Credit Cards

[Duke]

I have a good friend whom, like Duke, ended up looking at a bunch of bank loans on a car and ended up going with his credit card which was 2.9% for life.

Dang. I need to meet his account rep. That's even better than what I eventually got from BMW.

 

[Danoff]

Dan, you are supposing there is always a lending alternative to a credit card and that it always be cheaper. That's simply not always true.

Generally I'd say it's true. I agree that it isn't always the case (for example, the 0% for life balance transfer from discover I mentioned earlier).

My original point, if you go back to the beginning, was to say "it's not a bad thing if you run a very small balance, in fact it can sometimes be helpful".' This isn't something I pulled out of a hat. Go read page 13 of this primer from myfico.com.

It's not THAT bad if you run a very small balance, and you do get benefits. But generally speaking there will be a choice that makes better financial sense.

You keep saying this; can you demonstrate it?

I have a near perfect credit rating and have never run a balance on a card. Does that count?

I have a good friend whom, like Duke, ended up looking at a bunch of bank loans on a car and ended up going with his credit card which was 2.9% for life.

If you have a rate like that, you have no business not carrying the maximum balance every month (unless of course you're just about to get a bank loan and you want to have less debt on record).

If I had that credit card, I'd max it out and put the cash in an investment account.

Agreed that there are funny financial situations. But until now I've never heard of such a silly interest rate on a credit card. Had I know about these cases, I might have added some weasel words like "usually" and "generally" to my original posts. But I stand behind the principle, that for most people there is a better way.

 

[Pupik]

Another good reason to put everything on a credit card, or at least, as much as possible: In some cases, your sales tax is deductible (although ours wasn't in 2006). Your purchases which are tax deductible are doubly recorded in case of an audit, too. I also see a percentage and monetary breakdown of what we're spending, it helps us budget. And we get back rewards at the end of the year for paying off every penny at the end of the month. Heck, I bought my car with my card, but of course, I had the a certificate of deposit for that much money since the bank's interest rate on saving accounts is 0.crap% yearly.

What's not to like if your use your credit card right?

 

[Silvia20T]

A guy joins a video game/automotive forum, and his first post is about what credit card to get....

I've been a member b4, I've been away for a while and I thought it would be nice to get a new name upon my return.

 

[///M-Spec]

Dang. I need to meet his account rep. That's even better than what I eventually got from BMW.

His terms are solid gold. I admit he is an uncommon case, though. He used to run a PC sales, parts and repair company out of his home in addition to his day job as a tech. Purchasing over 5k of computer parts every month for over 5-6 years will tend to ingratiate yourself to lenders.

On my advice, he put a '99 Boxster on that card, btw (advice on the car, not how to pay). It was 6.5 years old and had only 17,000 miles on it. Good car, but the original tires were so old and dry, they were practically hockey pucks.

Generally I'd say it's true. I agree that it isn't always the case (for example, the 0% for life balance transfer from discover I mentioned earlier).

It's not THAT bad if you run a very small balance, and you do get benefits. But generally speaking there will be a choice that makes better financial sense.

Well then I think we agree to a certain extent then. I certainly don't advocate running substantial balances unless it's on a 0% or 0.9% card

I have a near perfect credit rating and have never run a balance on a card. Does that count?

That's not what I meant. I have a pretty good credit rating too, but I carry balances from time to time.

What I meant is can you demonstrate the cost effectiveness in real terms, using a real life example? You know, like an equation and all that. I don't have a problem being proved wrong, so long as it's proven.

If you have a rate like that, you have no business not carrying the maximum balance every month (unless of course you're just about to get a bank loan and you want to have less debt on record).

If I had that credit card, I'd max it out and put the cash in an investment account.

Agreed that there are funny financial situations. But until now I've never heard of such a silly interest rate on a credit card. Had I know about these cases, I might have added some weasel words like "usually" and "generally" to my original posts. But I stand behind the principle, that for most people there is a better way.

I don't know what my buddy was doing with the card until he bought the Boxster on it. But I don't think it ever occurred to him to put the cash in a short term CD, though I agree that'd be a good move; provided the interest for cash was the same as a purchase.

The super low rate cards seem to be more scarce these days, but not exactly rare. Off the top of my head, between my wife and I we have 7 lines of revolving credit and only 3 are higher than prime (Includes 2 AMEX accounts). Of course, we tend to close any card that tries to up the rate on us fairly quickly.

It'd probably blow your mind if you saw some of the terms on my folks' LOCs.


M

 

[DQuaN]

I thought I'd resurrect this thread as I'm considering getting a Credit Card to boost my credit score. I'd like one with low APR (even though I'm not planning on using it too much) and also with a very low limit, say £500 (to protect me from myself!). Any reccomendations?

 

[CDailey]

Interesting read, this thread. Thanks for resurrecting it Dquan. As someone who is just starting out building his credit, I'm looking for all the advice I can get. I think I'm doing good so far. I got my apartment and all my bills in my name and had my mom cosign with me on my car. All bills get payed at the very latest 2 weeks early, if not the same day or day after I get the bill in the mail. I put an extra $180-$200 on the principle of my car every month. By my calculations, this is going to cut about a year and a half off the total time of the finance.

Does Anyone have any good basic financial advice? Care to recommend any books?

 

[Wenders]

I thought I'd resurrect this thread as I'm considering getting a Credit Card to boost my credit score. I'd like one with low APR (even though I'm not planning on using it too much) and also with a very low limit, say £500 (to protect me from myself!). Any reccomendations?

I don't know how credit cards work over there so I am basing this on what we have in OZ and the advice I would give my customers.

A lot of people I deal with just look at the interest rate and choose the lower one because it sounds better without taking into consideration how they plan to use it.

Most of our credit cards have an interest free period - pay the full balance by the due day and pay no interest.

Most lower interest rate cards have a higher annual fee.

If you get an interest free period and plan on paying the debt off by the due date then the interest rate isn't important. It could be 50% and you would still pay nothing.

If you don't have an interest free period then the interest rate is more important but you still have to consider how much you would pay based on your spending compared to a difference in fees. £500 @ 21% = 28p a day. If you are going to spend one day and pay back the next week then the interest you pay may still be cheaper than a higher annual fee you may pay for a lower interest rate.

Some of our credit cards offer Award Points - each $ you spend you get 1 point that can be cashed in later for various items. We usually pay a higher annual fee for these. If this is the case for you then you need to look at what you can cash your points in for compared to how much you need to spend to get that reward. Generally you need to spend a fair bit every month to make any reward points worthwhile.

Hope this helps in your decision.