automatic negative to even have one (which it sounds like it isn't- I hadn't thought about people getting them for their kids, but it's a good idea).