question about credit

JockMan said:

I agree with saving and buying with cash, but most people won’t have the cash for a home upfront and will need a mortgage. To get a mortgage you need a credit history, so you will have to play this game, even if it’s only for a little while.

Even signing up for a mobile phone contract requires a credit check.

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A mortgage is a special case. It's at a very low interest rate, it frees you from paying rent, and - in the US at least - it comes with tax benefits. Consider what actually happens when you buy a home in cash: you're out a whole lot of money at once. You have to think like a capitalist - if the mortgage is going to cost you 3.5%, can you overwhelm that 3.5% by taking the loan and investing the cash in the mean time?

DO:

Get a credit card. Understand how it works.

Use it within your budget, learn that using the card is spending your money. Thinking of credit as free money is the best way to end up with more debt than you can pay off.
(Using some sort of accounting program so you can see your cash flow and understand what you are spending between billing statements is super helpful too).

Pay the credit card in full on the due date each month. Set it up to do it automatically. Doing it this way will still show credit utilization, but you will not pay any interest. Then you can get cashback or miles benefits (I don't fly much so prefer cashback and a Discover card has been my primary card for over 10 years).

If this is your first credit card, you may have a low limit like $500 or $1000. Try not to go over 40% utilization (as in $400 spent of your $1000 limit). Then after a year, you could request a credit line increase from the card issuer. I have way more credit on a single card than I could ever reasonably need. If I spent to my credit limit monthly, I'd spend our annual income in about 2 months.

Listen to anything NeoSneth says, that guy has it together.

DON'T:

Make only a minimum payment or anything less than the full statement balance, ever. The credit card is not your emergency account, you should have a small chunk of savings in case of job loss or other temporary financial hardship so that you do not rely on a credit card. $1000 is a good start, 6 months average expenses is better, and 12 months is best if you are a single income household.

Think that your games or possessions are in any way an 'investment'. You will not retire on a boxed copy of Earthbound.

Just get a card with some sort of Reward Points or Miles if you enjoy traveling. I pay everything, Gas, Food, etc on my Amazon Prime card and just pay it in full on a daily basis. I use the racked up reward points at the end the month to buy shit I don't need. You don't have to pay your credit cards when the statement comes. You could pay as you go. Great Credit is very Important. It's the difference between getting a bank loan @ 2% Interest and getting one @10%-16% interest. I know people who have shit credit that are paying 22% interest on their car loans which is insane.

SpamYouToDeath said:

A mortgage is a special case. It's at a very low interest rate, it frees you from paying rent, and - in the US at least - it comes with tax benefits. Consider what actually happens when you buy a home in cash: you're out a whole lot of money at once. You have to think like a capitalist - if the mortgage is going to cost you 3.5%, can you overwhelm that 3.5% by taking the loan and investing the cash in the mean time?

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I agree that home mortgages are a different beast. I was fortunate to be in a situation to be able to pay cash for my home. However, with the ridiculously low interest rates, that would have been a really stupid move. It's better to have your money making money for your. It all about strategy and being smart with money.

Most credit cards, even would a good credit score are 16% +. If your credit is trashed, those rates can get stupid quick. The highest I have heard is 79.9%.

As everyone has said, not going nuts with a credit card is the main thing. I've only ever had one credit card...ever. It actually frustrates me that they keep raising my limit automatically. Again, that's all part of the plan to get people to load up cards with purchases. If I want to temporarily use credit, I do it against margin on one of my accounts at approximately 6% interest - but pay it back ASAP.

RAZO said:

Just get a card with some sort of Reward Points or Miles if you enjoy traveling. I pay everything, Gas, Food, etc on my Amazon Prime card and just pay it in full on a daily basis. I use the racked up reward points at the end the month to buy shit I don't need. You don't have to pay your credit cards when the statement comes. You could pay as you go. Great Credit is very Important. It's the difference between getting a bank loan @ 2% Interest and getting one @10%-16% interest. I know people who have shit credit that are paying 22% interest on their car loans which is insane.

