Savings, finances, credit card bills...

[Ivy]

Actually right now and for the past several years we don't have any. But I realize this is not typical of Americans.

 

[prplchknz]

I have no choice but to carry a balance on my credit card, I can only manage to pay the minimum and its only a 600 dollar limit because my credit is crap, but than they charged interest so basically my credit card sits in my wallet while i try to pay it down each month. money sucks, or i'm not very good with money.

 

[Giggly]

Which of the following two scenarios would you prefer?

-Carrying a balance on your credit card but being able to put savings aside

I do this exactly just to keep my credit score up but I only have 2 cards and use it for normal expenses that I have the cash for anyway. I probably should stop doing this though and just put the money in savings but I'm not too comfortable with the idea of my credit score dropping because of that either.

 

[CzeCze]

Seriously? Five cards? I'd feel funny about having two.

That's what "how to guides" were saying several years ago and spurred me to open several low balance credit cards including 2 store cards. I closed all but 1. I think now perhaps 5 was the magic number then because those would spread out your debt and give you a lower balance to limit ratio. And they Recc'ed having a variety of credit to boost your credit score. Also those guides were prolly written by money hungry banks.

 

[DiscoBiscuit]

Might have already been stated, but using a CC as your main payment method for things isn't smart.

Use a CC for emergency stuff.

Get a debit card for everyday purchases.

Pay off your CC debt first. Then get a debit card. Then take your credit card out of your wallet.

Spend less, set up a Roth IRA. If you don't plan long term with your finances, you won't ever have any real savings and just stay on the credit treadmill.

 

[Ivy]

I don't think that's necessarily true, Disco. I think if you have the means and the discipline to pay off your balance every month, it can be very financially sound to use a CC to pay for everyday expenses and then pay it off routinely before the grace period is up. It makes for healthy credit as well as maximizing whatever points, miles, or other rewards the CC offers. There are plenty of credible financial planners who would caution you never to use a bank debit card at all, as they are typically not as well-protected from fraudulent use as credit cards are. And if somebody does end up using it fraudulently, that's your bank account, not a theoretical credit line, that they are dipping into.

 

[DiscoBiscuit]

I don't think that's necessarily true, Disco. I think if you have the means and the discipline to pay off your balance every month, it can be very financially sound to use a CC to pay for everyday expenses and then pay it off routinely before the grace period is up. It makes for healthy credit as well as maximizing whatever points, miles, or other rewards the CC offers. There are plenty of credible financial planners who would caution you never to use a bank debit card at all, as they are typically not as well-protected from fraudulent use as credit cards are. And if somebody does end up using it fraudulently, that's your bank account, not a theoretical credit line, that they are dipping into.

Well... as with everything what works for me won't necessarily work for everyone.

I figured given the nature of the OP, that the kind of discipline you mention wasn't present.

There are situations where where having and using a CC is beneficial, but for many, the option to spend more than one has with a CC can be too tempting an option.

I mention going with a debit card, because it forces you to get your spending in order right quick. Once you have trained your fiscal discipline with the debit card, I would then recommend using a CC where it makes financial sense.

 

[Ivy]

Well... as with everything what works for me won't necessarily work for everyone.

I figured given the nature of the OP, that the kind of discipline you mention wasn't present.

There are situations where where having and using a CC is beneficial, but for many, the option to spend more than one has with a CC can be too tempting an option.

I mention going with a debit card, because it forces you to get your spending in order right quick. Once you have trained your fiscal discipline with the debit card, I would then recommend using a CC where it makes financial sense.

Yeah, this is all true for me too. I don't use a CC because I don't have the means and discipline to keep it paid off. (Well- I have the means now, but I'm not sure I always will have it, and I am pretty sure I don't yet have the discipline.) We use a debit card for pretty much everything, although it makes me really nervous because if it gets sniped then that's our bank account, and that's all we've got. But I don't think a blanket statement that it's "not a good idea" is true either because it's actually a really good idea, if you can do it right.

 

[Ivy]

Well... as with everything what works for me won't necessarily work for everyone.

I figured given the nature of the OP, that the kind of discipline you mention wasn't present.

There are situations where where having and using a CC is beneficial, but for many, the option to spend more than one has with a CC can be too tempting an option.

I mention going with a debit card, because it forces you to get your spending in order right quick. Once you have trained your fiscal discipline with the debit card, I would then recommend using a CC where it makes financial sense.

Yeah, this is all true for me too. I don't use a CC because I don't have the means and discipline to keep it paid off. (Well- I have the means now, but I'm not sure I always will have it, and I am pretty sure I don't yet have the discipline.) We use a debit card for pretty much everything, although it makes me really nervous because if it gets sniped then that's our bank account, and that's all we've got. But I don't think a blanket statement that it's "not a good idea" is true either because it's actually a really good idea, if you can do it right.

 

[Giggly]

[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.

