Vegas Bound, I’m sorry to hear about your 820+ score. You probably spent well over $100k on a card to get that status. As for the airline miles, I’m almost at my Diamond Member for life at Hilton hotels and the only credit card I’ve used is the one issued by my employer. When I stay on my own I use a debit card. Also, until I cashed out 200k points during a 2 week hotel stay during my move I was over. 750k points that I earned a little over a year.
0stones0 do you think the vendor doesn’t pass that 3-5% on to you? Have you ever paid cash for stuff at a show or event? Often times you can even negotiate if you go into the store and offer to pay cash. They will knock that 3-5% off or do better than that if you’re willing to pay cash. The myth that you’re making money off of the credit card company is false. There’s a reason why their buildings are skyscrapers and our houses aren’t.
Silver14, even if you use 5% of 20,000, that’s only $1,000. That’s IF you get 5% back on everything. Most of the time the 5% is on an extremely limited list of things and gets capped for annual earnings long before you max out your spending for the year.
As I said with 0stones0, the credit card companies aren’t making that amount off of the vendor. The vendor, if they’re smart, are passing that fee on to you. If they’re not they won’t last long. As for the “consumer protection, security, and convenience” all of that can be accomplished with a debit card. When you run a debit card as credit it is up to the card’s company (Visa, MasterCard, etc.) to offer the same protection that they do to their credit cards. As for extended warranties, that’s a whole other discussion on how big of a rip off they are. 60% of an extended warranty is pure profit. From there they have marketing costs/advertising, commissions, research on what to charge, and other adminstrative fees. On average 10% of the cost of an extended warranty is used for covering the item it is guaranteeing.
KenKat, you mentioned that you thought some debt is good, but then you contradicted yourself on some items. For example, the mortgage debt you thought was fine with the low interest rate, but then said that without the deduction it wasn’t worth it. Even when the deduction was available it still wasn’t worth it. For the “average” American making $50k a year, if they had a $200k mortgage at 5% interest (I know high by today’s standards, but not uncommon a few years ago and it makes for easy math), they would pay approximately $10k in interest in a year. The deduction based on a 25% income tax would allow them to get $2,000 back from the government. So they would spend $10k to get $2k back at the end of the year.
As for the HELOC for your Camaro, that’s not a good way to go either. What you did was take a depreciating asset and put it up against your home. If you got to where you couldn’t pay your bill for your car this way you have now risked your home. A repossession on a car isn’t great, but a foreclosure is worse.
As for your statement of earning 7% in an IRA to have debt, if you had a paid for house, would you go out and take a mortgage just so you could invest? That 7% isn’t guaranteed and if invested poorly you could lose all of the money. Then you’re stuck with a mortgage and no money where before you would have no mortgage and could invest your mortgage payment. You’ll get MUCH further along that way. Your best wealth building tool is your income. Don’t let someone else make their money off of your income.
Iron Lung Jimmy, I’ll give you that some insurance companies do look at credit scores when basing their rate quotes. It is sad because they’re looking more at the people who can’t get loans anymore because they have horrendous debt, terrible payment records with places that don’t loan money, but still charge (like utility companies), etc. They don’t look to see if someone has a zero credit score, but a pile of money in the bank as someone who should have a better rate. However, utility companies will allow you to use their utilities without a credit score. I’ve had a utility company write a letter of good faith for me in the past stating that I was a good payer when I moved to a new area. Not only did that apartment complex not even run my credit, they were thoroughly impressed that I had that letter.
I’m not sure who is telling you that the bank is working out an insurance deal for you, but that is false information. They’re legally not allowed to do that as it is a conflict of interest.
I’ll assume you’re talking about new to you car vs. brand new car, but the principle goes pretty equally either way. When you purchase a car, you immediately lose equity. A car is a horrible investment shy of a couple ultra rare examples. If you pay for the car outright you have whatever the car is worth available to you later without the concern for paying the payment, or what happens if you miss a payment or two.
Ultimately the credit arguement is for at most a couple hundred dollars a year at most in savings of not having a credit score vs. not having any debt.
mlee, playing the game of maintaining a credit score is like playing with snakes. Most of the time you can get out without getting bitten, but eventually you’ll get bitten and some bites are worse than others.
FarmerFran, if you’re curious about my career, I’m an engineer. As you might guess from my alias, I’m an explosives engineer. However, I did not start off with a pile of money or rich parents that paid for everything. I was fortunate to get some assistance through college years, but I came out with a pile of student loan debt and my wife brought even more to the marriage that we’ve worked VERY hard to pay off in addition to other debt before learning more about the dangers of debt.
As for the comments of society needs people to do all kinds of jobs, I agree. However, in this society of a diverse workforce many believe that everyone needs to have the same luxuries. Not everyone can afford a brand new car, the latest smartphone, or the biggest, newest TV with all of the channels broadcast, yet many people get all of those even with the most minimal of incomes.
With your question about paying cash for a house, I wish I could be 100% debt free right now, but that is my final remaining debt and I’m working hard to eliminate it too. However, a few points that I’d suggest towards that is to not buy too much house, put it on no longer than a 15 year fixed rate mortgage, and pay it off early. If you choose to pay cash it can be done. Renting a minimal apartment knowing you’re saving for the house you want is one way, living with parents for a short period of time while saving like crazy can be another, but the likelihood that you’ll win the lottery is slim to none so that’s pretty much out.