Comments on Dual Income No Kids: Just Say No To Credit Cards

I used to work for Experian, so I learned a thing ...

2007-06-18T10:32:00.000-05:00

I used to work for Experian, so I learned a thing or two about the credit bureaus. As for the utility bills and your FICO score . . .

The two have NOTHING to do with each other, for good or bad. Your payment history on non-credit bills never hits the credit bureau. Ever. It can be recorded at the debit bureau, but this information is almost never tapped . . . only if you have no credit history does anyone ever access your debit bureau records.

So paying your utility/cable/phone bills will not help or hurt your credit score. It's called a "credit" score for a reason . . . it measures your ability to use, handle, and pay back debts. It has nothing whatsoever to do with utility bills (unless the utility company has to get a collections agency after you . . . and THEN it can hit your credit score-- HARD).

Just wanted to clarify that point. I'll not weigh in on the main topic except to say that Miel is right and James is wrong. :-)

What Diora posted was not an ad hominem attack. An...

2007-06-16T09:24:00.000-05:00

What Diora posted was not an ad hominem attack.

And you don't have to pay annual fees to get a rewards card. I have a Discover card which charges no annual fee and gives me cash back, which is better than airline miles.

I don't make credit card charges unless I have the money to pay the credit card bill in full when it arrives. So I pay no fees or interest and get money back. The decision as to whether or not to use a credit card is a no-brainer for me.

As to your point that sooner or later I'll get sucked in to the credit card trap and start carrying a balance: In my case I guess it'll be later. I've had credit cards for over 20 years without carrying balanced forward. Maybe "later" will be "never" for me.

In the end it comes down to personal responsibility. Someone who doesn't have it shouldn't have a credit card either.

/agree with k.Here the thing MVP. There are MANY p...

2007-06-15T22:26:00.000-05:00

/agree with k.

Here the thing MVP. There are MANY people out there who seem to think that it MUST be one or the other. These people refuse to see the advantages of the other side. At the end, what's the sense of arguing with these people..?

Some of you who say you've never experienced probl...

2007-06-15T18:56:00.000-05:00

Some of you who say you've never experienced problems with credit cards may think you have nothing to learn or take away from those of us who share our negative experiences and opinions of cc companies. That's fine and it doesn't offend me. I applaud those of you who've been responsible from the start. But who's really to say who's reading this PUBLIC blog? I don't think it's fair to assume everyone reading this blog is perfectly responsible with money and has nothing to learn. Why assume those with differing opinions have nothing to offer others, regardless of personal past? And whomever said a person is stupid for having credit cards is sort of like the person who said those who use cash are "lazy" (a past post) - it's ridiculous. Also, while cc companies technically "protect" you from fraud if someone makes unauthorized charges on your account, there's not much stopping the thieves who steal from the multitudes of credit card offers out of people's mailbox. Yes, this, along with a few other cc-related thefts that took a lot of time to iron out, happened to us - even if we weren't liable for the fraudulent charges in the end.

Just to respond to Gary's comment on my comment:Ga...

2007-06-15T16:04:00.000-05:00

Just to respond to Gary's comment on my comment:

Gary wrote:
...Mase, in order for you to have lowered your interest rate on you credit card repeatedly, you would have had to have incurred an increase in your interest rate repeatedly. Sounds as if you don’t use your cc wisely or the cc company has screwed you. Also, you only receive enough perks to outweigh the fees if you SPEND the money. You can reserve with a debit card as well, and the protections are still there. $90 annual fee!!!! I didn’t know they went that high. I hope that you take Miel’s advice and call them to try to get the fee waived....

To clarify, I've lowered the interest rate on each of my cards -- which is what I meant by "repeatedly" (not repeatedly on the same card). Thus, no repeated rate increase, no unwise use by me, no being screwed over.

My point on perks was exactly because I spend the money. This is money I'm going to spend anyway, so I might as well earn perks with it.

