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Yeah, things like unexpected expenses, pay cuts, etc, would be considered "trouble managing credit". Now, I have cash savings for those kinds of things. Some people are capable of learning from their mistakes.
No one has suggested one carry more cash than they could afford to lose. I've never had cash lost or stolen, while losing $100-$200 cash would suck, it wouldn't crumble my world.
What you call "perks" are one more thing I'd rather not have to manage or deal with. I'm not worried about my credit card covering the defective blender I bought.
I don't recall ever having this cash freeze, and if I did, it didn't affect me much.
I usually pay via credit on my check card. I've had banks call me immediately if they've noticed weird charges to confirm that they are valid.
I haven't had an overdraft in years. I keep track of the dates of automatic or scheduled debits, and leave the money in there (never a problem). It's called "balancing a checkbook".
Have a few life setbacks, and your credit card plan could set debt accumulation into motion.
Everyone has unexpected expenses. Your first post showed that you could not manage them. There is no managing or deal with perks. You go to the site and click a button. If you have setbacks you still have to pay your bills so I don't understand your last sentence. Won't you accumulate debt even without a credit card if you can't pay your bills?
It's quite obvious you don't understand car sales or how a dealership works.
0% is used to move certain models that attract a certain profile. Claiming that you're going to get a better deal because you're paying cash vs 0% financing is 100% false.
No, it isn't. They often offer cash back if you don't take their financing. At least around here they do.
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Originally Posted by Pyramidsurf
Most dealers make money from financing because they expect to collect a certain amount in late fees, penalties, and other by selling the loan even if it is 0%.
Really? They make enough on late fees to cover it? I call BS. Unless a majority of buyers are missing a very large number of payments, the math doesn't work. If the interest they could earn elsewhere is 1%, and they're lending $20k - $40k, that's at least $500 in foregone interest. If the late fee is $25, this would require 20 late payments to break even.
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Originally Posted by Pyramidsurf
Again, you look at things in a very simplistic way. Businesses will lend you the money to move the product. They aren't going to magically give you a better deal because you are willing to pay cash. Most of the 0% financing is geared towards vehicles that attract high income buyers with high credit scores. It's an incentive to sell the car and at the same time get a kick back from the financing company. Huge corporations work operate on cash flows and complex accounting and tax rules. It's usually to their benefit to finance sellers.
If a customer pays cash, the finance company's money could be used to buy Treasuries and earn 1%. How could they possibly want them to finance at 0% instead, if they would already be buying the car anyway and want to pay cash? The company would be leaving money on the table and it's irrelevant what their sales volume is if the customer is already buying the car.
You can call me simplistic but the math speaks for itself, period. You're starting to remind me of someone who tries to show using detailed calculations that an object heavier than air can't fly, instead of taking the time to enjoy the beautiful butterflies in the area.
No amount of sophistry and accusation of being simplistic can overcome the obvious, sorry!
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Originally Posted by Pyramidsurf
Because there really isn't that much of a difference in the premium for a high deductible to be useful. It would probably take you the life of the loan or longer for it to save you any money. If one accident happens, then all of your so called "savings" are wiped out. And what does an emergency fund have to do with anything?
If you get into an accident, your insurance will consider you to be a higher risk than they would otherwise, so the difference in premiums will go up. You can't one the one hand assume that accident-free rates are applicable and then argue on the basis of getting into an accident.
Of course, you don't know beforehand whether you will have an accident or not, and that's why you get the insurance. But you also have to realize that you savings will not be "wiped out" by an accident since said accident would otherwise mean you'd be paying even more in premiums than with a higher deductible. The difference the deductible makes to your premiums goes UP after an accident. Thus even if your savings were "wiped out", you would not only build them back up, but build them up more quickly than before.
You could of course apply the same argument again, but this time, the length of time you would need to break even is shorter, and the same reasoning applies. If you keep having accidents, perhaps you shouldn't be driving at all.
