JamesKim
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I called Bank of America and asked the requirements of them paying my minimum payment balance. Since I'm enrolled in a credit protection plan which isn't much like 0.99 for every $100's I use. If I get a 3.6 GPA or higher, they pay 3 months of your minimum payment which is $15.00 for me. And currently I may be able to hit 3.9 this semester so if all works out, that's $45 bucks free for basically doing well in school!
Suppose I use around $100 per month and they incur 99cents for every $100's that is spent on my credit card. That's $11.88 which isn't bad. But there may be months where I spend like $200-$300, not consistently though. So I either profit small from this or break even and covers the protection plan.
Your thoughts?
Thank you.
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Mon May 12, 2008 2:07 am |
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JamesKim
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I don't know about that, but they've been treating me very well in terms of services and informant.
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Mon May 12, 2008 2:55 am |
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pf101
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I'm not a fan of these programs. You'll lose money in the long run. Besides, you should be paying your entire balance off, not the minimum payment.
Personal Finance 101
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Mon May 12, 2008 3:10 am |
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JamesKim
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Well I'm just saying that if I don't use my credit card for 3 months, they could pay the minimum for me and I'll still have it without getting it to be defaulted. It's a small incentive I guess.
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Mon May 12, 2008 2:21 pm |
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pf101
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And if there is a minimum to be paid that means you're carrying a balance and getting charged interest on top of the 1% that you're paying them for this "service". So, in actuality, you're losing money.
You have to remember that banks don't offer services like this because they're good for the consumer. They make the banks money, that's why they offer them.
You said it yourself, you'll either break even or the banks will make a little bit...so what's the point? You're just spending extra money that you don't need to be spending.
Personal Finance 101
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Wed May 14, 2008 5:06 am |
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financialpeace
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One thing to remember is that if you play with snakes long enough, you will get bit! You will NEVER profit from a CC company, ever. That's a myth you have either developed yourself, or you've been told it so much you now believe it. If you profited and they didn't, they wouldn't be in business. They have to make more than they spend, or they close the doors and go home, this is a very basic fact of business and a life skill you'd better learn quick and early in life, or you will always be at the mercy of the next great marketing scam. All the banks (CC companies, mortgage co's, etc) offer is debt, period. They make no great product, they produce absolutely nothing, they offer no great social service, the only thing they produce is great marketing, and promises from their customers that the customers can't guarantee, thereby causing a master-servant relationship, and you won't be in the position of the master, if you catch my drift? You are getting caught up in the great myth of the 20th century(you're a little late, so there's still time to save you!), that you can't live without a CC and debt. The fact is, you can live without a CC or debt period. It can be done, I do it, others do it too. Please, please, please, don't just blindly believe the great marketing of the banks, if you do, you won't win. I hope the best for you.
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Wed May 14, 2008 1:15 pm |
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pf101
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Well, I disagree with you financialpeace. You can profit from a credit card. Just not this way.
I make about $1500/year off of mine and it doesn't cost me a dime.
As far as living without a credit card, sure you can, but eventually it'll make your life harder than it needs to be so why would you? Credit cards are not evil. Credit cards do not cause debt. They are a tool. Nothing more, nothing less. If used appropriately they can help, if used inappropriately they can hurt. It's as simple as that.
Personal Finance 101
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Wed May 14, 2008 11:15 pm |
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financialpeace
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pf101, I respect your position on this, but I don't agree with it. I would gladly go to war, fight and die, so that you can believe the way you do, but I sure wouldn't hire you for my personal finance coach. It's nothing personal, its just that your values and mine don't line up.
I'm curious, how much did you have to spend to get $1500 out of a CC company? What kind of tool do they offer so that you can destroy them? I suppose in my previous post it might look like I believed guns cause murders, or pencils cause mispelled words, and they don't, and yes, you are correct, CC's don't cause debt either, that is true, and thank you for correcting me. Let me say though that even though my post may have sounded that way, it was not what I was implying, because I actually stated that a person needs to look logically at the truth, and not be led blindly by some marketing scam, blindly conforming to latest trend just because everyone else is doing it, without ever asking "why?".
Yes, CC's do NOT cause debt, that is true, but they don't cause budgeting either, and in fact, statistics prove over and over again, that CC's are more likely an enabler for overspending than they are any kind of useful tool, another debt myth in my opinion.
