Are CCs worth the hassle?

[ActYourWage]

I think a lot of anti-CC folks hang on those studies that say people spend 18% more when they use a CC. That assumes that you are using your card for a lot of discretionary spending and variable purchases. Most of our charges are non-discretionary or fixed-cost items: gas, home and cell phones, cable, internet, Netflix, EZ Pass tolls, newspaper and magazine subscriptions, auto maintenance and registration, professional licenses, auto insurance, alarm fee, groceries and more. Those are all things that we would be spending the exact same amount on no matter how we paid the bills. The extra 18% probably is folks who are out at the mall every weekend looking to spend money on things they don't need and can't afford. We aren't like that at all.

@disneysteve:

"We aren't like that at all." I think you are a minority when dealing with CCs. You can handle that responsibility. The majority can't. There are too many cases that people are in CC trouble. It is not worth the hassle for most people. It is really that simple.

[ActYourWage]

How would paying cash be better than paying by credit card and getting a 5% discount? You'd pay an extra 5% that way. That doesn't make any sense.

I don't play with snakes, that is CCs. They will bite but you might not know when. That's my take.

[maat55]

PS: You can't just shut down a business when it's doing bad. You would be in violation of your lease agreement and the landlord would haul your bottom into court.

So your solution would be to loose more money or pile up more debt, then shut it down. If you have a two or more year lease agreement and your business shows no sign of profitablility, I would shut it down and deal with the lease loss only.

Anyway, using my CC to pay my bills has no lease agreements. I personally, keep working capital in all my accounts. I don't use credit for float.

[glock35ipsc]

I don't trust myself with credit cards, I/we proved that to ourselves in the past.

Since we became debt free except for the house, I will only use cash or the debit card, and sometimes the long forgotten check. Maybe, MAYBE, one day if I feel I have grown up in the credit card responsibility arena, I may go back to one.... maybe one with gas rewards or something like that.

But for now, I still don't trust myself with one. So I will use the 'old' ways of paying for things. For myself, I definitely don't consider using cash, checks or debit to be a hassle. I am very anal about writing my transactions down. But I am that way with anything! I want to know what is going on right now! And it drives my wife nuts!

For now, I don't want a credit card.

[maat55]

I don't trust myself with credit cards, I/we proved that to ourselves in the past.

Since we became debt free except for the house, I will only use cash or the debit card, and sometimes the long forgotten check. Maybe, MAYBE, one day if I feel I have grown up in the credit card responsibility arena, I may go back to one.... maybe one with gas rewards or something like that.

But for now, I still don't trust myself with one. So I will use the 'old' ways of paying for things. For myself, I definitely don't consider using cash, checks or debit to be a hassle. I am very anal about writing my transactions down. But I am that way with anything! I want to know what is going on right now! And it drives my wife nuts!

For now, I don't want a credit card.

Don't blame you at all. I'm just testing the water myself. I have used CC's on an limited bases for many years, but have never tried to take advantage of reward offers until now. If I can't do it comfortably, I will cease to use them as well.

[Scanner]

So your solution would be to loose more money or pile up more debt, then shut it down. If you have a two or more year lease agreement and your business shows no sign of profitablility, I would shut it down and deal with the lease loss only.

Maat,

YOu are effectively right. . .you have an "executive" decision to make, so to speak. . .but usually any business - you have good months and bad months. SOmetimes it's difficult to tell if your business is going down the hopper, if it can be rescued, or it's just a normal "hiccup."

But you have the "Devil's Choice" - do you pay the lease balance, which could be a lot. . . or do you continue to float a LOC?

If I take your advice and deal with the lease loss, you are asking me to pay about $24,000 over for space I wouldn't even be using (I pay $975/month - I rounded up to $1000).

I only offer the self-employed perspective here. . .I realize that most savingadvicees are working stiffs and the perspective doesn't apply.

I had a horrible second quarter. . .having a great 3rd quarter.

Such is life for the self-employed.

Without credit (both general and c/c), I would have been sunk many times before. Heck, I don't think the ship would have ever sailed.