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Originally Posted by Pyramidsurf
Yes. Unless you plan on living in a slum the rest of your life, you're going to have to get a mortgage at some point. It's simply absurd to think saving up hundreds of thousands of dollars to pay cash for a house is a resonable idea.
It depends on the situation and there isn't a one size fits all answer. For some it may make sense to save and pay cash, for others perhaps not so much. At any rate you can get an FHA loan without a credit score. All you need is a few tradelines with timely payments and a good income, job history, and down payment.
And on another note, not every cheap house is "slums".
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Originally Posted by Pyramidsurf
Don't have rich parents? Good luck paying for school without student loans.
You don't need a credit score to get federal loans, I thought this was obvious.
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Originally Posted by Pyramidsurf
False. Credit has been a part of life and business operations for a long time. Sure, a card didn't exist, but some for of credit was used regularly.
That is a nice little fantasy, but it isn't remotely true.
Why? If you can afford payments then you can afford to save for it.
As my dad likes to say, "If you can't afford it, how can you afford it and interest?"
The only exceptions are things that give you a greater financial benefit than the interest you're paying on them. For everything else, including cars and RV's, if you can afford payments you can afford to save enough to buy without a loan.
But then I see posts like that, and that's where I find the problem. "Always use cash" is good advice for people who are the debt equivalent of an alcoholic. But that doesn't make it a problem for everyone, and the concept of everyone being able to avoid a credit score is where things get ridiculous.
I can that some people can avoid credit, and I get that some people need to in order to control themselves, but that doesn't mean everyone should avoid it. For many people it's an extremely effective tool that despite the rhetoric, can actually be used to greatly increase a person's wealth.
I agree with your points here. All of them. But still feel overall, and again overall, it's usually a bad idea.
If possible, avoid it. Of course in order to open a bank account you will receive credit since the ATM cards act as credit cards also but at least they do not give credit which is not already in your bank account. So essentially they are ATM cards. My thinking is if you are that broke that you need a credit card, and you qualify for food stamps or whatever, take that first. Don't go into debt unless you know for sure, or quite sure, it will be paid off at the next bill.
I am sure there are exceptions to the general rule, but don't see many right now
You said "write a check" [for a house] in your post and then said "go on food stamps or Medicaid".
I said go on food stamps or medicaid instead.
Instead of taking out a loan via Credit Card, and if you're broke and qualify for these welfare programs. That's what they are there for
If you have money to buy a house, you don't qualify for food stamps to my knowledge.
I don't know about Medicaid but I think...you can own a house and still be on that program since the Affordable Care Act went through.
But you must have very little money
Not at all. I haven't actually mentioned investments at all in this thread. My belief is actually you need a credit score in case a situation comes up where you need/want to borrow money. It's easy to say you won't need/want to borrow money, but the future is uncertain, and more options is always a better thing.
My belief on debt is that debt is good any time the cost of borrowing money is lower than the cost of not borrowing money. A higher credit score simply helps keep the cost of borrowing money down, giving you flexibility.
Whether the cost of not borrowing money is losing out on things that could increase your income(car repair to keep your job, business loan to expand your business, etc) or the cost is paying more due to not having the money(renting instead of buying if that is more economical), or even missing out on things you don't think are worth missing out on(being able to pay for a funeral for example) there are many situations where you should consider borrowing money. The "never miss out on" category is where people tend to get in to trouble though as they tend to consider that cost higher than it really is(new shoes example) but that doesn't mean you should ignore it.
It's easy to say "never borrow for a car" but reality is that when it comes time to buy a car, you should at least figure out the numbers. I have no opposition to people who say "it doesn't make sense" after considering everything. I object to people dismissing options before they're evaluated ("Always pay cash")
To put it simply, a high credit score allows you to keep the cost of borrowing money down. And that just keeps your options open. Doesn't mean you have to use those options, but it's better to have them.
Not having credit can be good as a commitment device though. I certainly would not have had the discipline to save over $34,000 while living on a grad student stipend in a HCOL area if I knew I'd later be able to borrow money if I needed it.
