Debt. Good, bad, or whatever?
 

Just a general discussion because I know there's plenty of opinions and there's plenty of rampant debt right now, keep it respectful, but IMO there is no such thing as a good debt. What do you think?

Attachment 1061558

0% APR is tough to beat :)
If I have the cash but can finance at no charge and keep my cash, might as well.

0 payments trumps "0%" financing. Repossession and foreclosure occur on things with payments. Besides cash talks and BS walks. I've been able to get MUCH better cash deals than 0% financing deals because 0% just means they built the cost they're losing on interest into the price of the item.

i hate being in debt. I was young and dumb once and trashed my credit when i was 18. I had to go a little in debt to get my credit score up to a respectable level.

Not always. I have at least four debts not connected to the company financing them at 0% interest. In one example the interest sits in reserve and if a payment is missed then the principle and the interest is due. Otherwise interest only. Also on cash back credit cards is you pay off in full each month you still get the cash points. So if one pays for everything using the cash back card and then pays off the balance with cash you would have used instead, you are indeed ahead.

Those things can only occur when payments are missed :). Every deal requires it's own evaluation. If I come out further ahead paying cash, I will. If I come out further ahead keeping my money earning interest when someone let's me borrow for free, I'll do that.

Young people often get in credit trouble, it would be great if there was a bigger emphasis on financial education for everyone. Excellent point that you need credit history for those big purchases that most won't have cash for like a mortgage.

Get those 3-5% discounts where you can if you're not going to pay interest on it!

I did the Ramsey thing. Made it all the way to step 7. Three months later I financed a new car. Burnt myself out apparently after 4 years of no "fun" lol. So I'm pretty anti debt myself but I think you have to live a little in the interim.

Why would interest be sitting in reserve if you have a zero interest loan? That doesn't make any sense.

As for your cash back idea, you're more likely to spend more using a credit card than you are with cash, check, or even debit card. Significant enough that the money you're "making" or "earning" you've anyway spent on random other stuff.

I fortunately didn't trash my credit when I was younger, but ultimately I'm aiming for a zero credit score. The only real "need" for a credit score is to borrow money. I'd rather just not borrow money. As soon as my house can be paid off I'll be happy to be done with debt.

My wife and I are big Dave Ramsey fans because it's been incredibly beneficial for us. We've paid off a substantial amount of debt and set ourselves up well for the future because of it. If you made it to baby step 7 and didn't live at all you kind of missed the point. You need a free spirit so you still actually have a life, but car loans suck. Pay it off and move on.

I have one credit card that I’ve NEVER paid a finance fee on, in my life. Having said card doesn’t make me go out and spend frivolously. If anything, they don’t like people like me, as we don’t make them any money on the back end. Plus, they pay me to use it. Doesn’t get much simpler than that.

What the lender does it lend at interest free. They calculate the interest but do not apply it to the loan unless the borrower misses a monthly payment. If that occurs then they add the interest into the pay back. I have three such loans and I make the payments on time so I pay no interest. It is interest free borrowed money in that regard.

So your not a borrower, smart move.

That’s good that you have the self control to not carry a balance, but you’re in the extreme minority. 89% of Americans carry a balance on their credit cards every month. In other words 9 out of 10 people.

While a credit card might not make you go out and spend firviliously or carelessly, I bet if you had a budget set aside for the same amount of money that you average out spending each month for a regularly purchased budget item and used cash knowing that when you were out you were out, you’d end up spending less money or be much more mindful over what you spent on. The reason for that logic is that studies have shown that when you spend with cash it activates the pain center of the brain. Spending with cash actually causes you pain, knowing that the money you’re spending will never come back. However, spending the same amount with a credit card had zero brain activity, bringing a new meaning to the term “mindless spending”. You know that the card is coming back and there’s nothing actually leaving your possession.

An additional example is the vending machine industry. When the vending machine companies started adding credit card machines to their machines the average transaction went up 160%. No longer did you have to dig through the car seats to find some coins. Now you could just go over pick anything you wanted and swipe away.

Agree with what your saying pyro. In my particular case, doesn’t matter if I use card or cash. I buy what I think I need. It’s justifying it with real need vs. want. And of course, justifying it with the other half. :smiling1: