Credit Cards --- Good or Bad?

[2moretrees]

I had a long talk with a friend last night and we couldn't decide whether credit cards are good or bad. Although I know they have some good points, I feel that overall they have had a bad effect on society. My friend thinks that the issue is personal responsibility and therefore they are good for those who use them to their advantage. I'm curious what other people think?

[sdc2027]

I belive it is like any other Luxury; everything in moderation. Watching TV of itself is not bad, but when it doesn't allow you to get anything done-then it is bad. Surfing on the internet is not bad, but when it intrudes on your workplace job time, then it is bad.

Credit cards are very helpful in situations where there are emergencie or for things you know that will be paid off pretty darn quick, but when the cards stay maxed out on a regular basis... priorities need to be made.

My 2¢
-D

[luna-mia]

For me, they are bad and I pay them off and systematically cut them into little shards of evil.....

[2moretrees]

Originally Posted by luna-mia

For me, they are bad and I pay them off and systematically cut them into little shards of evil.....

lol.

I use mine to get extra airline miles so for me personally, they are a good deal. I think for many people they make life a financial struggle.

[Tree0164]

I don't think that credit cards are necessarily bad. It is bad how most folks use them and get in debt and end up paying $500 for a $50 dinner.

Most folks get in this trap as they keep getting these offers and are thinking free money! Free money.

[terry1156]

I love my credit card. It gives me a minimum of a free airline ticket each year.

I think the problem is they way they market to people who don't use them wisely. Extending more credit when a person is already only paying the minimum on the card. They are a business and they will make a quick buck on you any way they can.

[sarah]

I'm agree with most of you that credit cards are neither good nor evil. It depends on how they are used. However I think that they are not, overall good for the sociey. They encourage bad financial management in a society already stressed by structural changes and the process of globlization. You cna't charge your dreams. It just doesn't work. I got into trouble with credit cards in college and it took me years to get out.

I am curious though about reward cards? I love to travel and the possiblity of a free airline ticket sounds wonderful. How do these work. What are the disadvantages of these kinds of cards.

[terry1156]

Originally Posted by sarah

I am curious though about reward cards? I love to travel and the possibility of a free airline ticket sounds wonderful. How do these work. What are the disadvantages of these kinds of cards.

If you pay off your credit card bill every month, reward cards are like free money. I buy absolutely everything on my credit card, but then I know I will pay it off in full every month no matter what. For every dollar spent, I get a mile from the airline credited to my account. Every purchase adds more miles to your account.

My card supposedly has a $50 a year fee, but I have never paid it. Whenever the bill comes with the fee added, I just call and say that I have been a customer for a long time and can use other cards with no fees if they insist on charging me. They have waived the fee every time so far.

There are so many out there now (airline, gas, car, charity, mortgage reduction, cash back, etc) that you can get a reward card for anything you want. They are well worth having if you do pay off the bill every month.

[jmjj215]

I think credit cards have caused a lot of headaches for a lot of people. A friend once told me he belived they were "the personification of Satan himself." I had to laugh at the description.

I posted a reply in this thread about the rewards program here:

reward credit card vs regular credit card

As far as having a card for emergencies goes? I would recommend you have 3-6 months of expenses in a very liquid save account, such as a money market. I get a bad feeling when people have credit cards "for emergencies" that can set a whole wave of bad financial happenings into motion!

I personally don't have any credit cards - it's somewhat nice to just deal in cash - feels good. I don't owe anybody anything at any time. It's not "standard" in society, but I love it.

[terry1156]

Credit cards can be great if you use them right. Especially with the escalating fees that bank charge. You just have to pay it off each month. If a person can keep 3-6 months in expenses, they can pay off a credit card each month.

[jmjj215]

That's true that they would then have the money to pay it off - but then you're creating an extra transaction you need to make each month. If you use a debit card it comes out right away and that's the end of the story. You don't have to worry about paying twice so-to-say.
Those rewards incentives are strong aren't they?

[terry1156]

Don't mean to nit-pick, but your first argument in the other thread was that credit cards caused people to spend more and they should use cash. A debit card is basically the same as the credit card when it comes to ease of purchasing (and I would assume that people pay just as much more with either a debit card or credit card in hand compared to cash)

So we are spending the same amount and I have to make an extra step 12 times a year to get a free airline ticket. I have insurance on all the items I purchase through the credit card in case they get stolen or broken within 3 months of purchase. I get automatic coverage on insurance with rental cars so I don't have to pay extra for it when I travel. None of this costs me a dime.

I'll take the free airline ticket and other benefits that the 2 minutes it takes me to write a check to the credit card company gives me every time.

[jmjj215]

Yes, people spend just as much with a debit or credit card - they're both plastic.

I understand your arguments for the use of credit cards. It's all very enticing. But Terry, you're in a very small minority of people who actually use the credit cards wisely. So I wouldn't worry if you had 10 credit cards, or 20, you use them wisely. I am much like you in that I'm very aware of my finances, I budget..yada yada. I could also use credit cards wisely and possibly benefit from their rewards.