Let's say you spent some $30k to get $1500 back on some whacked out points system or air miles promo(of which those are almost never redeemed, unless Jupiter and Venus are lined up), shall we? And, let's calculate the average 'overspending' that happens when someone uses plastic, like 15%(which is actually a very conservative figure), because plastic doesn't register in the psyche a pain of immediacy that hinders overspending. Swiping is easy, relaxed, painless, and wreckless to most. So, mathematically, $30k x .15 = $4500, I don't see the math here, do you? A person that overspends $4500 in order to save $1500 isn't really winning, are they?
Not to mention, the CC companies charge a fee for every scan or 'wave'(that's the new thing, 'waving' registers even less pain than swiping) which is passed on to all consumers as higher prices. So, the CC company gets a fee for the swipe, whether you got a good deal on the product or service or not, the business is charged the fee, so they tag that fee onto the costs of goods/services sold, it's pretty simple economics, but it in no way benefits the consumer. These fees and overspending habits only benefits the CC co and the business. Again, I'm still not seeing where you or anyone else are actually 'winning' here. I agree with you about the CC not being the evil thing here to a point, but it does act as the enabler, giving the drinker another drink so to speak, that I'm sure you won't dispute, since you yourself promote 'personal finance' which I would hope would promote some sort of personal accountability? The use of a CC only prolongs the disease, the disease is overspending, the symptoms of the disease are plain and simple debt. Consolidation doesn't cure the disease, only treats the symptoms. So, that being said, maybe you are one of every 1000 people who can actually curb the desire to overspend and still use the CC "tool", but in reality, people like easy, and budgeting and spending less than we make is NOT easy, ever, and anyone who says it is, I laugh in their face, and I'll gladly turn their logic upside down in every way possible. If someone says budgeting and actually living by a budget is easy, I say they must be all tied up in some computer modelling software or some other thing that actually gives them even less control over their personal finances, which again, isn't "easy" but more like submission.
Budgeting and money management is not easy, it won't happen all by itself, but overspending will. A person will either learn to manage their money, or the lack of it, will always manage them, but CC's are more likely to enable overspending and lack of management, than they are to enhance money management. And that statement can be proven time and time again, all we have to do is watch the news, and stock prices of banking(debt) institutions. Congratulations to you if you have found a way to single handedly destroy the CC industry, but right now, I am very skeptical, and my advice to the original poster still stands, "Don't use CC's, or any other type of debt 'tool', you will eventually get burned."
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Thu May 15, 2008 2:34 pm |
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pf101
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quote:
Originally posted by financialpeace
pf101, I respect your position on this, but I don't agree with it. I would gladly go to war, fight and die, so that you can believe the way you do, but I sure wouldn't hire you for my personal finance coach. It's nothing personal, its just that your values and mine don't line up.
Which is also why I wouldn't have you as a client. 
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I'm curious, how much did you have to spend to get $1500 out of a CC company? What kind of tool do they offer so that you can destroy them?
Honestly, I'm not sure. I'm not a fan of budgets. I think they set people up for failure. I prefer goals. And I don't recall saying I destroyed anyone, but I'm certainly not the only person who makes money off of the CC companies.
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Yes, CC's do NOT cause debt, that is true, but they don't cause budgeting either, and in fact, statistics prove over and over again, that CC's are more likely an enabler for overspending than they are any kind of useful tool, another debt myth in my opinion.
As I said above, I'm not a fan of budgeting. I think when you budget you're going at it backwards. As far as over-spending, that depends on the person involved, not the instrument used. Personally, I can't hold on to cash to save my life.
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Let's say you spent some $30k to get $1500 back on some whacked out points system or air miles promo(of which those are almost never redeemed, unless Jupiter and Venus are lined up), shall we? And, let's calculate the average 'overspending' that happens when someone uses plastic, like 15%(which is actually a very conservative figure), because plastic doesn't register in the psyche a pain of immediacy that hinders overspending. Swiping is easy, relaxed, painless, and wreckless to most. So, mathematically, $30k x .15 = $4500, I don't see the math here, do you? A person that overspends $4500 in order to save $1500 isn't really winning, are they?
If someone has no impulse control then this would be a problem. That is not an issue for me, nor is it for the OP whose question we are addressing.
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Not to mention, the CC companies charge a fee for every scan or 'wave'(that's the new thing, 'waving' registers even less pain than swiping) which is passed on to all consumers as higher prices.
You're paying that increased price too even though you're not getting a benefit so I'm not sure how that supports your point.
