Just got our credit scores

[disneysteve]

The risk of credit cards are things like forgetting to make payment, or you do, but somehow the cc company messes up the online payment. Maybe you forget to look at the fine print and suddenly they start charging a yearly fee for it.

With my bankcard if they make a mistake, it has been fixed immediately. Plus with cash, I don't have problems with fraud.

There are certainly risks if you have a CC and don't manage it responsibly. Don't pay the bill on time. Don't check all of the terms and conditions. Etc. If you are the type to do that, it would be best not to have a CC.

harder to track spending habits.

An interesting question to those who enjoy using credit cards is "Do you write down and track all your spenditures from your credit card purchases or do you just spend as much as you want and then pay whatever that amount off is?"

I think tracking spending habits is much easier with credit cards. Every month, we get a printout that shows all of our charges for the month. At the end of the year, we get an annual summary of our charges broken down by category. It is a very useful tool for tracking spending.

As for your question, my wife and I do no budget our spending. We are both frugal and have no need to limit our spending in any particular category. I always wonder how exactly it would work if you've budgeted $200 for gas for the month and on October 29, you find your tank empty and your gas envelope empty, what do you do? You have to get gas.

I look at budgeting more as an after-the-fact exercise. I like to look at our year end CC summary and see that we averaged $X/month on gas and $Y/month on groceries. It is more for information and future planning purposes.

[GREENBACK]

I think tracking spending habits is much easier with credit cards. Every month, we get a printout that shows all of our charges for the month. At the end of the year, we get an annual summary of our charges broken down by category. It is a very useful tool for tracking spending.

As for your question, my wife and I do no budget our spending. We are both frugal and have no need to limit our spending in any particular category. I always wonder how exactly it would work if you've budgeted $200 for gas for the month and on October 29, you find your tank empty and your gas envelope empty, what do you do? You have to get gas.

I look at budgeting more as an after-the-fact exercise. I like to look at our year end CC summary and see that we averaged $X/month on gas and $Y/month on groceries. It is more for information and future planning purposes.

This is how I view it. Know what you have to spend and that's what you spend. The credit card gives you a simplified electronic method to track spending. Whole lot easier than budgets and counting dollars out of your wallet. With that said, They're not for everyone. They're especially not for people who can't/won't keep track of their expenditures.

[MonkeyMama]

The risk of credit cards are things like forgetting to make payment, or you do, but somehow the cc company messes up the online payment. Maybe you forget to look at the fine print and suddenly they start charging a yearly fee for it. In fact right now my wives Discover card had fraud on it, they cancelled the card, it took a week to get another and then we are still waiting a month later for them to figure it all out. With my bankcard if they make a mistake, it has been fixed immediately. Plus with cash, I don't have problems with fraud.

These risks are all pretty easy to avoid. I've had credit cards for almost 20 years and never had a problem. (As I've often said - I have never paid the cards a dime in interest or fees).

As far as fraud - I rather have cc fraud than any other kind. Cash can get stolen and it's hard to pay the bills is your debit card is breached (money taken from your checking account). Credit card fraud is common, but it is a hassle for the credit card company to figure out and deal with - no money out of my pocket while they figure it out.

I've always looked at my credit card as a "convenience." Since we pay the amount off monthly, we never consider it borrowed money. I just don't think of it that way, at all. Likewise, I only charge what I have the cash/budget to pay. (I also find charges easier to track, than cash. I track all our expenses electronically, using Quicken. I can just download all our charges and they are automatically categorized, etc. Much less time consuming and much more useful than writing it all down. IT can take me seconds to get detailed reports of our spending).

[disneysteve]

I rather have cc fraud than any other kind. Cash can get stolen and it's hard to pay the bills is your debit card is breached (money taken from your checking account). Credit card fraud is common, but it is a hassle for the credit card company to figure out and deal with - no money out of my pocket while they figure it out.

Exactly. No actual loss with credit card fraud. With debit card fraud, you are out the money immediately which could cause other payments to bounce and leave you a big mess to clean up once the bank figures it out and restores the money to your account.

I've always looked at my credit card as a "convenience." Since we pay the amount off monthly, we never consider it borrowed money. I just don't think of it that way, at all.