[LivingAlmostLarge]

Yeah and lose 5% actyourwage? That is why you were in debt and I was not. Probably because I consider 5% large enough to benefit anything I buy.

I paid off my DH's tuition in FULL on the CC and the CC in FULL when due. Actually I paid it off the day after the charge went through because I wanted to leave enough buffer on the CC. We only have a limit of $10k on the card so with three different payments I didn't want to go over the limit. So it was all paid off before the statement even came.

So I guess responsible people look at how to stretch their dollars and heck ya I'm going to strech my buck an extra 5%!

I'm only paying 95% of DH's tuition! Not much but it adds up fast!

[ActYourWage]

"Yeah and lose 5% actyourwage? That is why you were in debt and I was not. Probably because I consider 5% large enough to benefit anything I buy."

WAS in debt. Thank you.

I actually only had 4k in CCs debt. Never was late either. The rest was my wife and part of a loan from my parents (they paid 20% down on my house).

Bummer, I lost my 5% on 4k.

"I paid off my DH's tuition in FULL on the CC and the CC in FULL when due. Actually I paid it off the day after the charge went through because I wanted to leave enough buffer on the CC. We only have a limit of $10k on the card so with three different payments I didn't want to go over the limit. So it was all paid off before the statement even came.

So I guess responsible people look at how to stretch their dollars and heck ya I'm going to strech my buck an extra 5%!

I'm only paying 95% of DH's tuition! Not much but it adds up fast!"

Ok. Thanks for the info.

[disneysteve]

I don't play with snakes, that is CCs. They will bite but you might not know when. That's my take.

I would agree that credit cards CAN bite you but I would disagree that they WILL bite you. I think that is an important distinction.

I got my first CC 26 years ago when I went off to college. I've never had a late fee, never carried a balance and never paid a penny in interest, so I haven't been bitten yet and don't expect I ever will be.

At the same time, I know lots of people who are frequently hit with bounced check fees, overdraft fees and other fees from misusing their checking accounts and debit cards.

Bottom line is that people who aren't careful can get into trouble with any system, whether it involves a credit card or not.

[Snave]

Steve, you are also in a position financially, both from savings and just your income, that you can afford if you happen to "splurge" on the credit card for something. Fortunatley, I have enough savings and make a decent income where using a cc wouldn't/isn't necessarily a problem for me either. I have one and use it for a lot of things. However, I find that while I do have the discretionary income where I could use a cc and not have it "bite" me, I do spend less with cash. For example, my wife and I said that we would only spend X amount of dollars during the holidays. We then pulled out the cash and didn't go over that limit. It makes it easy to say "no" more spending when you have no more cash in your wallet. If we would have done the same thing but used a credit card, I am sure we would have exceeded the limit if even by a little bit. It is just easier to do. There is nothing stopping you from swiping the card one more time even if it is just for an extra $20 transaction. An empty wallet tells you no. I don't think cc's are evil, I love the rewards I get, but I find that I save more using cash than I earn in any type of rewards program. Maybe it's that I am stingey (sp) and don't want to hand over the cold hard cash.

[maat55]

Maat,

YOu are effectively right. . .you have an "executive" decision to make, so to speak. . .but usually any business - you have good months and bad months. SOmetimes it's difficult to tell if your business is going down the hopper, if it can be rescued, or it's just a normal "hiccup."

But you have the "Devil's Choice" - do you pay the lease balance, which could be a lot. . . or do you continue to float a LOC?

If I take your advice and deal with the lease loss, you are asking me to pay about $24,000 over for space I wouldn't even be using (I pay $975/month - I rounded up to $1000).

I only offer the self-employed perspective here. . .I realize that most savingadvicees are working stiffs and the perspective doesn't apply.

I had a horrible second quarter. . .having a great 3rd quarter.

Such is life for the self-employed.

Without credit (both general and c/c), I would have been sunk many times before. Heck, I don't think the ship would have ever sailed.