No, it isn't. They often offer cash back if you don't take their financing. At least around here they do.
Really? They make enough on late fees to cover it? I call BS. Unless a majority of buyers are missing a very large number of payments, the math doesn't work. If the interest they could earn elsewhere is 1%, and they're lending $20k - $40k, that's at least $500 in foregone interest. If the late fee is $25, this would require 20 late payments to break even.
If a customer pays cash, the finance company's money could be used to buy Treasuries and earn 1%. How could they possibly want them to finance at 0% instead, if they would already be buying the car anyway and want to pay cash? The company would be leaving money on the table and it's irrelevant what their sales volume is if the customer is already buying the car.
You can call me simplistic but the math speaks for itself, period. You're starting to remind me of someone who tries to show using detailed calculations that an object heavier than air can't fly, instead of taking the time to enjoy the beautiful butterflies in the area.
No amount of sophistry and accusation of being simplistic can overcome the obvious, sorry!
Again, you seem to lack an understanding of a business operation. Saying that a company could just buy treasuries instead of financing at 0% shows you don't understand business.
Let's say a dealer is selling car A. They offer 0% financing for 25K. The car is quite popular and easy to sell. 0% financing is made through the financial arm of the manufacturer. So they are still making the same money back spread out over a period of time.
You say they can buy TIPS? That doesn't make any sense. TIPS don't help them move cars or get people into the dealerships. You seem to be stuck on the belief that the manufacturer is losing money. Like I said before, they make up enough of it in sales and counting on late fees and penalties to make it worthwhile to them. 100 sales at 0% could theoretically be better than 75 sales at 5% depending on the margins. This doesn't even include the sales they make by luring people into the dealership with the 0% offer. They dealer also gets a kickback from the financing company.
So, what incentive does a dealership have to take cash? People don't realize that there is less profit in cash. If a car sells well, someone will be along shortly willing to take the 0% financing and give the dealer more money. There is literally no real incentive for them to take cash unless the car doesn't sell well.
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If you get into an accident, your insurance will consider you to be a higher risk than they would otherwise, so the difference in premiums will go up. You can't one the one hand assume that accident-free rates are applicable and then argue on the basis of getting into an accident.
Of course, you don't know beforehand whether you will have an accident or not, and that's why you get the insurance. But you also have to realize that you savings will not be "wiped out" by an accident since said accident would otherwise mean you'd be paying even more in premiums than with a higher deductible. The difference the deductible makes to your premiums goes UP after an accident. Thus even if your savings were "wiped out", you would not only build them back up, but build them up more quickly than before.
You could of course apply the same argument again, but this time, the length of time you would need to break even is shorter, and the same reasoning applies. If you keep having accidents, perhaps you shouldn't be driving at all.
I'm going to have to disagree. Saving 20$ isn't worth having a huge deductible to me.
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It depends on the situation and there isn't a one size fits all answer. For some it may make sense to save and pay cash, for others perhaps not so much. At any rate you can get an FHA loan without a credit score. All you need is a few tradelines with timely payments and a good income, job history, and down payment.
And on another note, not every cheap house is "slums".
You don't need a credit score to get federal loans, I thought this was obvious.
....Your exact words were...
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Most Americans HAVE to have debt to live? No.
I still think it's entirely unreasonable to believe this.
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Why? If you can afford payments then you can afford to save for it.
As my dad likes to say, "If you can't afford it, how can you afford it and interest?"
The only exceptions are things that give you a greater financial benefit than the interest you're paying on them. For everything else, including cars and RV's, if you can afford payments you can afford to save enough to buy without a loan.
I could pay my car loans off tomorrow in cash and not even make a dent in my personal savings. However, there is absolutely no point to it. My car loans are at 2.99% interest and my savings earned over 15% last year in the stock market.
Not having credit can be good as a commitment device though. I certainly would not have had the discipline to save over $34,000 while living on a grad student stipend in a HCOL area if I knew I'd later be able to borrow money if I needed it.
