Randomnity
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- May 8, 2007
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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.[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.
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.
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).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.
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.