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Rewards points are another way to sucker people and keep the middle class trapped where they are. People with money never talk about how great their rewards points are doing.

Neo Ash said:

Rewards points are another way to sucker people and keep the middle class trapped where they are. People with money never talk about how great their rewards points are doing.

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It works for me. I've had airfare for my family to Europe covered using my United reward points. My Amazon reward points I use to buy my music and games. I know plenty of people way better off than me that do the same. Just pay your cards in full and your set. I use my cc just like I would my bank card.

If a regular card works for you than go for it.

RAZO said:

If a regular card works for you than go for it. What's not Smart is buying a house in cash.

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Like your edit. Might want to read my post again....

Was just firing off a warning shot but changed my mind since I like you lol. Yes, what you said is correct.

RAZO said:

Just get a card with some sort of Reward Points or Miles if you enjoy traveling. I pay everything, Gas, Food, etc on my Amazon Prime card and just pay it in full on a daily basis. I use the racked up reward points at the end the month to buy shit I don't need. You don't have to pay your credit cards when the statement comes. You could pay as you go. Great Credit is very Important. It's the difference between getting a bank loan @ 2% Interest and getting one @10%-16% interest. I know people who have shit credit that are paying 22% interest on their car loans which is insane.

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While paying it daily might be a good money management strategy if you think you will overspend, it is not a great way to build credit because when the card reports you will show 0% credit utilization. The bureau's like to see that you 1) have credit and 2) use credit responsibly. This means using the card and paying it on time, but if the report always shows 0% used, they won't know that you are using your available credit, responsibly or not.

Like I said, do this if it works for you, but if the question is about building credit, this is not great advice.

Neo Ash said:

Rewards points are another way to sucker people and keep the middle class trapped where they are. People with money never talk about how great their rewards points are doing.

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Credit is just one form of money, if I use a credit card and spend $1000/month and get $5 of rewards am I better or worse off than if I use cash and spend $1100/month and get $0 rewards?

Money management is all about what works for each person, so if you like to use cash, great, do it. For me, cash kinda leaks out of my wallet on stupid stuff, a vending machine purchase, a $5 lunch, stuff that I wouldn't normally pull out a card to buy, but hey! I have a few bucks in my wallet. Yes, if a person is the reverse, hoards their cash while going nuts with the 'free' money that is a credit card, they will come out worse off.

Spend less than you make whether you've purchasing with cash or credit and you'll be ok.

lithy said:

While paying it daily might be a good money management strategy if you think you will overspend, it is not a great way to build credit because when the card reports you will show 0% credit utilization. The bureau's like to see that you 1) have credit and 2) use credit responsibly. This means using the card and paying it on time, but if the report always shows 0% used, they won't know that you are using your available credit, responsibly or not.

Like I said, do this if it works for you, but if the question is about building credit, this is not great advice.

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Yes, I agree. I was speaking for myself since I've been building my credit since my first CC. I'm at a point in my life were I don't like to owe anything on CC's. Credit Is in Great Shape and trying to keep my Credit Utilization Low incase some investment opportunity like another home pops up on my radar.

lithy said:

Credit is just one form of money, if I use a credit card and spend $1000/month and get $5 of rewards am I better or worse off than if I use cash and spend $1100/month and get $0 rewards?

Money management is all about what works for each person, so if you like to use cash, great, do it. For me, cash kinda leaks out of my wallet on stupid stuff, a vending machine purchase, a $5 lunch, stuff that I wouldn't normally pull out a card to buy, but hey! I have a few bucks in my wallet. Yes, if a person is the reverse, hoards their cash while going nuts with the 'free' money that is a credit card, they will come out worse off.

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It comes down to perspectives. I'm not a proponent of the credit theory of money. Otherwise, I think we're inline on this subject.

There are several variable that impact whether the rewards program *might* actually help a person.
* You must pay your balance on time to earn rewards
* When you don’t pay your credit card bill on time, you lose money.
* 1/3 of credit card owners never redeem their rewards
* Rewards points typically devalue with time
* Annual fees can make it even harder to profit from credit card rewards

People need to get on a budget and stop using credit card completely before they start to use it for rewards. For people that don't have a handle on their credit cards, they're just taking on extra risks chasing rewards points.