I've been in business for 20 years and I know what your saying. I've had ups and downs also. I used to use a credit line, but desided to fund my own credit line. When need be, I get deposits on jobs to keep good cashflow.

I'm fortunate that I have no lease, but its wise to build up a good business EF. I've had two bad quarters for me, but am still making money. I'm glad to see your having a good quarter. Self-employment, gotta love it.

[disneysteve]

Steve, you are also in a position financially, both from savings and just your income, that you can afford if you happen to "splurge" on the credit card for something.

While that's true, it is totally irrelevant. As I said above, I got my first CC when I was 18 and going off to college. I had virtually no income then. I continued to use a CC through college and med school and internship and residency when my income was minimal and I was living largely on student loans. No matter how much I earned at any point, I used my CC responsibly, never charging more than I could afford to pay in full when the bill came.

It has nothing to do with income or savings. It has to do with responsibility. I am quite certain you could find loads of doctors and higher wage earners who have the same credit card debt problems as everyone else. There are articles on the topic regularly in physician financial publications. A higher income doesn't make you immune to all of the same money problems that average wage earners face.

[ActYourWage]

While that's true, it is totally irrelevant. As I said above, I got my first CC when I was 18 and going off to college. I had virtually no income then. I continued to use a CC through college and med school and internship and residency when my income was minimal and I was living largely on student loans. No matter how much I earned at any point, I used my CC responsibly, never charging more than I could afford to pay in full when the bill came.

It has nothing to do with income or savings. It has to do with responsibility. I am quite certain you could find loads of doctors and higher wage earners who have the same credit card debt problems as everyone else. There are articles on the topic regularly in physician financial publications. A higher income doesn't make you immune to all of the same money problems that average wage earners face.

Were raised with a frugal mindset? That would answer a lot of your views. There are MORE problems that occur from using CCs than cash or debit cards with the majority of the people out there. It is not good advice to tell people they should spend 40K to only get maybe $900-$1000 bucks a year. That's probably what it takes to accumulate that kind of money. It appears that the more the person charges on a credit card the more 'rewards' they get. That sounds very risky, when most people carry balances anyway. What happens when they can't come up with the money or they only spend the minimum on the balance? They are not paying down anything then. CCs are not worth the hassle.

[disneysteve]

It is not good advice to tell people they should spend 40K to only get maybe $900-$1000 bucks a year. That's probably what it takes to accumulate that kind of money. It appears that the more the person charges on a credit card the more 'rewards' they get. That sounds very risky, when most people carry balances anyway.

I agree 100%. I never said I advised others to do what I do. I just posted to share my own experience. Some people can handle doing this. Many can't. If someone knows they are the type who couldn't do this without getting into trouble, they shouldn't do it. If you can't use your credit card and pay the bill in full each and every month without fail, you shouldn't use a credit card.

Yes, we charged $40,451.45 on our credit cards in 2007 and got about $900 in rewards. Every penny of those charges would have been spent no matter how we had paid - cash, check, debit card, credit card. So if we were going to spend the money anyway, it was far easier with a credit card and we got the $900 back in the process.

[MonkeyMama]

I just had to chime in I obviously am with Steve on this one. But had to chime in income has nothing to do with it.

I had my firt card at 16 and through college barely made an income of $10k, but never had a late charge or fee or finance charge or anything of that nature.

I think it's a shame too many people are scared of credit cards whereas a proper education at a young age is really what is more needed for people to stay out of trouble. (I think I am a prime example whereas most people are appalled at getting credit cards for their kids, simply because they are scared).

I had $500 of cash rewards last year charging something like $20k. Groceries, gas, utilities, anything and everything. There wasn't any excess spending to get rewards.

But agreed - if you can't handle the cards - cut them up.

I've personally never been tempted to put more on the cards than I would pay cash, because I know the consequences. I don't understand personally why so many people struggle with that. IT's a shame really. IT's not because I have a decent income today. It's because I've always known the consequences, no matter what my income. I rather get a second job than pay 10%+ interest on a purchase.