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I think I understand where you are going in that you would rather pay $50k total dollars toward interest if you make extra payments to have it paid off in 10 years rather than say $180k in total dollars towards interest if you make minimum payments for 30 years. The total amount paid towards interest is important to you and I get that.
However, I just want to make sure you, and others, realize no matter how much extra you pay the interest rate is not changed. There is no changing a 3.6% rate to 2.3% by making extra payments. No matter how much or little you send in for extra payments the calculation remains the same. Your interest rate divided by 12 months times the amount you still owe. Again the only thing changing is the amount of time you are paying that interest rate.
Absolutely agree. I could have paid full cash for my home but that would have been a very bad decision. I put enough down to avoid PMI and invested the remaining money (after closing costs). Those investments have paid off at a much larger return (interest rate and dollar amount AFTER TAXES) than I would have saved if I had purchased my home for cash. The lenders money was cheaper to use than mine.
Well, it also changes the amount interest is calculated on. Even small amounts every extra I send in means a little principle for interest to be charged on. I like seeing the principle portion of my payment go up and the interest portion go down.
Another money saving benefit is the cc doubles your warranty up to a year on pretty much everything except computers. I had a tv go out after 14 months and they replaced it.
The only thing I don't like about cc is that they always have great bonuses like miles, cash, etc but it hurts your credit score bc it lowers average age and increases inquiries. I don't see why you are penalized for taking advantage of the free stuff.
Let's say you get an average of $50 a month cash back, that means you spent $2500 on your credit card. I guarantee, if instead, you had paid cash you would have that 2% and more, in grocery savings alone, you would have easily spent $50 less at the grocery store over the course of the month. Factor in the rest of the purchases that you would not have bought with the friction of the paying process back in play, then that 2% doesn't really seem like a reward.
Ohh, and you can't speak or free floating money and self-control in the same post, one contradicts the other.
That's only if you're on a strict budget and only take X amount to the store. However, if you pull out $200 then you might just spend the $200. I don't know many responsible people who pay in full every month who think "I can go crazy bc I have a cc" they know they are paying it in 3-5 weeks anyway.
Dave Ramsey says he uses a debit card to buy airline tickets, hotel deposits, etc.
Suze Ormon's advice is even more simplistic than D.R.'s.
I would never do that. You don't have the protection with the debit card. Plus, I worked at a hotel and I can't tell you how many freak outs I dealt with from people who used their debit card and don't realize how much of their money is getting tied up. Hello, it's standard practice.
Well, it also changes the amount interest is calculated on. Even small amounts every extra I send in means a little principle for interest to be charged on. I like seeing the principle portion of my payment go up and the interest portion go down.
This is the main reason I pay extra to my principal. Yes the bank is going to make some money off my loan that's inevitable. It just won't be anywhere near what they project.
Some people can't handle alcohol at all. Some people can't handle credit at all. His advice fits that small group that simply can't handle credit. I believe a lot of people who think they can't handle credit probably could but it would take an extra push of discipline for them.
I'm a big believer in cash back cards. We don't travel much so mileage or other reward cards don't pay off for us. Everything we can pay by CC gets paid that way. Our local utilities all charge a hefty premium to use CC so those are paid by check. Pretty much everything else is CC though.
I will never use a debit card. If your account is compromised, it can take up to 10 days for the bank to refund you. Many banks will move faster but many also won't. In the meantime, you don't have use of those funds. If it's a small fraud amount that generally doesn't matter but the fraudulent amounts aren't always small. Plus, you have the added work of getting a new bank account.
Handling fraud with a CC is much easier. We actually had one late last week. I reported it immediately and the charge was reversed immediately. We had a replacement card on our doorstep the following day.
I use a debit card but I keep the bulk of my liquid cash in a separate savings account that is not linked to a debit card for this reason.
If you took one year, and paid strictly in cash and debit, the overwhelming vast majority would see a savings greater than the rewards. By putting the "friction," back in the paying process it would be clear just how much you are truly spending under the disguise of "I was going to spend that anyway." Trying this for one month would not work, consciously or subconsciously you would put off purchases to show you credit card usage is not different than cash, but stretch it out over a year and the numbers would be much clearer. At the end, the question is, is the ease of using a credit card worth the increased spending? A question you have to answer for yourself.
Perfect answer.
90% of the people are not mature enough to handle credit. They would be way, way ahead in life by staying out of debt.
Good grief, many *simpleton's* are millionaires and your assumption is nothing but your perceived stereotype. Why not go all out and refer to everyone you feel is a simpleton as trailer trash morons?
You should perhaps learn the definition of unsophisticated as well.
For every millionaire who is having cash flow issues you show me, I can (particularly down home in the South) show you 100 trailer-dwelling simpletons who think that buying something on the card is not really "buying" it, but, somehow, they don't really have to pay for it. They think only in terms of "how much per month" so are perpetually in debt, and don't really understand how much of their meager take home pay is going to interest. As Dr. Thomas Sowell said, people who have a high time preference - they will take a lesser reward to get it NOW - are low class or will become low class. Likewise a low time preference - being willing to wait to get more - is high class or will become high class.
These guys are the living definition of "unsophisticated".
It does not require that much mental horsepower or advanced math training to understand personal finance, I think most people who get into trouble with credit card debt are just victims of their own wishful thinking.
How can that be? My cc doesn't tell me every charge I make as I make it. I have never heard of being held liable for unauthorized fraudulent charges. What bank cc is this?
Quote:
Originally Posted by jencam
Yeah that isn't right. I didn't know my card was used because it wasn't missing. A server at a restaurant copied the info and charged that way. I didn't know until my statement came and said those are not mine and that was the end of that.
It happened with their debit card not their credit card. I have no idea what bank but that is what happened to them. They were liable for the charges before they found out the card was gone.
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