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Author: wallywest00 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308519  
Subject: Thoughts on credit (long) Date: 5/30/2001 11:50 AM
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I got to thinking the other day, is there ever ANY good reason to use a credit card, or to get a loan for that matter? Asside from the obvious emergency use why do we even have these stupid lumps of plastic?

From a financial planning perspective any high interest debt has to be your first priority. Pay it off, and stop that kind of spending. Once you get down to nothing but mortgage and possibly car loans as your only long term debt you can start investing. You'll almost certainly make better interest in the market over the long term than you're being charged on your mortgage so it makes sense to do that instead of paying down your house quicker.

But where do credit cards fit into the whole economic scheme? If you use them responsibly and always pay your balance you get the benefit of using someone elses money for a month. The only person I can see who could actually see a real advantage to that would be a successful day trader (oxymoron?). If you're in long term investing then a thirty day lag is not going to do you any good. So who really benifits from a credit card transaction? Not you, that's for sure. The vendor doesn't really get anything either, in fact they have to inflate their prices to cover the transaction fees. Sure, they get more business, but from a financial standpoint they'd be better off if everyone paid cash.

So that just leaves the bank behind the credit card. They get insane interest rates from the unfortunate many who don't pay their balance each month, and they get a percentage of every dollar spent. Which ultimately, in the form of inflation, ends up coming out of your wallet whether you use a credit card or not. Nice racket. They make a killing off of other peoples money and their "product" is nothing more than convenience. I don't find that "convenient" at all.

I'm thinking that later this year when my credit card debt is gone that I'm going to keep one or two cards for emergency use only and do most of my buying with cash. It won't make any great difference I know, but at least I won't be feeding the system any more.
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Author: jsn7 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73225 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 12:13 PM
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Well Wally,

It's all about money. Consumer spending accounts for 2/3's of the GDP. If it becomes harder for consumers to get instant credit, you'll see a lot of business's suffer.
I can't argue with your premise that carrying a balance is bad business. As an old boss used to say," banks lend money like professionals and consumers borrow it like amateurs".

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Author: SRenaeP Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73226 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 12:20 PM
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I got to thinking the other day, is there ever ANY good reason to use a credit card, or to get a loan for that matter? Asside from the obvious emergency use why do we even have these stupid lumps of plastic?

I use my credit card for online purchases. I don't feel comfortable using my debit card online. If my CC number is stolen, it will inconvience me but I won't have $100's, maybe $1000's, missing from my checking account causing checks to bounce, etc. In addition, I like to use my CC for large purchases because of the guarantees CC's offer - i.e. resolving disputes with retailers, purchase protection.

Loans are another story. I got a car loan when I finished grad school. I didn't have any savings and needed a car. I was moving 3000 miles from home to a region that pretty much requires a car to get around.

-Steph

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Author: uwalum Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73229 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 12:30 PM
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Credit cards, when used prudently, are a great way to "borrow" money for 25 days (assuming the grace period is 25 days) at no interest. Especially if there is a rebate of sorts involved. The key is to pay it in full every month and no annual fees. The important part of the equation is to decide if you have the self discipline to not carry a balance. I simply didn't use a cc for years because I work better on a cash basis. However, I plan to spend money on occasion and will use the cc for the purchase and pay it all off before interest accrues. Credit cards are not "bad." They are a plastic card that allows you to spend money that you may not have available. It's all about the person.

L

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Author: Leviathan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73243 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 1:10 PM
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I got to thinking the other day, is there ever ANY good reason to use a credit card, or to get a loan for that matter? Asside from the obvious emergency use why do we even have these stupid lumps of plastic?

Where there are some places that will only take a form of plastic (hotels and car rental places, among others), but that's why I have a check card that I use only where cash or a check will fail me.

Leviathan

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Author: WalStMonky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73244 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 1:15 PM
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"If you're in long term investing then a thirty day lag is not going to do you any good."