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Again, I'm still not seeing where you or anyone else are actually 'winning' here. I agree with you about the CC not being the evil thing here to a point, but it does act as the enabler, giving the drinker another drink so to speak, that I'm sure you won't dispute, since you yourself promote 'personal finance' which I would hope would promote some sort of personal accountability?
Personal accountability is just that. Personal. Not enforced. To use your alcoholic analogy, I can force an alcoholic to not drink by keeping him away from booze. That doesn't solve a problem though. The alcoholic has to CHOOSE to not drink, the spender has to CHOOSE to not spend - that is personal accountability. If anything, NOT carrying a credit card is enabling them more because they're not learning and practicing self control, they're being forced into it. And, as any recovery therapist will tell you, unless the person chooses change, then it will never stick. As soon as they get an opportunity they'll go right back to their vice of choice.
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The use of a CC only prolongs the disease, the disease is overspending, the symptoms of the disease are plain and simple debt.
Again, you are equating credit cards with debt. Those who have self control will have no debt, no matter how many cards they have. And those with no self control will figure out a way to have debt regardless of the fact that they have no credit cards. Just look at the flood of payday loan places and home ATM accounts (AKA HELOCs)
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If someone says budgeting and actually living by a budget is easy, I say they must be all tied up in some computer modelling software or some other thing that actually gives them even less control over their personal finances, which again, isn't "easy" but more like submission.
You're right, it's not easy. Which is why I don't recommend it. Living by a budget makes your life MUCH harder than it needs to or should be. There are much easier ways to live your life. For most people, budgets are a set-up for failure.
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Budgeting and money management is not easy, it won't happen all by itself, but overspending will. A person will either learn to manage their money, or the lack of it, will always manage them, but CC's are more likely to enable overspending and lack of management, than they are to enhance money management. And that statement can be proven time and time again, all we have to do is watch the news, and stock prices of banking(debt) institutions. Congratulations to you if you have found a way to single handedly destroy the CC industry, but right now, I am very skeptical, and my advice to the original poster still stands, "Don't use CC's, or any other type of debt 'tool', you will eventually get burned."
Budgeting is not easy. Money management is and can happen in about 5 minutes a month. And if you have self control, you can do it with credit cards. If you don't you can't. It comes down to that. If you personally don't have self control then stay away from credit cards. But, making a blanket statement to never have or use them, it's short sighted. Credit is necessary. You can argue that it isn't but it is. It's necessary for getting a mortgage. It's necessary for getting utilities. It's necessary for good insurance rates. It's necessary for getting a job. And it's going to become more and more necessary through the coming years. If you don't believe that, all YOU have to do is look at the news. It's talked about all the time.
You mention that whole destroy thing again. I'm really not sure where you're getting that. I'm not out to destroy anyone/anything. Why would I want to destroy something that I can work for my benefit? BTW - I only use cash cards. The only people that mileage cards make sense for are those who fly a lot (usually for business) and enjoy it. Otherwise it's just not worth it.
Personal Finance 101
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Thu May 15, 2008 11:58 pm |
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pf101
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Yes, I'm talking about the old fashioned I'm going to spend $18/month on this and $32/month on that kind of budget. It's usually built from what people *think* they should be spending and, IMO, they are not only a backwards way of managing your money, but they add a stupid amount of stress by trying to force someone into rigid silos of spending. They also work about as well (and as long) as the typical fad diet. Meaning, they work fine for a week or two then something unexpected happens and it all falls apart.
I'm a fan of lazy accounting and lazy budgeting. The easier you make it the more likely it is to work. Figure out what your goals are, figure out what your required expenses are. Pay them automatically on the day you get paid and then spend the rest. Who cares if you spend it on a haircut or dinner out or a new pair of jeans? As long as your goals are being met and your expenses are covered, the rest just doesn't matter.
On the first of each month there are 6 transactions that take place immediately:
My IRA Contribution
An ING transfer to fund my random savings goals
My rent gets paid
My Internet and electricity get paid (on my credit card)
My credit card gets paid in full
Any money that's left in my account after that is mine to spend as I desire. Being self employed makes it a bit more tricky as there are times I have to dip into my savings. But then I just replace that money the next month so it all evens out.
My financial management takes me 5 minutes a month. Pretty darn easy.
Personal Finance 101
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Fri May 16, 2008 7:02 am |
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pf101
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I usually suggest that for the first 3-6 months on my system people switch to all cash. It only takes 1-2 times of running out of money before then end of the month before you figure out how to fine tune your spending. Once you get that nailed then you can spend however you want (meaning cash or credit).