Yes, you can reserve a rental car or hotel room with a debit card, but only those affliated with a CC company. I did not dispute that, only that the benefits of using a CC outweigh, for me and other diligent users, using a debit card.

And, yes, for my high-fee card, I have called and have gotten it waived each year (sometimes it takes a few calls -- I call back if the PSR I speak with is not receptive).

James, you don't seem to understand what the phras...

2007-06-15T10:15:00.000-05:00

James, you don't seem to understand what the phrase "ad hominem" means. If diora had written, "James is an idiot and no one sould listen to his argument," that would be ad hominem. She did no such thing. Instead, she argued that someone who has in the past made bad choices is not in a very strong position to pass judgment on others who have consistently made good choices. That's not an ad hominem attack, that's reason.

Your argument could be reduced to the following syllogism:

I, James, have had problems using credit well. All (or most?) people are like me. Therefore, all (or most?) people have problems using credit well. It's obviously false when we break it down that way.

"Gary, too often have I seen people say that someo...

2007-06-15T09:43:00.000-05:00

"Gary, too often have I seen people say that someone is "stupid" for using credit cards. That's what I was referring to when I talked about bashing."
This is what set me off as well. I saw this message in another thread. Also I found the reference to those of us who've paid in full for many many years was pretty insulting.

Yes, I agree that the experience of people who had been in debt, got out of it successfully and are doing well could be of a tremendous benefit to those who are straggling with debt. It may also be of help to kids in college as a warning not to get into debt. But how useful could it be to those of us who have always paid our bills in full? I'd imagine the reason we did so was exactly the fear of paying interest. I'd also imagine that the majority of people who read this blog are not among 58% who carry balances (except for taking advantage of 0% offers).

One advantage of credit cards that has not been mentioned is fraud protection. Sure, there is a little bit of it with debit cards, but the protection is not nearly as strong. Also, if you notice a fraudalent charge on you credit card and complain, you are not responsible for the money while the matter is being investigated. With debit cards, you don't have access to your money during investigation. (I had a somewhat similar problem when an ATM malfunctioned, didn't give me cash but deducted it from my account. Took me 3 weeks to get it back). Given large enough amount and bad timing, and this could be a major inconvenience.

Gary, too often have I seen people say that someon...

2007-06-15T00:47:00.000-05:00

Gary, too often have I seen people say that someone is "stupid" for using credit cards. That's what I was referring to when I talked about bashing.

And, are you saying that without a doubt, even though one's utility bills are NOT shown on one's credit report (which would IMPLY to me tha they're not reported to the bureaus at all), they still contribute directly to one's FICO score?

Also, to James, please keep in mind that of the 58% that DO NOT pay in full also comprise of people who are BENEFITTING by not paying that debt, for example, those engaging in credit card arbitrage, and those who have their balance on a 0% APR card.

Everyone, I apologize for the length of the post, ...

2007-06-14T19:02:00.000-05:00

Everyone, I apologize for the length of the post, which is why I separated each person’s post so they can skip the rest if they choose. Too many people give credit card companies too much money. Some people are very responsible, but the amount of profit they bring in shows that the majority of people are not. Nobody mentioned the losses of money and time and stress when a person steals credit card information (easy to later use on the internet) or gets a card through the myriad of offers in peoples mail boxes. The only reasonable argument made for the use of credit cards is the rewards. Where were these rewards when I use to use a credit card? Oh yeah, they started popping up a few years back in an effort to get more people to use them; right before the time that all of the debt help companies started coming about.

James, I'd have to say that you forgot to add that when paying with cash you receive one less bill. Stress caused by bills is big-time.