I have an average balance of just around $1500 per month for the sundry items of everyday life. Basically I perpetually owe the issuer this sum. Since it's paid off each month, it's interest free. Since I have the money before I spend it, it sits in a money market account until the just before the due date. I am getting 5% on that money, so it is the same as having an unencumbered bank account with $1500 in it. That's $75 a year. While you may not think 75 free dollars per year is anything, I sure like getting it. Oh, I almost forgot. I also get a rebate from the credit card company. The first $10000 generates a 5% rebate toward a new GM car or truck. I can get $500 per year for up to seven years. So far, I have accrued over $2500 toward the purchase of my next vehicle. Every dollar after that goes onto a card that pays 1%. Since I average $1500 per month that's another $80 per year (1500*12=18000, 18000-10000=8000, 8000 x 0.01 = 80). So, I get $75 + 80 + 500 = $655 for doing nothing other than buying what I would have were I to use some other payment method. I sure will enjoy my new car a more after the GM card chips in close to $3500 toward the purchase.

Aside from that benefit, if I lose my credit card I lose nothing. If I lose cash or am robbed, I am out of pocket. I don't have to worry about cashier's shortchanging me. There are some merchants (e.g. car rental) that won't even deal with you unless you have a card. Cash deposits are waived at some others. I get a detailed bill each month telling me exactly where my money went. I enter this into quicken, and can generate reports and graphs. It is easy to lose track where cash goes. Of course most of the benefits in this paragraph also attach to using a Visa/Mastercard check card. But having that credit line could come in handy in an emergency.

Having about 4 credit cards with an R1 rating boosts the FICO score, possibly qualifying me for less expensive mortgage rates and other loans.

Responsible use of credit does have its benefits. You are correct that carrying a balance (unless it's lower than the risk free rate) has little to no benefit and actually negates most if not all of the above.



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Author: MikeEaster Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73258 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 1:46 PM
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The only person I can see who could actually see a real advantage to that would be a successful day trader (oxymoron?).

No, that is not true. Making up some numbers here, let's say that you were to charge $1,000/month on average, with an average period between charging and payment of 45 days. Let's also say that you have a credit card that pays you back 1% on your purchases and that you mail in your payments each and every month, requiring a stamp ($0.34) and a check ($0.03). Let us say that during the float period, the money to pay off the charged amount is in a money market account with 4.8% interest (because it makes the math easier), and that, in addition, money earned as a rebate is paid back at the end of the year in a lump sum with no interest.

How much money do you gain over the course of one year by charging instead of paying cash?

For the first month, the float gives you ($1000 * .006) - $0.36 = $5.64.

Leave that in a money market account for 10.5 more months (assuming payment made in the middle of February for charges in January), and the amount of the gain is $5.88.

Repeat for each month, and you get a total of (approximately - I am ignoring compounding interest for simplicity) $69.17 from the float alone. Add in the cash back received from the credit card ($120) and the total comes to $189.17 for one year of float + cash back use.

Compounded at an after tax nominal 8% (say, real interest rate of 5%) for 30 years, this amount grows to $1903.55 in nominal dollars, or $ $817.58 when adjusted for inflation. And keep in mind, this was only for one year...

--Mike


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Author: Michaelzehr Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73288 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 2:48 PM
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I think the question being asked is whether there is any good reason to carry a balance on a credit card, not whether there's a good reason to get a 0% interest loan for a month (which so far everyone on this thread agrees is a good idea). There are many cases in which you almost have to use a credit card even if you have the cash (like hotels).

I can think of a number of reasons, all of them related to emergencies or unexpected events that exceed the level of one's (possibly non-existent) emergency fund.

For example what if the month after you've paid off all your credit cards and are ready to start building an emergency fund a close relative dies? Do you not attend the funeral because it will take three months to pay it off? One doesn't have the option of waiting three months and then paying cash.

What about repairs or medical bills? Perhaps one's budget includes $2000 a year for home upkeep but all $2000 of it is needed before a fund has been built up?


Ideally one has some extra money each month to deal with such things, as well as an emergency cash fund.