Personal Finance 101
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Fri May 16, 2008 6:37 pm |
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financialpeace
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quote:
Originally posted by pf101
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I'm curious, how much did you have to spend to get $1500 out of a CC company?
Honestly, I'm not sure. I'm not a fan of budgets. I think they set people up for failure. I prefer goals.
You either made $1500 off the CC companies, or you didn't, all I asked is show your methods and accounting, and if you can't, then your claim doesn't really hold water. I don't really care whether you did or you didn't, after visiting your website, I can see clearly that you are not 'average', most likely well above average. But you have to realize that when you make claims you can't substantiate, many peoplewho might not understand all of the consequence(such as the OP) will believe you and run out trying to do the same things without any plan or reasoning, and they will likely fail, or at best only reach mediocrity, rarely their full potential.
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As I said above, I'm not a fan of budgeting. I think when you budget you're going at it backwards. As far as over-spending, that depends on the person involved, not the instrument used. Personally, I can't hold on to cash to save my life.
You have to take account of income and expenses, or you really don't know where to start and every plan regardless of how simple or how sophisticated, will fail if there is no 'cash-flow-spending-plan', especially at the beginning. How do you know what goals to set, if you don't know where you are presently, monthly? If you don't know what you spend money on and how much income you have, how can you set any goals? Overspending happens automatically, but living within your means doesn't. Maybe you have some things on 'auto-pilot' on a personal basis, which is good, many of us have as much of our finances on auto-pilot as possible, but that doesn't mean the average person does. And it doesn't negate the fact that it's not bad to monthly make sure 'auto-pilot' is functioning correctly and still on course. I copy many of my budget line items over from month to month, the figures many times never change, but they still hit the list so that I don't forget and I'm reminded monthly of my priorities and goals. I've counselled many families, and I've seen many who were current on their CC bills and two months behind on their mortgage or a month behind on their kid's private school tuition. That's upside down and backwards, that doesn't mean they don't have goals, it just means their game plan (instrument) isn't working. The instrument used to achieve the goal is more important than you might think, its more like the road map and the vehicle to get you to the destination, all wrapped into one. It's like having a GPS in the car, wow! Imagine what that would be like?  I can have a goal of taking a trip this summer from my home in WY to Destin, FL, as I've done before, but I am more likely to take the trip in a 747 than I am a horse/buggy. I am also more likely to enjoy the trip when I've saved(budgeted) for it all year long, and my vacation doesn't follow me and my family home in the form of debt. If I decide to go take my team to the NBA national championship game and have a goal of getting there and winning it all, that's a fine goal, but it means nothing if I've not trained my team, educated my team, and then put the right players in the right positions within the right game plan, to make the goal happen. So many people have this 'control-freak' issue when they hear the word budget, and it's not. It's just telling your money where to go and what to do, and if something comes up or costs more or priorities change, then something else goes down the list until the least important priority falls off the bottom of the 'cash-flow-spending-plan'(budget). It really is OK to say NO once in a while. I used to have to practice just forming the word, almost had to go to a speech therapist, but now, after many years, "NO" comes pretty easy to me, and the more I say it, the more wealth I build, the more wealth I can give away. Budgeting of some form is a necessity. Businesses do it, corporations do it, or they fail. I ask myself the same question that Dave Ramsey asks all of his students that attend his courses, "If you worked for a company called YOU, Inc, and you handled money at YOU, Inc the way you handle money for you now, would you fire you?"
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Not to mention, the CC companies charge a fee for every scan or 'wave'(that's the new thing, 'waving' registers even less pain than swiping) which is passed on to all consumers as higher prices.
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You're paying that increased price too even though you're not getting a benefit so I'm not sure how that supports your point.
It supports my point because it proves that the banking industry has a wonderful marketing program and has made consumers believe they can't live without a CC and can't pay cash for anything. That's like the argument, you'll always have a car payment, so you might as well have one with a new car smell. I still don't see the benefit I seem to be missing? How much would a house cost in CA if 30yr, 40yr and I/O loans were outlawed? I bet you could pay cash for a house pretty easily in just a few short years. How much would a new truck cost if you couldn't finance it to buy it? I bet it would cost less than $15k for a new truck with all the bells and whistles. Debt has falsely driven the costs of everything through the roof. People that are too broke to buy, have bought stuff, and it makes us as a culture get 'stuffitis'. It creates its own fever of 'gotta have it now, I deserve it!" syndrome. I've been a participant in this problem in the past too, but no more. I pay cash. Cash is king, and the paid off home mortgage is the new status symbol of choice.