Fair enough that it can create a fire under you in some cases and work as a drive to motivate you to save more. I can definitely see that. Where I wonder though is would you willing light a fire under yourself as motivation at the risk of burning yourself? To some extent it's similar to getting a 15 year mortgage vs a 30 if the rates were the same. Sure, the 15 year mortgage forces you to pay it off sooner, but if something goes wrong, you don't have any flexibility and could lose your house instead of just scaling back the payments to the 30 year rate. In the fictional world where the rates are the same, I'd go with the 30 year mortgage for the flexibility and just set up the auto pay.
Choosing to go without a credit card can be motivation, but if things go wrong and you need that credit card, not having a credit score can seriously burn you. I'll agree that if the motivation keeps you from needing it, then you'll probably come out ahead, but I think it's just as likely that it won't keep everyone from needing it and the absence of a "safety net" of sorts will cause more pain than anything.
Some people will view a "safety net" as a sign they can be reckless and will view the lack of a safety net as a reason to be extremely cautious. Others are naturally cautious and to them, it's a good thing to have a fall back plan in case it comes to it.
If someone needs that safety net taken away to avoid jumping on it like a toy, then by all means do so, because it's the right move for them and there's nothing wrong with that choice. But for the people who would be cautious anyway, that extra layer of protection is definitely a good thing.
If not having a credit card is the only think keeping someone in line, then agreed, don't get a card. But I find most of the time that those people also wind up in the pay check to pay check group and will blow through savings as fast as credit line. Money not being available shouldn't be the only thing that keeps you from spending it, but I'll fully admit, sometimes that's what it takes for people to avoid spending.
You're missing the point. The argument is that if you aren't going to go into debt, you don't need a credit history in the first place. Even if you are, as long as your only debt is a mortgage, you can get an FHA loan with no credit score.
Mostly, yes, but also from people paying lots of interest. And I actually have an ethical problem with vendor fees as well because retailers should be allowed to charge more for CC customers to cover it without higher prices on everyone including cash payers who do not cost retailers that money.
I don't like the shady system and want nothing to do with it.
No, of course not, but they might pay *less* interest than otherwise. Also a lot of people get a credit card for the points, fully intending to pay the whole thing every month and avoid interest expense, but in real life they often end up in debt.
The one friend I have that tried to give me a "talk" about not having a credit score is now in credit card debt!
You, the credit card companies, and the debtors are all playing a part. The debtors have the most immediate responsibility for their debt, but it isn't quite true to say no one else has anything to do with it either.
Benefits they provide for some people.
Credit cards are a tool, in the same sense that a chainsaw is a tool. You can do useful things with it, you can get hurt with it, or perhaps you simply don't have much of a use. It would be really silly to say that a chainsaw is a bad thing, but at the same time, it's silly to suggest that everyone ought to have a chainsaw. People living in an urban apartment with no yard and no need to cut down trees can get by just fine without a chainsaw, even though it is a useful tool.
I'd argue that the same thing is true of credit cards - they can be a very useful tool, they can hurt you, or they might just be irrelevant to your life.
Well you already implicitly admitted that you went into debt to buy a car and that kinda nullifies the idea of not using credit. You don't get to arbitrarily exclude something just because you don't want to admit that you used credit.
Actually, I didn't go in to debt. I had the cash to pay for the car. I put the car on credit just to build it up. I paid the car off in less than six months. Hardly what I call debt.
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Now, I have cash savings for those kinds of things. Some people are capable of learning from their mistakes. 
To some extent it's similar to getting a 15 year mortgage vs a 30 if the rates were the same. Sure, the 15 year mortgage forces you to pay it off sooner, but if something goes wrong, you don't have any flexibility and could lose your house instead of just scaling back the payments to the 30 year rate. In the fictional world where the rates are the same, I'd go with the 30 year mortgage for the flexibility and just set up the auto pay.