But even if you have monthly ups and down in expenses it isn't necessarily financial best to have a large enough emergency fund that it never runs out. Carrying a $1000 balance on a 9.9% interest rate card one month out of the year costs less than keeping an extra $1000 in a 2.5% bank account all the time instead of invested in the market at an expected rate of 10%.

-Michael


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Author: aja91 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73295 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 3:07 PM
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Here's what I do with my credit card. Some of this will make more sense if you understand how I budget and track finances (http://boards.fool.com/Message.asp?mid=15000513).

(1) Keep the limit fairly low. Even if I'm tempted to buy $10,000 of furniture, I can't use my card for it.
(2) I keep my checking, savings, and credit card with one bank with online banking capability.
(3) When I make a purchase on the credit card, I transfer the amount of the purchase to the savings account immediately, and record the purchase on the credit card and transfer in Quicken.
(4) In Quicken (where I track everything), the deposits for the credit card are kept separate from other short-term savings.
(5) When the bill comes due, I make the payment online from my savings account to my credit card account. I do not have my card set up to automatically debit my savings account in the event a disputed charge shows up.

The benefit here is that I can earn some interest on the funds I will use to pay off the balance (hence taking advantage of the "float" the card offers). Since I keep all accounts at the same bank and take advantage of online payments, I don't have to be worried about whether the transfers to savings went through, or mailing a check far enough ahead of time to avoid late fees. I'd eventually like to repeat this process somewhere where I can earn slightly high interest on the funds in savings, but for now this works well. In the event there is a problem with the purchase I can dispute it via the credit card company (my bank), which is an advantage over using cash. In practice, we use our cards very infrequently (usually just $100-$200/month), so it's not a huge money maker for us.

The other benefit to having a card is that it can serve as an emergency fund mechanism. That is, if an emergency occurs and you do not have a checkbook handy, the credit card can serve as a temporary means through the emergency (obviously, pay the balance off due off at the end of the month).

Hope this helps.

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Author: worstnightmare One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73334 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 4:59 PM
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My chase Shell card gives me a 1% rebate (good toward Shell gas) on ALL purchases. This means, in effect, you are pay MORE by not using this card.

I charge nearly everything I can and earn 1% on everything, & 5% on shell gas.

(No, do not go to shell if its more than 4% higher than the other stations. Here it is the same price or a penny or two more)

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Author: stdupree Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73350 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 5:33 PM
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What you are all forgetting in your gloating about how much you've gotten back from rebates, is how much you are paying for these rebates in the form of increased merchant costs that get passed on to you. Every time you use your card, the merchant pays between 1-10% (yes 10% for some small merchants for some card companies) of the purchase in fees. This increases their cost of doing business and thus they must increase the prices they charge you. The real winner is the credit card company. The rebates you get back only partially offsets this extra cost (otherwise the CC companies would be operating at a loss and would go out of business).

Since almost all merchants charge the same price wether you use a credit card or not, I don't know if there's anything we as individuals can do about it. But it's something to keep in mind when you are calculating the "benefits" you get by using your card.
-steve


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Author: WalStMonky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73362 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 6:15 PM
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"Every time you use your card, the merchant pays between 1-10% (yes 10% for some small merchants for some card companies) of the purchase in fees"

They pay the same fee regardless of whether the issuer pays me a rebate. Prices are set according to the laws of supply and demand and of elasticity of demand. Your argument doesn't hold water.


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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73363 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 6:19 PM
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I got to thinking the other day, is there ever ANY good reason to use a credit card, or to get a loan for that matter?

Why, yes.

Let's work on credit cards first.

Some credit cards give rebates, or frequent-flier miles (which some people think are valuable ). So using these particular cards on things a person would be buying anyway is good.

And then most credit cards have a grace period (and why would anyone keep one that doesnt?), so you can continue to collect interest on the money for 3-7 weeks after you spend it. That's nice if you're, oh, buying a used car for ten grand. It's nothing to complain about if you're buying gasoline.

I'd agree that, aside from emergencies, there's no good reason to carry a balance on a card, but that isn't what you asked.