 

[DiscoBiscuit]

Yeah, this is all true for me too. I don't use a CC because I don't have the means and discipline to keep it paid off. (Well- I have the means now, but I'm not sure I always will have it, and I am pretty sure I don't yet have the discipline.) We use a debit card for pretty much everything, although it makes me really nervous because if it gets sniped then that's our bank account, and that's all we've got. But I don't think a blanket statement that it's "not a good idea" is true either because it's actually a really good idea, if you can do it right.

I had a my debit card jacked when I was in Cancun while on spring break in college.

The first thing I did was pull my cell out of my pocket, call Wells Fargo, and get the card canceled and ordered a new card. Problem solved.

 

[SilkRoad]

Might have already been stated, but using a CC as your main payment method for things isn't smart.

Use a CC for emergency stuff.

Get a debit card for everyday purchases.

Pay off your CC debt first. Then get a debit card. Then take your credit card out of your wallet.

Spend less, set up a Roth IRA. If you don't plan long term with your finances, you won't ever have any real savings and just stay on the credit treadmill.

I think there are different lines of thought about this? I live in the UK and I think it's considered safer to use a credit than a debit card. Ie. if something gets hacked you're more protected if you've used a CC. I also know that for things like plane tickets, if the company goes bust, you get more protection if you used a credit card.

I have a debit card but I mainly use it for drawing cash from bank machines. Occasionally I pay for things with it, especially if I can avoid incurring transaction charges that way, but more often it would be the CC or cash.


EDIT: Oh I just noticed [MENTION=2]Ivy[/MENTION] said a lot of what I was going for.

 

[SilkRoad]

Well... as with everything what works for me won't necessarily work for everyone.

I figured given the nature of the OP, that the kind of discipline you mention wasn't present.

There are situations where where having and using a CC is beneficial, but for many, the option to spend more than one has with a CC can be too tempting an option.

I mention going with a debit card, because it forces you to get your spending in order right quick. Once you have trained your fiscal discipline with the debit card, I would then recommend using a CC where it makes financial sense.

Nah, I probably gave the impression I'm horrible with money. I could be better but I'm not horrible. I almost never pay interest charges on my credit card and almost always pay it in full (and if I haven't paid in full it's been a small amount for a month or two. I think in almost 15 years of having a credit card I've done that about five times.)

My main problem at the moment is I'm not saving much, at least not in the country where I currently live - my investments are in my home country. My expenses are a bit less than my monthly income, but close. (In my defense, I work in the arts and live in a really expensive city!!)

I'm more just curious about how people come at this generally. I know a lot of people who've had major credit card debt for years...

 

[Ivy]

[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.

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.

 

[Ivy]

I had a my debit card jacked when I was in Cancun while on spring break in college.

The first thing I did was pull my cell out of my pocket, call Wells Fargo, and get the card canceled and ordered a new card. Problem solved.

Good for you. But you don't always know right away. They can jack it electronically these days, and your account is drained before you even know it's happening. If that's going to happen it's much better for it to happen to a CC where the charges will just disappear once you report the fraud, and it won't affect your cash flow at all.

 

[DiscoBiscuit]

I think there are different lines of thought about this? I live in the UK and I think it's considered safer to use a credit than a debit card. Ie. if something gets hacked you're more protected if you've used a CC. I also know that for things like plane tickets, if the company goes bust, you get more protection if you used a credit card.

I have a debit card but I mainly use it for drawing cash from bank machines. Occasionally I pay for things with it, especially if I can avoid incurring transaction charges that way, but more often it would be the CC or cash.


EDIT: Oh I just noticed [MENTION=2]Ivy[/MENTION] said a lot of what I was going for.

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.

 

[DiscoBiscuit]

Good for you. But you don't always know right away. They can jack it electronically these days, and your account is drained before you even know it's happening. If that's going to happen it's much better for it to happen to a CC where the charges will just disappear once you report the fraud, and it won't affect your cash flow at all.

I've also been hacked, and Wells called me up first thing and asked if the charges were correct and I said hell no.

This depends on the bank, but if your bank has a good fraud department, there isn't too much to worry about.

But depending on your bank ymmv.

 

[SilkRoad]

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.

Depends how you use the CC. For a lot of people, the above is definitely the case, but like I said, I've always spent based on how much money I actually have, and have almost always paid off in full. I think the worst amount of monthly interest I have ever paid was something like £30 (for a month or two.)

 

[DiscoBiscuit]

Depends how you use the CC. For a lot of people, the above is definitely the case, but like I said, I've always spent based on how much money I actually have, and have almost always paid off in full. I think the worst amount of monthly interest I have ever paid was something like £30 (for a month or two.)

If you're spending only as much as you can afford and still save, then why is your choice between paying your CC bills and saving money?

Smart finances assume a certain percentage of income will go to savings automatically.

 

[SilkRoad]

If you're spending only as much as you can afford and still save, then why is your choice between paying your CC bills and saving money?

Smart finances assume a certain percentage of income will go to savings automatically.

I'm spending only as much as I can afford...the amount of savings currently is pretty minute.

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