I don't overspend, but with your method, the average person actually could overspend easier. A person not living on a budget could very easily spend the grocery money in the electronics store, without even knowing it. I could do that too, but I would have to actually rip the cash envelop for 'groceries' out of my wife's hand, and then spend it. It would be immediate pain of spending the cash where I hadn't planned, I would immediately be confronted with my choices of 4th grade civics (food, shelter, utilities, transportation) and there would be an immediate reference to the consequences about to come about through my actions. Then, there would be prolonged agonizing pain of dealing with my PO'ed wife the rest of the month.  Therefore, I am much less likely to spend on impulse or even without purpose when I spend with cash for some things, but nevertheless, on purpose for all things. We even budget for 'blow' money, and I'm not talking about crack or meth,  I'm referring to the fact that we all blow money in some form or another. But the fights between spouses starts when we blow money without reason or accidentally, and the other spouse then sees that we either go into debt, or they have to give up something that was a priority to them in order to keep from going into debt. I get blow money, my wife gets blow money, and when I blow my money, there is no guilt, no remorse, and no one holding any blame or resentment over my head. It works wonderfully. Also, when spending cash, I'm also more likely to 'ask' for a good deal and to seek a good deal, or I'll take my cash and go home.
You said it before, you like to have goals, but the goals won't just achieve themselves, there must be a roadmap and plan of action, and even then, the destination and the map won't get you there, the need for a vehicle still exists. All a budget does is lay out a game plan for the month, if it changes, adjust it, it really isn't a straight-jacket, but it does give a lot of peace of mind knowing that there's a plan in place. I see on your website that you counsel families/couples, and that is a very necessary and noble service to this culture, I think that's a really cool thing you do, but you should be finding if you've done it much, that as soon as there are two personalities and characteristics brought into a financial relationship, then there had better be some form of agreed upon plan, including, goals, hopes, dreams, and the transportation method to get there(cash flow spending plan). I've counselled many families(last count well over 60, not that I'm bragging cause that's not what's important, but just for statistical purposes), and without a doubt, almost all of them that are struggling financially, or even those that think they're 'ok' but still have more month than money, they all have a struggle with where the 'other' spouse is spending the money. It becomes this ping-pong, tug of war, game of finances, and it doesn't have to be like that. The two basically sit down and discuss their hopes and their dreams, and all the while, they're developing a plan and creating the vehicle to get them to the destination. Living on the budget is the actual vehicle that makes the trip possible. This method helps flush out the priorities of the family. Once they agree on a budget, they get unity that can't be found any other way, especially not with CC debt. Yes, some people such as yourself can toy with the snakes and not get bit, but most people will eventually get caught up in the stage 4 toddler grocery store fit, "I want it now! WAHHHH!!" and will eventually build up a mound of CC debt.
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Personal accountability is just that. Personal. Not enforced. To use your alcoholic analogy, I can force an alcoholic to not drink by keeping him away from booze. That doesn't solve a problem though. The alcoholic has to CHOOSE to not drink, the spender has to CHOOSE to not spend - that is personal accountability. If anything, NOT carrying a credit card is enabling them more because they're not learning and practicing self control, they're being forced into it. And, as any recovery therapist will tell you, unless the person chooses change, then it will never stick. As soon as they get an opportunity they'll go right back to their vice of choice.