Now for a loan:

I'm currently living in an apartment where the rent is $840 a month. It will probably go up in a couple months. This payment gets me NO equity.

I'm working on buying manufactured housing in a park. I plan to put between 10% and 20% down, because that's the amount I have saved. If I get the place I want, the space rent will be under $500 and the loan payment will be about $250. The total is better than $100 a month less than what I'm paying now; $1200 a year - minus about $300 in property taxes and $100 in insurance, a nice $800 gain. Plus my loan payment will be gettimg me equity (and I'll be out from under the elephants in the apartment above us - a major quality-of-life issue).

A loan to help establish a business is also reasonable, if the business plan is good.

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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73365 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 6:23 PM
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What you are all forgetting in your gloating about how much you've gotten back from rebates, is how much you are paying for these rebates in the form of increased merchant costs that get passed on to you.

The increased prices because of credit-card fees that the merchant pays, are already factored into our overspending economy.

You can't avoid them by paying cash.

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Author: stdupree Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73376 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 6:54 PM
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Prices are set according to the laws of supply and demand and of elasticity of demand.

Prices are also affected by competition. If merchant A has to pay less in Visa merchant fees than merchant B, merchant A can charge lower prices while still making a profit, thus getting more customers than merchant B, while lowering the price that people have to pay for the widgets.

And there is at least one thing people can do about merchant fees (other than just not use credit cards). On large purchases, like furniture, appliances, and cars, you can negotiate the purchase price, and if the salesperson knows that you are going to pay cash they have more room to negotiate in, so they can give you a better price. You could save hundreds per purchase this way.
-steve

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Author: WalStMonky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73405 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 9:01 PM
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". If merchant A has to pay less in Visa merchant fees than merchant B, merchant A can charge lower prices while still making a profit, thus getting more customers than merchant B, while lowering the price that people have to pay for the widgets."

Rebates offered by an issuer won't be affecting that. That would depend on the type of business, volume, and competiton among the businesses that clear credit card transactions. An online merchant that clears $300 a day of charges is going to pay high end, SWY is going to negotiate the lowest rate because of their huge volume. Stuff sells for what it sells for, it isn't based on what the merchant's costs are. That's a mistake a lot of people make. The only reason a merchant will lower his prices is if he thinks he can increase sales and therefore profits. That's elasticity of demand.

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Author: jmbellv One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73420 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 11:11 PM
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wallywest00,

We use a credit card for almost all purchases for convenience, a budgeting tool (a great way to "time" purchases - just ask the CC company for the next year's monthly closing dates) and for excellent record keeping. Our credit card also pays rebates and doubles warranties.

We pay off the balance every month, rarely write checks and use very little cash.

jmbellv

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73422 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 11:23 PM
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<<"Every time you use your card, the merchant pays between 1-10% (yes 10% for some small merchants for some card companies) of the purchase in fees"

They pay the same fee regardless of whether the issuer pays me a rebate. Prices are set according to the laws of supply and demand and of elasticity of demand. Your argument doesn't hold water.
>>


Bank charges for credit card charges do vary a lot, and small businesses often get hit with a heavy percentage chrage for handling credit cards. That's one reason I don't accept credit cards in my furnace repair business.



Seattle Pioneer

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73424 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/30/2001 11:35 PM
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<<What you are all forgetting in your gloating about how much you've gotten back from rebates, is how much you are paying for these rebates in the form of increased merchant costs that get passed on to you.

The increased prices because of credit-card fees that the merchant pays, are already factored into our overspending economy.

You can't avoid them by paying cash. >>


Oh, I think I can fairly often get cheaper prices for cash than someone can who is limited to using a credit card.


I bought myself a boat three or four years ago. The guy who was selling this year old Bayliner had bought it on credit, but no longer could afford to make the payments. As a matter of fact, he was rather desperate to get out from under the loan.

I made him an offer of cash which he eventually accepted. When we went to his bank to release the lien on the boat, he lost the entire amount of the downpayment he'd made the year before, and had to add some additional cash of his own to pay off the loan, in addition to what I gave him.