I'll admit, that I don't monitor my rewards points. I did, out of curiosity, check the points status a few weeks ago. It was pretty underwhelming, and this is on a good Platinum card.

When it comes to his comments on managing credit, Neo-Ash doesn't know what he is talking about.

Neo Ash said:

It comes down to perspectives. I'm not a proponent of the credit theory of money. Otherwise, I think we're inline on this subject.

There are several variable that impact whether the rewards program *might* actually help a person.
* You must pay your balance on time to earn rewards
* When you don’t pay your credit card bill on time, you lose money.
* 1/3 of credit card owners never redeem their rewards
* Rewards points typically devalue with time
* Annual fees can make it even harder to profit from credit card rewards

People need to get on a budget and stop using credit card completely before they start to use it for rewards. For people that don't have a handle on their credit cards, they're just taking on extra risks chasing rewards points.

I'll admit, that I don't monitor my rewards points. I did, out of curiosity, check the points status a few weeks ago. It was pretty underwhelming, and this is on a good Platinum card.

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• Most dealerships dont care if you use them for financing. Their revenue comes from service / extended warranties and not car sales. They don't care how you pay. You are not sticking it to anyone by paying with cash.

It's fine to be against the trend of credit and credit cards as a necessity of society; however, that is not going to change the fundamental methods that financial institutions use to review your credibility.

Keep in mind that even renting an apartment usually requires a credit check to see if you are fiscally responsible. Simply telling the landlord that you pay for everything with fists full of cash is not going to make them trust you. Are you going to provide receipts for your automotive cash purchase?

There's a lot of things wrong with how society uses credit. It doesn't hurt to be educated on how it works.

norton9478 said:

When it comes to his comments on managing credit, Neo-Ash doesn't know what he is talking about.

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Thanks for all the informative content you have added to this thread.


Oh wait.........





.......you haven't done that.

NeoSneth said:

• Most dealerships dont care if you use them for financing. Their revenue comes from service / extended warranties and not car sales. They don't care how you pay. You are not sticking it to anyone by paying with cash.

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True. It's the manufacturer that makes additional profits by extending their own credit offerings to buyers.

I think you misinterpreted what I said on the first page. I've never felt it was sticking it to anyone; I see it as a bargaining angle. The sales guy is there to move cars. He'd rather have a person in and out on a cash deal than screw around with finding someone financing, as it eats up time he could be selling another car. The end of the month is the time to hit up dealers. They don't like to have units carry over on the next months inventory if possible. Money talks and bullshit walks.

Neo Ash said:

I think you misinterpreted what I said on the first page. I've never felt it was sticking it to anyone; I see it as a bargaining angle. The sales guy is there to move cars. He'd rather have a person in and out on a cash deal than screw around with finding someone financing, as it eats up time he could be selling another car. The end of the month is the time to hit up dealers. They don't like to have units carry over on the next months inventory if possible. Money talks and bullshit walks.

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Have you made a major car purchase in the last 10 years?
There are finance people to handle the paperwork at any reputable new/used 1st/3rd party car dealer. The sales person is done once he hands you to finance. He doesn't care how long you are in there or where you get the loan. I've even seen finance completely handled by teleconference at major 1st party car sales.

I'm with you, I purchase my vehicles outright, but that's because i don't like the idea of debt. I have actually attended roughly 5 automotive financing deals with friends and family tho. It's also the financing person's job to sell the warranties.

NeoSneth said:

Have you made a major car purchase in the last 10 years?

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Yup. I just know, like you, I'm in and out. While the people in the adjacent office have been camped out there all day because their credit score is in the garbage. The salesman may or may not care; however, if it were me in his shoes I know I'd rather move stuff quickly and get more commissions in. I've never seen situations where the salesman doesn't stay with a buyer while the fiance portion is in progress.

norton9478 said:

When it comes to his comments on managing credit, Neo-Ash doesn't know what he is talking about.