Nobody said anything about holding a gun to someone's head and forcing them to not use CC's.  But if you think a husband can blow $2k on an HDTV that the wife was expecting to use that same $2k for a vacation or a new china hutch, and there won't be any 'enforcement' of the law, you're mistaken. One way or the other, if there's no agreed upon plan and vehicle for the trip, you're likely to be travelling alone. I can't understand your logic here, even though you said I am backwards and failing because I budget? How does having a CC teach someone about learning and practicing self control? That's like saying by having a drink every day I can learn to recover from alcoholism or will never become an alcoholic in the first place.  Therapists will tell you, get away from the addiction and the things that enable the addiction, and become educated and learn where, how, and why we fall into the traps of addiction in the first place. They ALWAYS work to remove the addicted from the source of the addition and cease all enabling, and at the same time educate, that's when the change comes. The change won't just come all by itself, the pain of 'same' must be greater than the pain of 'change' or change will not occur. The addict might make the choice to choose help, but the help won't work if it promotes the addict living within/around/enabled to be an addict. An addict doesn't have the judgement to see the consequences of their actions at the onset of their treatment, their judgements are clouded, and in order to lift the veil so that truth can be seen, sometimes it takes extreme measures. A shock factor is often needed in the beginning. Most alcoholics and drug addicts and debt addicts and any other addict don't think they have an addiction, they can't see it or understand it. Usually it takes a catastrophic event to shock them into reality. That being said, full change and recovery will only occur AFTER the person makes the educated decision of what's best for them and weighs the consequences of their actions. Otherwise, all that will happen are back-sliders and relapses. I want people to fully hate debt, and to never use it, I don't want people falling off the wagon into debt. If they fully understand the consequences of debt, and then they use it, no one is perfect, but atleast they are informed. If they are educated in the consequences but still act inappropriately, then we can easily say they have acted in stupidity. I have acted stupidly with money many times in my life, and I'm sure it's not over. Atleast I know to fully weigh the consequences before blindly signing up for something and then wondering who I can blame. Our whole society is full of the blame-game right now. We all want to blame something or someone for the sliding economy, or failing politics, or rising taxes. Nobody wants to see themselves as part of the problem. Anyway, as far as the theory of using CC's in order to keep out of debt and as a tool to create habits of spending self control, no 'respectable' sex addict therapist would hand their client a stack of Hustlers and tell them to read the wonderful life-fullfilling articles without looking at the pictures because that might hinder their treatment, would they? If they did, could they ever expect them to recover, or in your terms, reach their goal?
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Again, you are equating credit cards with debt. Those who have self control will have no debt, no matter how many cards they have. And those with no self control will figure out a way to have debt regardless of the fact that they have no credit cards. Just look at the flood of payday loan places and home ATM accounts (AKA HELOCs)
Very good point, and yes I am equating CC's with debt, what else are they? Screwdrivers? Hammers? Steering wheels? Savings accounts? Certificates of Depression?
I have studied the payday loan, float-the-note, joints of the world, and look where they are? They're right smack in the middle of the uneducated hardest debt marketed to part of town, or they're within the first 5 blocks off the military bases, the areas where people believe what they're told without seeking the truth. They're positioned right next to the lottery ticket selling agents, which by the way, is just a tax on the poor and people who can't do math. They have believed the myth, and if you'll study those people that use those 'tools' you'll find that most, actually almost all of them are getting their payday loans to pay their two-three month overdue minimum balances on their maxed out CC's and their upside-down car loans and leases. It's bad x bad, and that math never = good. Very very few, if any at all, start out their financial career at the payday loan joint, yet that's just where they end up when they've lived the myth of the 'needed CC' too long, and have no hope.
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making a blanket statement to never have or use them, it's short sighted. Credit is necessary. You can argue that it isn't but it is. It's necessary for getting a mortgage. It's necessary for getting utilities. It's necessary for good insurance rates. It's necessary for getting a job. And it's going to become more and more necessary through the coming years. If you don't believe that, all YOU have to do is look at the news. It's talked about all the time.
Nope, that statement is actually 'long-sighted', because what will become more and more necessary in the future is the cash in the bank. Those that have, will have more, those that don't, won't. I have almost always spoken to the masses, not to any one individual when writing on these forum, for the simple fact that once it's posted, millions could view it. We should start teaching people to get out of debt, live without debt, give, save, and build wealth. Right now we're so strapped financially with debt, we can't give, or invest, and taking the post-modernist view won't always work. With some things, there is truth and there is false, 98% truth is still 100% lie. If we get into this whole idea of blending truths and false, then we lose all sense of reality, yet that doesn't negate the fact that reality is still very real and having and effect on our lives everyday, whether we want to accept it or not. I can say I don't believe in traffic, but if I stand out in the street, traffic will prove itself to me, and the consequence might be more than I can afford.
Actually, a whole bunch of paid off CC's with high spending limits will actually hurt a person when applying for a mortgage. The lender knows that once they get into the house, which is usually right at the max amount allowed to finance because debt people are usually broke and buy too much house, the first thing they're going to do is put new carpet in, change the drapes and head out to the appliance/furniture store. And since they likely don't have any $$ but have tons of great credit, they end up just like many thousands of people today, B.R.O.K.E., foreclosed and bankrupt.