Same here. To me, there is no difference between cash, check, debit card or credit card when I'm standing at the cash register. I consider them all equal. I never, ever consider using a credit card to be borrowed money. I consider it delayed payment, just like writing a check. When I write a check, the money doesn't come out of my account immediately but rather days later when the recipient cashes the check. Purchases charged to a credit card are the same thing in my mind.

[minnie1928]

An interesting question to those who enjoy using credit cards is "Do you write down and track all your spenditures from your credit card purchases or do you just spend as much as you want and then pay whatever that amount off is?"

I track every red cent the same way, whether I spend it on a credit card or using cash. I've actually found that I spend more money if I use cash than I do with a credit card. Something in my brain says that if I have cash then I've already deducted it from my checking account and spending it won't impact my balance, so I spend it. Where as if I use my credit card then it "feels" different and I know anything I do will impact my checking account (eventually). But, I'm also an accountant by trade so for me to track my finances any other way than to the penny just seems wrong to me.

ps-I also reconcile all my credit card statements and my deposit accounts, every month. I'm anal like that...

[GREENBACK]

I'm preaching to the choir on this post but if everybody handled credit cards as has been mentioned here there wouldn't be a problem. The banks might not even offer them for that matter. That isn't the case though and I love the advantages of having them. When it's no longer to my advantage I'll cancel them immediately. I've said before that I don't really like bankers but it's a buisness dealing for me and that's how I treat it. Works for me.

[MonkeyMama]

I just had to add that we have tended towards small bank or credit union credit cards, over the years. LEss fine print and bait and switch to worry about (never any annual fees, etc.).

That said, I have a Chase card at current (the cash rewards are phenomenal), and I really have no issue with them. Just last month I Accidentally paid off the wrong card (my dh has some old Chase, and I confused them in my Online Bill Pay). We were on vacation and so we came home to about $70 in late fees and interest. It's the second time I paid the wrong card - it's the first time I didn't catch it before due date. They immediately applied the payment to the correct card and removed all charges. So, I haven't found them to be as difficult and troublesome as I would have imagined. I generally steer clear of the big banks and their cards, because they do tend to play a lot of games. But thing is, there are thankfully plenty of other fish in the sea!

[littleroc02us]

As for your question, my wife and I do no budget our spending. We are both frugal and have no need to limit our spending in any particular category. I always wonder how exactly it would work if you've budgeted $200 for gas for the month and on October 29, you find your tank empty and your gas envelope empty, what do you do? You have to get gas.

I'm glad you asked that question. You listen to David Ramsey right? What would he say to that question? He would say that you have an emergency meeting regarding the budget with your spouse and transfer money from another budgeted item. The thing about a budget is that it is a long term education in how to make it better each month. We aren't perfect with it, but now we are learning to write things down and add them into the mix. I always leave a buffer in the checking account just in case i'm a little off.

[skydivingchic]

Yes I do budget and track all CC purchases along with purchases made by other means. I use Mvelopes, a virtual envelope budgeting system. So it makes no difference to my budget whether a purchase is paid by CC, debit card, check, or cash. A purchase at the grocery store comes out of my electronic "grocery" envelope and I know how much I have left to spend in each budget category.

CCs have far too many advantages if you can use them responsibly. As has been pointed out, I would FAR rather have CC fraud than debit card fraud. Things will likely get eventually straightened out in either case, but with debit card fraud I am out real money from my checking account immediately.

Another big issue with debit cards is for car rentals and other places requiring some kind of damage deposit. If you rent a car with a debit card, they are likely to put a hold on a good bit of money in your checking account, let's use $1000 as an example. They put a hold on that $1000 and for all your purchases, it is like that money is gone from your account until you return the rental car. So if you don't have the $1000+ buffer, you could incur overdraft fees. Not so with a CC. They simply put the hold on your credit line, so you simply have to account for that when making purchases so that you stay under your credit limit.

I don't believe for a second that Dave Ramsey has "proven" that a credit score is not necessary. Credit scores are used for more than obtaining loans. Plenty of insurance companies check scores to determine rates. Lots of landlords check scores to determine wheter or not to rent to you (and if you are saving cash to pay for 100% of a house, you'll be renting for a number of years). Many companies check credit scores before hiring someone. We can argue whether or not these are good practices, but the fact of the matter is, this is the way things are. A lack of a credit score can negatively impact all those things. Perhaps if your name is Dave Ramsey, it won't be as much of an impact. But for your average Joe, these things need to be considered.