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Qft.

It used to be that manufactures made good money on financing (and would kick some back to the dealer). But now manufactures are offering below market financing to entice buyers.

Also, many dealerships work like Gamestop's Cycle of Life Program. They make the money on your trade in.

Neo Ash said:

.......you haven't done that.

.

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Don't listen to Neo-Ash is the best advice I could give.

I don't mind the "Pay Cash" mentality but most of the rest of everything you wrote is just bad.

norton9478 said:

Don't listen to Neo-Ash is the best advice I could give.

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Right....because you're such a successful fucking expert.

I like how this thread has derailed on people’s differing opinions on fiscal responsibility. But yeah, big 3 that affect your credit score are amount of credit, credit utilization, and oldest line of credit. Bad credit reports stay on your history for 7 years or 10 for bankruptcy. Catch 22 that you need credit to get credit. You need to start somewhere. For your first card, get something that you’ll have forever so it’ll defacto be your oldest.

Neo Ash said:

Rewards points are another way to sucker people and keep the middle class trapped where they are. People with money never talk about how great their rewards points are doing.

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That's crazy talk, the best part of using a Credit card is the reward system and its benefits. Its pretty much free money you're getting back for paying for things, unlike cash. Also some people dont know but your credit card also does price protection. I bought my OLED for $2400...I got $500 cash back as i saw one cheaper a month later. You can get i think $1500 worth of protection per year & maximum $500 per protection item.

HDRchampion said:

That's crazy talk, the best part of using a Credit card is the reward system and its benefits. Its pretty much free money you're getting back for paying for things, unlike cash. Also some people dont know but your credit card also does price protection. I bought my OLED for $2400...I got $500 cash back as i saw one cheaper a month later. You can get i think $1500 worth of protection per year & maximum $500 per protection item.

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Congratulations.


Everyone should make their own decision....

https://www.moneymanifesto.com/are-credit-card-rewards-programs-worth-it-11105/
https://www.bankrate.com/finance/credit-cards/case-against-credit-card-rewards.aspx
https://www.thebalance.com/is-it-worth-having-a-credit-card-to-earn-the-rewards-2385752
https://www.creditkarma.com/credit-cards/i/credit-card-points-vs-miles-worth/

Neo Ash said:

Congratulations.


Everyone should make their own decision....

https://www.moneymanifesto.com/are-credit-card-rewards-programs-worth-it-11105/
https://www.bankrate.com/finance/credit-cards/case-against-credit-card-rewards.aspx
https://www.thebalance.com/is-it-worth-having-a-credit-card-to-earn-the-rewards-2385752
https://www.creditkarma.com/credit-cards/i/credit-card-points-vs-miles-worth/

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I click on them as long as you pay every month, rewards are great. Get gas with cash, you dont get shit...With credit card you get 5% back. Buy things online you get cash back...It all ads up, since January i already got $800 cash back from all my bills & purchases. Not to mention discounts/promos for using certain cards.

HDRchampion said:

I click on them as long as you pay every month, rewards are great. Get gas with cash, you dont get shit...With credit card you get 5% back. Buy things online you get cash back...It all ads up, since January i already got $800 cash back from all my bills & purchases. Not to mention discounts/promos for using certain cards.

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Maybe so. But most people carry a balance, so you would fall into the minority of users than can benefit. This thread is about advice and most people don't fully pay off their balance at the end of the month. That's why I have my stance, also I'm anti-debt in my approach to money management.

Neo Ash said:

Maybe so. But most people carry a balance, so you would fall into the minority of users than can benefit. This thread is about advice and most people don't fully pay off their balance at the end of the month. That's why I have my stance, also I'm anti-debt in my approach to money management.

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Exactly this thread is about giving advice. You come in here acting all big tymer saying credit is for poor people. Pay for cash on everything.

How is the dude going to build credit if he pays for everything in cash. Since he is already getting a credit card, might as well learn what the rewards can be while building credit.