A got a very good deal for cash which would not have been practical to do if I'd been offering him a credit card.



I will give you a second example.

I am self employed doing repairs on furnaces. Because of the expense of bank charges to me for handling credit card purchases, I don't accept any credit cards. Cash or a check please.

So if someone calls me at night, a holiday or weekend with no heat and wants to pay with a credit card, I simply tell them that I can't help them. If they can pay me with cash or a check, they will probably have heat the same day. I really only have three or four people a year who turn me down ---I find that almost all people will pay with cash or a check rather than go without heat.



Seattle Pioneer



Seattle Pioneer




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Author: warrl Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73441 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/31/2001 1:22 AM
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But in that case, Seattle Pioneer, you did NOT save paying those credit-card fees by paying cash.

You saved them by buying used.

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Author: WalStMonky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73464 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/31/2001 7:37 AM
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"Bank charges for credit card charges do vary a lot, and small businesses often get hit with a heavy percentage chrage for handling credit cards."

Yes, credit card processing fees do vary a lot. I never denied that. But a merchant doesn't pay a higher fee when he accepts a rebate card than he would for a non rebate card.

"That's one reason I don't accept credit cards in my furnace repair business. "

Now, now, why not just add the cost onto your price? If you want $100 to fix that furnace just charge $105 to cover the fee. What, that would drive customers away you say? Go figure. I think that has something to do with elasticity of demand, no? I'll also assume you must have figured the cost of bounced checks into the equation, as well as paying every penny of tax due on the cash collected.

BTW, I'm happy to pay by cash or check if I can get a deal. But the grocery store doesn't negotiate, neither does the drug store or my ISP or the gas station, etc, etc.


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Author: wallywest00 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73487 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/31/2001 8:53 AM
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First, I agree that getting a loan for a house is pretty much unavoidable at least the first few houses that you buy. What gets me is how much you actually end up paying for that house, in interest I mean. If you had been able to pay cash in the first place you could have kept ALL of that equity. As it is it will take you many years to get to the point where the equity catches up to how much money you have in it. I think I'd rather be making money on the house from day 1.

Second, for day to day expenses like food and gas I can possibly see how using credit cards and taking advantage of the float time can be somewhat benificial. It's not a huge amount of money we're talking about though. For any sizeable purchase cash is the only way to go IMO. As others have noted, you can almost always negotiate a better price with cash. I do it all the time. It's especially great for cars.

Responsible use of credit cards is fine. Pay it off every month and you're doing better than most people. But I still feel that our credit card economy would have experienced less inflation in the last twenty years if credit cards were not so prevalent. My wife runs a business with her family that accepts cash or check only. If they accepted credit cards it would cut their bottom line badly. And there's no need seeing as how they have more business than they can handle anyway.

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73490 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/31/2001 9:06 AM
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<<But in that case, Seattle Pioneer, you did NOT save paying those credit-card fees by paying cash.

You saved them by buying used. >>


Had I been limited to using credit cards, I would have been unable to make the boat purchase.



Seattle Pioneer

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73501 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/31/2001 9:43 AM
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<<
"That's one reason I don't accept credit cards in my furnace repair business. "

Now, now, why not just add the cost onto your price? If you want $100 to fix that furnace just charge $105 to cover the fee. What, that would drive customers away you say? Go figure. I think that has something to do with elasticity of demand, no? I'll also assume you must have figured the cost of bounced checks into the equation, as well as paying every penny of tax due on the cash collected.

BTW, I'm happy to pay by cash or check if I can get a deal. But the grocery store doesn't negotiate, neither does the drug store or my ISP or the gas station, etc, etc.
>>


As you note, most people ARE willing to pay cash in order to get a deal. With me, the deal is you get some heat in the winter time if you pay with cash or a check. And since I have more business than I care to do, those who don't want that deal are welcome to shop elsewhere.