Miel, I agree that auto pay does help to keep the fees away (it’s the only way to go for a credit card user) and that using your credit card does improve your credit score, but being a homeowner and a pay as you go kind of guy, I don’t need to worry about the score too much. My score was fine enough to buy a house with a low interest rate. A good credit score can be had without a credit card. Besides, as the amount of offers that I receive for personal loans and credit cards, and the number of people going through foreclosure these days, credit score doesn’t mean a thing when it comes to purchasing power. As to your second point, the rewards are a “positive feedback” for using the card. People like positive feedback and will spend more than normal to receive it. Thus, credit cards may get you perks, but you spend more to get them (basic concept of a slot machine). CC companies may billions off of people simply because they do not follow your third point. They have check cards with perks? I like that. Course it puts your major argument down. Why use a cc when you can get the perks without the risk, unless those hidden fees come in. I disagree with the credit card use, but I certainly agree with your ideas for responsibility.

Richard, there’s a difference between a credit score and a credit report. Paying a credit card bill never showed up on my credit report either. Good strong rebuttal though. Pointing out the problems with credit cards is not bashing people, unless you work for a cc company.

Mase, in order for you to have lowered your interest rate on you credit card repeatedly, you would have had to have incurred an increase in your interest rate repeatedly. Sounds as if you don’t use your cc wisely or the cc company has screwed you. Also, you only receive enough perks to outweigh the fees if you SPEND the money. You can reserve with a debit card as well, and the protections are still there. $90 annual fee!!!! I didn’t know they went that high. I hope that you take Miel’s advice and call them to try to get the fee waived.

Diora, “Learn from other people’s mistakes.” I know it’s a cliché, but it is relevant to your opening comments. People who have been there and come back from it have valuable advice to give. Many of the most powerful public speakers are peers who have made the mistakes and don’t want to see others continue down the wrong path. Get off your high horse about taking advice from others. They may have some wisdom to share.
In your rebuttal to James you weren’t sure that you were attacking? You implied that the people who have carried a credit card balance have nothing of value to say. I haven’t carried a balance for many years, but I know that people who do are not necessarily stupid. Does experience cloud judgment? I thought that experience made one wiser. Your experience makes you feel confident that you will not have a problem. It has clouded yours, because the majority of Americans do carry a balance.

DC, All credit card companies make money, not just the low end ones. How do the most reputable ones make money? They use the same tactics as the others.

Philskaren, Good strong argument. Shouldn’t need a high limit though.

Anonymous, Just because a person does not like ccs does not make them finance challenged. Does James get charged fees when he uses cash? MVPs post didn’t make her sound angry; please refer to James post about ad hominem. Don’t believe her comments could hurt anyone. Maybe her comments could actually help a person to avoid hurting themselves. Financial issues are one of the biggest causes of divorce in our country. It does actually cause many people physical and mental stress. You just sounded like an idiot in your comment (sorry, my ad hominem). Nobody is blaming others. You must be a single person with no children, because when you mess up with your cc, others are affected. I’m not a fan of credit card companies because I know that millions of people get screwed by the hidden fees and changes in interest. I have not held a balance on a credit card in many years; I guess that means that not only the people who have messed up don’t like the cc companies.

Gary

Anonymous, On the contrary. I'm trying to HELP peo...

2007-06-14T09:18:00.000-05:00

Anonymous, On the contrary. I'm trying to HELP people not to make the same mistakes I, and millions of others, have made in the past using credit cards. I have just as much right to my opinion as you and others on this blog. Take it or leave it.

Diora -Bravo! Only the people who burned themselve...

2007-06-13T19:11:00.000-05:00

Diora -

Bravo! Only the people who burned themselves seem to be angry at credit card companies. I manage my credit very well. And, as a responsible ADULT, I know that if I mess up, I have NO ONE to blame but myself.

Only children and failures blame others for their own mistakes.

Correction -- AMEX Starwood card converts at 20K p...

2007-06-13T19:01:00.000-05:00

Correction -- AMEX Starwood card converts at 20K points --> 25K Miles.

My first comment had that backwards. My apologies

@JamesStill wondering about the whole utility-bill...

2007-06-13T18:59:00.000-05:00

@James
Still wondering about the whole utility-bills-count-to-your-FICO-score thing....