But why do I need a credit score, or a mortgage, if I pay cash for my house? I was a RE investor and landlord, so I know you can get utilities with the worst kind of credit, or the best, and if you don't have any credit, but instead have six places in front of the decimal point in the emergency fund in the bank, oh, I think they'll hook you up. If you have bad credit, then yes, it will hurt your insurance rates, but if you have no credit, then they will just check your assets and your driving history. The one with no credit might pay very slightly more, but let's do some math to see how much more, shall we? You see, again, there's a myth out there that you 'need' credit and debt to exist, and you don't. If I never take debt, and have zero credit, not bad, not good, just plain nothing(which is usually considered as bad), and I pay $50/month more on my liability car insurance than you do because you have a great credit score, but because I don't worship the debt gods with interest charges of $200-300/month throughout my life, I really don't see mathematically where I'm losing and a debt lover is winning? If I'm debt-free, have $50k in the emergency fund but have no credit score, I could easily increase my medical co-pay and deductible, taking more of the risk on myself, thereby lowering my insurance premiums substantially. While the debt lover who has a credit score might get a lower premium, but when a medical emergency hits, it will also be a financial emergency too. Not only are they sick, possibly out of work, but they can't get a loan now with no income, but that credit score sure looks nice! If I were to lose my job/income or have an emergency, I'd rather have tons of cash in the bank than a good credit score. That score won't get you squat for a loan if you have no way to repay. Try qualifying for a 15yr HELOC after you've been diagnosed with cancer. You might get that loan, but you'll be required to have so much life insurance the cost won't be worth it. I'll take the cash, not the score.
My last point about budgeting is that many of our expenses in life are not something that happens automatically, like quarterly or semiannual car insurance, or vacations, or car repairs, or school tuition, horse/pet vet bills, and doctor bills. We know the expenses are coming sometime, and we know pretty close how much they will be, but if we don't budget for them throughout the year, we'll likely dip into savings or go right into debt when the big expense comes. I like saving for quarterly/semi-annually/annual expenses through budgeting monthly, it takes the monthly peaks/valleys and smooths them out somewhat. If my car insurance is $600/six months, then I budget and 'spend' $100/month to my savings account, and I track the line item for car insurance, when the bill comes due, I just write the check, no worries because I purposely spent the money while I had the money. It doesn't feel like I'm playing a game of ping-pong by dipping into my savings, it was purposely spent to savings for the upcoming expense. I get the same high-yield MM saving return as I do on my emergency fund money, but no management through crisis. Backwards? I don't think so. Set up for failure? I'm surely not failing, atleast that's what my banker, accountant, and tax preparer are saying. Not to mention my lawyer is really enjoying adding all these assets to my trusts, since he gets a slight fee every time I acquire an investment and place it in my and my wife's trusts. If he thinks I'm failing, he sure hasn't said so yet.
Bottom line is, I don't really want to get into a big trash argument on debt and budgeting with you pf101, I've read through your website, and it seems for the most part we are on the same side in the argument, just have different views on what we believe are the right ways to get to the destination, I can get over that. Of course I won't be swayed in your direction on the use of CC's or a budget, but then again, I won't have any high hopes that you would be swayed either, and that's ok. I appologize for being such a long-winded blabber mouth, which is probably why its a good thing I only post on this site a couple of times a year, else they would run out of disk space. I see that you have a wealth of knowledge in the investing area as well, it's been enlightening to read some of your posts in that thread. Again, I respect your position and hope you have great success in helping people achieve their financial goals.
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Tue May 20, 2008 9:06 pm |
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financialpeace
Contributing Member
Cash: $ 6.20
Posts: 31
Joined: 21 Feb 2006
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quote:
Originally posted by coaster
quote:
Originally posted by financialpeace
You either made $1500 off the CC companies, or you didn't, all I asked is show your methods and accounting, and if you can't, then your claim doesn't really hold water.
I once had a credit card that paid a cash rebate. I was in a job that had a LOT of travelling expenses. Until the company got us company cards and made us use them, I charged all my business expenses on my personal card. So I got my expenses reimbursed plus the cash rebate from my card. This claim of $1500 is entirely believable and I see no need to publish methods and accounting.
Believable? Is it? I wasn't asking for monthly statements. Besides, when dealing with CC's, there's fuzzy math and fine print, so being precise isn't important because its impossible under those circumstances and that's just the way CC companies like it. The system is set up to baffle and confuse, its the 'hide-the-nut-under-the-shell' game.