However, most people are not like you. Many many people are in dire straits because they thought they needed a credit card. They cause more harm than they cause good and you certainly will agree with that! And because they cause more harm than they do good then I advise people to not use them - because the large marjority of people could benefit greatly by cutting them up and closing their accounts. Don't you agree?

[terry1156]

No, I don't think nealy as many people are in financial hardship as everyone makes it out to believe. I think most people are responsible. I know that cardweb has the average $8000 - $10000 per family in credit card debt, but averages are deceiving. Put me in a room with Bill Gates and what is our average income? You get my point.

In reality:

---Most Americans owe nothing to credit card companies.

---Most households that carry balances owe $2,000 or less.

---Only about 1 in 20 American households owes $8,000 or more on credit cards.

Yes, some people don't know how to use CCs. But most people are like you and me.

[jmjj215]

Here are some stats I pulled - take them for what you will. Averages can be skewed, but increases are telling, either way.

The avergae cardholder's outstanding balance is $4,400-up 123 percent in only a decade, according to the Nilson Report, while personal income rose 72 percent. Meanwhile, the government recently reported that personal savings have fallen to the lowest monthly level in history.

Category: Credit Card
Sub Category: Balances
Reporting Pub: U.S. News and World Report
Pub Date: 3/19/01
Article Title: Digging Your Way Out of Debt
Article Author: Paul J. Lim and Matthew Benjamin
Source: The Nilson Report

Today (2001), the typical U.S. household carries an average credit-card balance of $7,500 up from less than $3,000 in 1990.

Category: Credit Card
Sub Category: Debt
Reporting Pub: My Generation (Sep-Oct 2001)
Pub Date: 10/1/01
Article Title: Drowning in Debt
Article Author: Gary Belsky

Credit card spending jumped 8.1% in the first half of the year, and nearly 5% of consumers are late with credit card payments, according to industry newsletter The Nilson Report. Home foreclosures have hit a 30-year high. Personal bankruptcies are at record levels.

Category: Credit Card
Sub Category: Spending
Reporting Pub: USA Today
Pub Date: 9/13/02
Article Title: Guidelines can help debt load
Article Author:
Source: The Nilson Report
Source URL: http://www.usatoday.com

For most of the college students polled by the Institute for Higher Education Policy in 1998, credit cards were principally a convenience, not a passport to an unaffordable lifestyle; 82% of them carried monthly debts of lass than $1,000. These small debts mean that most students -- 59% -- were able to pay their charge-card balances in full every month. The proportion of the population at large that pays in full each month is only about 40%.

Category: Credit Card
Sub Category: Students
Reporting Pub: usatoday.com
Pub Date: 7/30/01
Article Title: Teen credit cards actually teach responsibility
Article Author: Robin Marantz Henig
Source: Institute for Higher Education Policy
Source URL: http://www.usatoday.com/news/comment...1-ncguest1.htm

Overall, credit cards are bad. On a case by case basis (such as in your case), one could justify their use - agreed?

[terry1156]

Credit cards are not bad. People who do not know how to use them properly is a problem, but credit cards are not inherently bad . Again, all your stats are averages which I said before is very misleading.

Again:

---Most Americans owe nothing to credit card companies.

---Most households that carry balances owe $2,000 or less.

---Only about 1 in 20 American households owes $8,000 or more on credit cards.

*****These figures are from the Federal Reserve's 2001 Survey of Consumer Finances, one of the most comprehensive assessments of what Americans own and owe.

Only 5% of the people have large credit card balances. I would even argue that most banruptcies are not caused by poor credit card use...most are caused by medical bills (of which many are put on credit cards, but the underlining problem is not misuse of credit cards)

I would argue the opposite: Overall, credit cards are not bad. On a case by case basis, one could say that credit has been bad for that individual person.

[jmjj215]

I guess I shouldn't have said credit cards are bad. The poor spending habits of people are what causes the problem. Credit cards simply give people access to money they wouldn't otherwise be able to spend.

[midnight]

This is an interesting argument. I am not a big fan of credit cards as they have helped me get into debt, but can anyone really live without one in this day and age? I just went on a trip and reserved all my hotel rooms in advance at a big discount, but they required a credit card to hold the rooms. How do you purchase things online without one? Although it may be possible to live without a credit card, I think it would be inconvenient and it some areas would end up costing you money. Does anyone not have any credit cards? What problems do you face?

[jmjj215]

midnight,
I don't have any - can you believe it? LOL.
I reserve hotel rooms with my debit card - they've never raised an issue. I pay for online purchases with the same debit card. It's through Wells Fargo. It's accepted anywhere Visa is accepted. I'm yet to run into a problem.

[midnight]

I guess I should have been more specific. Can anyone live today without a "plastic card?"

I don't see a real difference among credit and debit cards. I know debit card is taken out of an account at a bank istead of loaned by a credit card company, you can still get in just as much trouble with them. I had a friend who went over her limit, got charged huge Courtesy Overdraft charges, then had it sent to a collection agency by the bank which charged even more and ruined her credit completely.