@Moneymonk
Do you think that if EVERYBODY paid their balances in full every month, then the cc industry would be a multi-billion dollar one? No, of course it won't. Yet it is. Simply because many people (58%!) do NOT do just that. But consider for a moment, what you could stand to gain, if you sat in the other 42%.

People keep talking about "no free lunch", and they're right, in that SOMEONE is paying for your miles/cashback/rewards, BUT they're wrong in that IT DOESN'T HAVE TO BE YOU. The 58% are sufficient enough to pay for the "burden" (on the cc industry) of the 42%, and still produce ginormous profits.

It would seem therefore, that the key to winning the game is simply to sit within the 42%, and stay there. If you can't do that, then don't play. But why bash the people who CAN and in fact do so quite successfully?

mvp - you seem really angry about these issues bec...

2007-06-13T17:47:00.000-05:00

mvp -

you seem really angry about these issues because you've screwed yourself on them before. Perhaps you should work to forgive yourself and move on and stop trying to hurt the people who HAVEN'T made the same mistakes you have.

Sorry, Miel. You're just going to have to keep fig...

2007-06-13T17:45:00.000-05:00

Sorry, Miel. You're just going to have to keep fighting with your finance-challenged husband on this one. Stay strong. If he gets in your face about your opinions, remind him how much he's spending on fees and probably losing on his random stock picking.

I have paid my balance off every month I have had ...

2007-06-13T16:37:00.000-05:00

I have paid my balance off every month I have had the card (a little over a year) and earn about $30 per month just for using the card. I don't pay an annual fee, I don't accrue any interest as I have automatic payments set up and I have a very high limit set up so that I never go over and so I NEVER accrue any fees. The $30 I earn each month is cash back right on the card each month all for spending money I was already going to spend- CDs and interest-bearing checking accounts can't touch this! Oh, and I get to have my money accrue interest for a little while longer in the bank.

I want to also add paying your mortage or car note...

2007-06-13T16:33:00.000-05:00

I want to also add paying your mortage or car note can also improve your FICO

paying interest is the worst, add that with financ...

2007-06-13T16:31:00.000-05:00

paying interest is the worst, add that with finance charges and late fees one transaction can cause you trouble.

I have not used a credit card in ten years, My debit card does just fine. I go on vacations, stay at hotels and rent cars with my debit card. I do not like cc's.

If you have the cash saved for emergencies and groceries and so forth. You do not need to bother with cc's.

Forget the cash back rebates and airline miles, it's just another ploy to suck you in and make more purchases. The cc company always win. No matter how much advantage you think you have with credit you don't. The cc industry is a billion dollar industry. You cannot win.

The cc replaced the emergency fund that is why so many people are deeper and deeper in debt. Credit cards make you not save.

James, I am not sure that pointing out that the pr...

2007-06-13T16:08:00.000-05:00

James, I am not sure that pointing out that the prior experience of a person may have influenced his opinions qualifies as an ad hominem attack.

What about if a recovering alcoholic starts telling you that you shouldn't ever touch wine or a former compulsive gambler tells you you shouldn't ever go to casinos. If you are a type of person who occasinally enjoys a glass of wine or who occasionally visits a casino, looses max of $20 in exchange for a bit of entertainment, you'd probably question of the person's advice. Since you don't have a problem.

Most of the opinions you express on credit cards seems to center around the facts that people who claim that they pay balances in full every month are bound to slip at least once. Assuming that you used to have a problem - and I don't know if you are, I was just wondering - don't you think your prior experience clouded your judgement? Don't you think your comments about how those of us who tell we always pay our balances and have a long history of doing so in full are "overconfident", don't know if we have balances or are bound to slip may be a bit insulting to some of us?

While I don't agree with your opinion on credit ca...