Most cash back and points systems pay @ 1% or 2% at best, which puts the total charges @ $150k/yr in order to 'make' $1500/yr, or $75k if you have the 2% 'reward' system. Believeable? Sure, it's mathematically possible. Likely? Nope. Is there one that pays more than 2% back? Maybe a 3% cash rebate? So if there's a 3% back program, then we're talking only spending $50k/yr, to 'make' $1500. Yeah, that's a couple of dinners at Outback and a few HDTV's in a year, that's for sure. I drive atleast 55miles/day one way to get to the office, and I don't spend $50k/yr on gas, even if it were $10/gallon.
Again, it's more than likely just another marketing twist, like the famous 0% interest car loan. Hmm... nobody ever thinks that maybe the 7% normal interest paid on a car loan is factored into the front-end cost of the vehicle? There is no 'free' money in the world, it's just another twist on emotions to make us 'feel' like we're beating them or we're smart & sophisticated for using their product. It's billiant marketing that's all. What retail store, or salesman wouldn't love to have people running into their store, bending down on one knee and begging them to sell their stuff to them? No sales pitch, no negotiating, just rushing right in to sign the paperwork. That's what we do, we run to the bank or the car dealership so that we can sign up for their product and establish a 'relationship'. All they have to do is make us 'feel' like they are 'taking care' of us, like the only reason they are in biz is so that we can win by 'using' them. You know, "Life takes Visa", and "Chase freedom", and my favorite, "Discover the possibilities". What possibiliites? Oh, the same mathematical possibility we were talking about earlier? Possible, but not likely. Repeat a lie often enough, and loud enough, and it will soon become accepted as truth.
Now the lending industry has developed a fictitious 'scoring' system to tell them and you just how likely you are to 'pay' them back with interest and on time, and the only way to increase the score is to sign up for more of their product and pay them an even higher price(interest) and on time, all just to get your name higher on the list so that you can use even more of their product so that you can continue to climb the numbers ladders so that you can use even more of their product. Do you feel like you're spinning yet? Hamster in the wheel? I sure do. The borrower is SLAVE to the lender.
My point is still the same, MC, Visa, AMExcess, Discover, whatever flavor, all charge between 2-4% in order to service the merchant account, and the merchant then passes this expense on to the consumer in the costs of goods/services sold. How is it mathematically possible that a 1% cash 'reward'(gotta love that buzz word!) on a 2% expense is actually making any money for anyone, except the bank and the merchant because it allows the merchant to gain a larger market share by offering such a wonderful 'convenience' to its customers? Oh please, give me three!
Yes, I agree, you can 'make' money if you are working some system with your employer where you cover the costs up front of travel or procurement purchases, then you're reimbursed. I've done that years ago with some of the largest oil/gas companies in the country when I've travelled or purchased parts/inventory for them, and this is somewhat why I wanted to know what method was being used. I've also seen that the average grace period is now about 25days instead of what used to be 28days 8-10yrs ago and 30days almost 15yrs ago, and it often takes more time than that to get reimbursement from a company, so you have to watch out that you're not getting hit with even one finance charge, or the whole system implodes. It's mathematically possible that you can make $1500 if you're burning through $100-250k of procurement inventory/purchases for some company, or they fly you all over the place on biz(like Scotland @$7500/first class more than 10x/yr), and they reimburse. But it's more likely that the average person doesn't get this type of 'stimulus'(another buzz word) from their employer, so that's why I don't agree with blanket statements regarding how much people 'make' off the CC industry without including some specifics. People are marketed every day this kinda of junk to use more 'products' and 'services' of the CC industry, that's what started the OP in the first place, so state truth if you've got truth, otherwise, state it as what it is... myth. Everyone's got their own methods and justifications for why they do what they do, but we often fail to realize the effects that marketing has on our emotions, which then shapes our behaviors. Marketing isn't evil, I use marketing to my advantage all of the time, but I also know what techniques are likely being used on me. I've learned to look through the marketing and that over the years has made me a more wise and informed consumer. I'm not perfect, that's for sure, I mess it up all of the time, but I don't like doing biz with companies that constantly change the rules to the game, and that's just what CC companies do, the invest $BB's to figure out the next best way to get us to 'swipe' it, it's not a game to them, and it's not a relationship, its business and it's mean. Of course, this is all just my opinion, I could be wrong. We could banter back and forth about this all day long, and it won't probably solve a thing, there's a whole world out there that thinks I'm weird, but I've learned that our culture, 'normal' = broke, so if I'm weird, that's fine with me. So I'll quit this one now, cause I think I've said enough to lay this argument to rest many times over...
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Wed May 21, 2008 4:45 pm |
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