If one can't use a CC responsibly, then don't use one at all. But as with many blanket generalizations, the CCs are "evil" bit is simply not true and gets old fast.

[littleroc02us]

Another big issue with debit cards is for car rentals and other places requiring some kind of damage deposit. If you rent a car with a debit card, they are likely to put a hold on a good bit of money in your checking account, let's use $1000 as an example. They put a hold on that $1000 and for all your purchases, it is like that money is gone from your account until you return the rental car. So if you don't have the $1000+ buffer, you could incur overdraft fees. Not so with a CC. They simply put the hold on your credit line, so you simply have to account for that when making purchases so that you stay under your credit limit.

I don't believe for a second that Dave Ramsey has "proven" that a credit score is not necessary. Credit scores are used for more than obtaining loans. Plenty of insurance companies check scores to determine rates. Lots of landlords check scores to determine wheter or not to rent to you (and if you are saving cash to pay for 100% of a house, you'll be renting for a number of years). Many companies check credit scores before hiring someone. We can argue whether or not these are good practices, but the fact of the matter is, this is the way things are. A lack of a credit score can negatively impact all those things. Perhaps if your name is Dave Ramsey, it won't be as much of an impact. But for your average Joe, these things need to be considered.

I want to check into the virtual envelope system. That sounds pretty cool. As for renting a car with a check card, I have to do this a couple times a year and have much success with this. They simple hold $200 and my insurance card from American Family takes care of any possible accident issues. If you can't afford to have $200 for reserve then you probably can't afford to rent a car. Not all companies will do this, but I use budget or enterprise to name a few. I also reserve all my hotel rooms and buying items online from Amazon with my check card. Never been a problem.

You are correct on your next paragraph. The insurance companies do check credit scores for car insurance. There are tons of lawsuits waiting to get that changed. It's funny how someone who has a networth of over a million dollars can have lower rates because they don't have a credit card and a low score. You can get insurance with a low credit score but you may pay higher.

Thirdly, paying off your house and then paying for the next one in cash is doable for those who take the time to sacrifice.

Renting an apartment is easy with the right lanlord. I had a low credit score in 2004 didn't say a thing back then. I don't plan on renting ever again unless I have too. I'm trying to build wealth and real estate over time.

[kork13]

This is just me, but I'll never understand the fanatical opposition to credit cards of DR devotees. But in the end, some people follow that philosophy, and others follow just the opposite philosophy, that credit cards are a tool to be used to your advantage. You're never going to convince one of the other's perspective.

But for the sake of conversation, I use credit cards to pay for everything I possibly can, and do it with the strategy of maximizing rewards. I get between 2%-5% cash back on every purchase I make on my credit cards -- basically an automatic discount. Just so far in this year of low total purchases, I've gotten over $200 back in credit card rewards. With cash purchases is that you don't get any of that, so I'm perfectly happy to buy everything I need by credit card if possible. One other note... I'm currently living in Japan, where the Yen is KILLING the dollar. By purchasing items with my credit card, the CC company applies a more advantaged exchange rate. For example, instead of the ¥80/$1 rate that I'm currently getting on cash, my credit card company is giving me a ¥81.6/$1 rate on my purchases in Yen. Also, they don't charge me foreign exchange fees (I selected this CC specifically for that purpose). The savings seen in using credit cards are very real, so I take every advantage of them.

Also interesting (about DR-ism) is that the problems of not having a decent credit history are pointed out, acknowledged, and written off. 5% increases in insurance premiums and mortgage rates? I'm absolutely gonna pay attention to that!

[Elena C.]

Wow, that's crazy. I'm around 765 and I thought that was high. I didn't realize that they actually give out scores over 800! Congrats!

[disneysteve]

I didn't realize that they actually give out scores over 800! Congrats!

Yes. FICO scores go up to 850.

[NJDebbie]

DisneySteve,

Are you paying any points to get 3.99%? We were thinking of refinancing; we still have 25 years on a 30 year mortgage @5.375%. What do you think?

[disneysteve]

DisneySteve,

Are you paying any points to get 3.99%? We were thinking of refinancing; we still have 25 years on a 30 year mortgage @5.375%. What do you think?

No points. We are paying closing costs of about $2,000 but we'll save way more than that over the life of the loan. We have no intent at all to move.