2007-06-13T15:05:00.000-05:00

While I don't agree with your opinion on credit cards that isn't the part which bothers me the most on this matter. You and your wife write a personal finance blog. The majority of your readers are probably people interested in their personal finance and are probably a bit more savy than the average joe. In reading through other financial blogs these are people who use credit cards to their advantage with the perks and 0% balance transfers. You're trying to sell tickets to the ballet at a NASCAR race. Much of the sleeze in the CC industry comes from lower end companies. Companies who prey on people who struggle just to qualify for a credit card or are already up to their necks in CC debt. I feel pretty confindent when I assume that those people aren't usually browsing these types of blogs.

I have a card which gives me 1 airline mile for every dollar I spend. With my spending that works out to around 20,000 miles a year(I put all my bills on the card). Gave me 20,000 miles for signing up (thats one free airline ticket and living in Alaska that is worth upwards of $1,000). I get one $50 companion ticket a year so any flight I fly on a friend can come with me for $50. I pay my balance in full every month and have an annual fee of $50 with the first year waved. That works out for the first year with the 2 free tickets and the companion ticket of a savings upwards of $2000 - $2500 depending on travel taken.

I'm sorry but saying nobody should use credit cards when financially savy people can use them to their advantage is just plain wrong.

Diora,According to wikipedia, the point you've mad...

2007-06-13T12:44:00.000-05:00

Diora,

According to wikipedia, the point you've made is ad hominem and therefore problematic...

From wikipedia:

An ad hominem argument, also known as argumentum ad hominem (Latin: "argument to the person", "argument against the man") consists of replying to an argument or factual claim by attacking or appealing to the person making the argument or claim, rather than by addressing the substance of the argument or producing evidence against the claim. It is most commonly used to refer specifically to the ad hominem abusive, or argumentum ad personam, which consists of criticizing or personally attacking an argument's proponent in an attempt to discredit that argument. (In soccer it is referred to as “playing the man, not the ball.” Which in turn gave rise to the literal as well as the figurative use of the phrase, as in A attacked B personally, ignoring his arguments – he played the man, not the ball.)BSOz 08:52, 12 June 2007 (UTC)

Other common subtypes of the ad hominem include the ad hominem circumstantial, or ad hominem circumstantiae, an attack which is directed at the circumstances or situation of the arguer; and the ad hominem tu quoque, which objects to an argument by characterizing the arguer as being guilty of the same thing that he is arguing against.

Ad hominem arguments are always invalid in syllogistic logic, since the truth value of premises is taken as given, and the validity of a logical inference is independent of the person making the inference. However, ad hominem arguments are rarely presented as formal syllogisms, and their assessment lies in the domain of informal logic [1] and the theory of evidence.

http://en.wikipedia.org/wiki/Ad_hominem

Thanks,

James

One thing I am wondering about - as I mentioned on...

2007-06-13T11:55:00.000-05:00

One thing I am wondering about - as I mentioned on another blog - is if the majority (not all) of "Say No To Credit Cards" crowd - are people who used to/still struggling with credit card debt?
If this is the case, why do you think you are any authority to those of us who have never been in this situation in spite of using credit cards for years and years? Who were smart enough even at a young age to know even at a young age the difference between credit and spending money?

It is not that difficult not to "slip occasionally". As long as you treat your credit card bill just like any other bill - you look at the amount, you sign a check, you'll never slip. As long as you think before you buy anything that costs more than what is pocket change to you, you'd not be faced with a bill that you cannot pay. For that matter, if you sign up for automatic full balance payment plan, how is it different from a debit card? In both cases your overspending will result in overdraft.

It seems to me that people who used to or are still struggling with credit card debt trying to advice those of us who've been using credit cards for years without ever paying a penny in iterest is akin to a recovering alcoholic advising someone who has never had a problem with alcohol about not ever to drink. If you cannot stop drinking you shouldn't drink; if you cannot live within your means and use a credit card - don't. But don't presume you can advice those of us who managed to avoid your problems.

Must say that I'm wholly within your wife's camp o...