I occasionally get a bad check, but these are usually paid off in a reasonable amount of time. I very rarely will turn a bad check over to a collection agency, and rarely write off a transaction as uncollectible. People writing bad checks are usually hardship cases and people down on their luck for some reason --- occasionally I will write down a payment by some percentage to get payment and not feel bad about it. I have ways to deal with the person who is just brazenly cheating me, too --- such as returning to repossess any parts I installed in their furnace.


Seattle Pioneer

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Author: joycets Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73645 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/31/2001 3:10 PM
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and then there are those of us who buy things with cards (hopefully the ones we can afford to pay off the following month) because we are using our actual cash MONEY to throw hailstones at our other cards! (a hailstone is like a snowball but its smaller)

joyce in Texas.


(Money Market Fund? Oh REALLY.)

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Author: joycets Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73650 of 308519
Subject: Re: Thoughts on credit (long) Date: 5/31/2001 3:16 PM
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(3) When I make a purchase on the credit card, I transfer the amount of the purchase to the savings account immediately, and record the purchase on the credit card and transfer in Quicken.
(4) In Quicken (where I track everything), the deposits for the credit card are kept separate from other short-term savings.
(5) When the bill comes due, I make the payment online from my savings account to my credit card account. I do not have my card set up to automatically debit my savings account in the event a disputed charge shows up.
The benefit here is that I can earn some interest on the funds I will use to pay off the balance (hence taking advantage of the "float" the card offers)


---the problem here, is for those of us who have to try to keep a *certain minimum average balance* in the cking acct to avoid a $5 monthly fee. Money moved to savings would not help with that. Once I got them to refund my fee cos I was within $5 of the amount, but to me $5 is $5.

joyce

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Author: Mangard Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73976 of 308519
Subject: Re: Thoughts on credit (long) Date: 6/1/2001 5:13 PM
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What to me is truly amazing is the entire concept. Okay, you spend plastic, you float your money or get "rebates", you have gotten something for nothing. So, you have bought into "it" whatever "it" is. I have done it, I can tell you, and I am trying to get out of it. But, it is soo sneaky. Spend money here it whispers and you can get stuff for "free" it whispers. I feel like this whole idea is balancing on a tiny precipice with the loan shark creditors waiting at the bottom for one misstep. Why put yourself at risk? For some money you earned out of some ingenious game?

Sure, there was a time when there was no cc cards. But that was before the burgeoning middle class boomed. It was your word on a bill of credit in stores or it was cash. You dealt with the merchants themselves and cut out the middle man. And there was no interest on the bill of credit. What happened? Did we all succomb to the "money for nothing" disease, or what? In theory, you are posting on the cc board because you have problems with creditors/ccs. So, you just justified these cards in the name of, essentially, free money. But what if we did like wally mentioned. Just stopped using them. Stopped the whole concept of "something for nothing". Because society has told us as adults, that it is just not possible, plausible, nor sensible.

Woah, and then I woke up. And I will keep my cc cards like all the other Americans for "emergencies". But what is a greater moral crisis, the emergency that got us using the card or the fact that we succombed to using money, a credit line, that we have improperly "deserved."

Mangard

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Author: MikeEaster Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73979 of 308519
Subject: Re: Thoughts on credit (long) Date: 6/1/2001 5:20 PM
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But, it is soo sneaky. Spend money here it whispers and you can get stuff for "free" it whispers. I feel like this whole idea is balancing on a tiny precipice with the loan shark creditors waiting at the bottom for one misstep. Why put yourself at risk? For some money you earned out of some ingenious game?

Well, you could always regularly review your credit card statements. Determine whether each purchase was worth the price you paid, the time you spent to earn the money. Do this every month. Mark the purchases you feel, in retrospect, were not wise expenditures.

Keep doing this.

(Actually, I check not only each month, but once each week on Friday I pull up my unbilled activity to see just what I have spent over the past week.)

It works for me, and I feel I can stamp out unwarranted expenditures faster this way than I could if I were simply paying cash. The key is just not to connect the rebate, or the goodie, to the purchase.

--Mike

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