2007-06-13T10:50:00.000-05:00

Must say that I'm wholly within your wife's camp on this one, with the caveat (as I believe she wrote) that credit cards are good for the diligent user -- paying off the balance each and every month.

For someone that pays off their balance every month, almost none of your objections apply:

Industry Sleaze
Although the companies are sleazy in many ways, the blame game is not one-way. People need to take responsibility for their own actions as well. (Similar to the Enron/Worldcom employees that put a disproportionate amount of their 401[k] money in company stock). Industry sleaze alone is not a reason to not have, and responsibly use, a credit card. (plus, if sleaze is such an issue, one should not use most debit cards as they are affliated with a credit card company as well)

Perk's That Aren't
you seem to concede this for those, like your wife, who do pay off their balance each month. Thus, the higher interest rate is a non-factor (I've lowered mine repeatedly by just a phone call).

Your objection w/r/t an annual fee is a valid one but outweighed by the more significant perks one can/will receive (again, only for those that diligently pay off their balance each month).

Hype
Although you don't need a credit card to help improve your FICO score, it certainly helps. Having a credit card not only gives you bump for having a differnt type of credit, it does so for your having a higher amount of credit available (as well as not using the majority of that amount for the diligent user).

In addition, although a credit card is not required by law to rent a car or hotel room, it certainly makes it a lot easier. You can reserve in advance without a deposit (which the majority of hotels and car rental places will require), you won't be 'out' the money sitting as a deposit and, most importantly, for rentals many credit cards provide insurance above/beyond what your own policy provides. Lastly, the buyer protection you get with a credit card is a very big perk as well.

(Granted, some of these benefits are also provided by card-associated debit cards as well).

Paying Interest
Againk, for the diligent user, this is a non-issue.

Credit Cards are Good for the Diligent User
Credit cards are clearly not a good option for many people, and debit cards are ofter a better option, especially for those that cannot pay off their balances every month. Your main objection running throughout your post is the debt risk one is constantly facing. However, for a diligent user, this is really almost no risk.

Personally, I use two cards and purchase almost everything on them.

1) Mostly I use AMEX's Starwood Preferred Guest affliated card ($1 spent converts to 1 starpoint; $90 annual fee waived the first year). I use the points for both free hotel rooms (at Starwood properties) and for free flights (as 25K points = 20,000 miles with most airlines frequent flyer programs). Makes my wife's and I vacations very inexpensive.

2) For gas, groceries, and pharmacy purchases, I use the Citi Driver's Edge card (6% cashback on gas, pharmacy, and groceries for 12 months, then 3%; 1% cashback on everything else; $0.01 cashback for every mile driven; no annual fee). You can use the cashback for car repairs or purchases only, however you can convert the money to Thank You points, which are redeemable for gift cards just about anywhere that has them.

The value I get in these perks from these cards (as well as the increase I've seen in my FICO score by responsibly using them) has far outweighed, for me, the risks involved in having the cards.

Thanks to both you and Miel for all of your posts. They are always well-written and informative.

Agreed on all points, James. And for many of us, c...

2007-06-13T09:41:00.000-05:00

Agreed on all points, James. And for many of us, cc debt also is bad for your physical and mental health ;) I found, once I took control of paying my debt off, many other negative things in my life began to fall into place like dominos. I even lost 40 lbs. I'm glad you hilighted the "sleaze" factor associated with the ways cc companies do business. Many people think they're playing the companies' game and winning; I don't care to try to win at that game, as I don't care to play with sleazeballs.

I'm sorry... what was that about utility bills get...

2007-06-13T00:05:00.000-05:00

I'm sorry... what was that about utility bills getting put towards your FICO score? I've been paying electricity/phone/internet bills for years now and I've never seen it on any of my credit reports (although the occasionally hard inquiry finds its way there).

Are you saying that although they don't show up on your credit report, they constitute part of your FICO score nonetheless?