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I've rented cars and hotel rooms without a credit card. I used my debit card. My husband built up a relation renting cars locally with Enterprise using his debit card. They usually put a $150-$200 hold on the card until you return it. Life is possible if you don't have a credit card. I am teaching my children to live without credit. You can still buy a house without one. There are first time buyers programs for everything. Back when we were young and first married we went out and bought our very first new car with no credit and very little down. We paid that off quickly and BAM good credit. So you can go and take out a loan on a new car (or used), put a bunch of money down and pay it off quick. You don't need a credit card. It's a scam many of us have fallen into.
Sure, there are some, the minority, who like the above posters mentioned, use it wisely. But that is NOT the norm.
Hence, the huge financial mess this country is experiencing. My opinion...save yourself the headache and don't get a credit card. If you do, you'll have to pay an annual fee, interest (if you don't pay it off in full), etc.
In the end it's all up to you.
Our grandparents lived in a different world. You can't rent a hotel room or a car -- or complete about a dozen other transctions, and I'm sure there are more -- without a credit card. Even if you're going to pay cash.
Not so much a different world - but a different style of living.
I'm quite sure I could get along just fine without a credit card. Is it easier in some aspects because I have one? Yes. Necessary? No.
I've rented cars and hotel rooms without a credit card. I used my debit card. My husband built up a relation renting cars locally with Enterprise using his debit card. They usually put a $150-$200 hold on the card until you return it. Life is possible if you don't have a credit card. I am teaching my children to live without credit. You can still buy a house without one. There are first time buyers programs for everything. Back when we were young and first married we went out and bought our very first new car with no credit and very little down. We paid that off quickly and BAM good credit. So you can go and take out a loan on a new car (or used), put a bunch of money down and pay it off quick. You don't need a credit card. It's a scam many of us have fallen into.
Sure, there are some, the minority, who like the above posters mentioned, use it wisely. But that is NOT the norm.
Hence, the huge financial mess this country is experiencing. My opinion...save yourself the headache and don't get a credit card. If you do, you'll have to pay an annual fee, interest (if you don't pay it off in full), etc.
In the end it's all up to you.
While I agree with some of what you're saying here, most credit cards don't have annual fees (just get one that doesn't). Also, if you have any kind of self control you can make credit cards work for you (rewards, etc) without paying a $.01 of interest. Using my credit card works very well for me!
OK. I typed a long response to answer your question for you this AM but then City-Data started uploading it at a snails pace and then my DSL connection stopped for a second so all my typing went to waste and the explanation is floating around in cyberspace. Here it is a second time.
The answer to your question has been partially answered. Credit cards are good for the following:
1) As a form of identification
2) To use in case of emergency like to cover a big health insurance deductible, or pay for treatment that isn't covered by your insurance if you were suddenly injured or sick--- or buy a new hot water heater when your old one breaks down --- and you may not have or may not wish to use your cash for those things.
3) As has already been said, some things are difficult if not impossible to get without a credit card such as a car rental or a hotel room. The hotel needs to know they'll get paid for services you'll use while you are there like the phone in your room. It gives them some assurance they will get paid.
4) Buying something on a credit card and paying it off slowly yet on time or even early and paying above the minimum payment required helps you establish a credit history. Having a credit history that shows you are responsible gives you a good credit rating. Prospective employers do background checks on people before they are hired and checking your credit rating is part of it. If you have a good credit rating you have an edge over someone applying for the job who might not.
Another way to establish a credit history if you don't have a credit card and want one is to take out a personal loan at a bank and use a savings account at that bank for the amount of the loan as collateral. I did this in the 70's to establish credit. I paid off the loan over time in advance of when payments were due over a period of about 6 months. That was enough to establish a credit history so I could get a credit card.
Another reason why having a credit card or having a good credit history can help you is for leverage reasons when it comes to investments.
If you buy a $500,000 apartment building for $500,000 cash that generates $6000 per month rent between 4 units or $72,000 per year gross profit you'd have a little over a 14 percent gross return on your investment each year.
If you buy a $500,000 apartment building for $100,000 down and a bank gives you a mortgage for the rest and the mortgage payments are $3000 every month, that still leaves you (after you pay the mortgage out of the rental income) with $3000 per month gross profit or $36k per year which works out to a 36% return on your money AND you still have the other $400,000 to invest in other things.
People who have good credit can do this. People with no credit or bad credit can't.
If you buy a $500,000 apartment building for $500,000 cash that generates $6000 per month rent between 4 units or $72,000 per year gross profit you'd have a little over a 14 percent gross return on your investment each year.
If you buy a $500,000 apartment building for $100,000 down and a bank gives you a mortgage for the rest and the mortgage payments are $3000 every month, that still leaves you (after you pay the mortgage out of the rental income) with $3000 per month gross profit or $36k per year which works out to a 36% return on your money AND you still have the other $400,000 to invest in other things.
This is a huge pet peeve of mine - I hate this example because it provides a false sense of the reality of real estate investing.
It's simply not an accurate portrayal of the costs and profits associated with running multi unit buildings.
The answer to your question has been partially answered. Credit cards are good for the following:
If you buy a $500,000 apartment building for $500,000 cash that generates $6000 per month rent between 4 units or $72,000 per year gross profit you'd have a little over a 14 percent gross return on your investment each year.
If you buy a $500,000 apartment building for $100,000 down and a bank gives you a mortgage for the rest and the mortgage payments are $3000 every month, that still leaves you (after you pay the mortgage out of the rental income) with $3000 per month gross profit or $36k per year which works out to a 36% return on your money AND you still have the other $400,000 to invest in other things.
I agree that this can be misleading. In theory, it is true.
But to encourage someone to use credit as 'leverage' is a misuse of credit. And before attempting this type of 'investment', they should do a lot of research to be aware of the colossal headaches that could arise from owning and managing real estate rental properties.
I realize that this was probably just an example. But in many ways, the problems we are seeing today in the credit and mortgage markets are a direct result of unqualified people doing just this type of thing.
While I agree with some of what you're saying here, most credit cards don't have annual fees (just get one that doesn't). Also, if you have any kind of self control you can make credit cards work for you (rewards, etc) without paying a $.01 of interest. Using my credit card works very well for me!
While I agree with some of what YOU are saying most people DON'T have self control Just look at the news and business/finance forum and the mortgage forums here on CD.
I HATE credit cards and if I could do without them I would get rid of the banks too!! What a ripoff. I have found that I keep better track of my spending and spend more wisely if I have cash. We use the envelope method here. I am teaching my kids to do the same. Don't buy stuff until you actually have the money in your hand. Sure, credit can be used to someone's advantage IF you have that self control. Most don't. I work with a WHOLE bunch of them. We also live in a town, heck country, where most DON'T have self control. I vote don't get a credit card. Keep your life simple.
While I agree with some of what YOU are saying most people DON'T have self control Just look at the news and business/finance forum and the mortgage forums here on CD.
I HATE credit cards and if I could do without them I would get rid of the banks too!! What a ripoff. I have found that I keep better track of my spending and spend more wisely if I have cash. We use the envelope method here. I am teaching my kids to do the same. Don't buy stuff until you actually have the money in your hand. Sure, credit can be used to someone's advantage IF you have that self control. Most don't. I work with a WHOLE bunch of them. We also live in a town, heck country, where most DON'T have self control. I vote don't get a credit card. Keep your life simple.
Agree with you here and CC's are not for everyone. If an individual knows that they have no self control, then I would stay away from most CC's. Just get one with a very low limit ($300-$500) and try to purchase 1 thing and pay it off every month. That way you could build up some good credit history without going broke and getting into debt. For me it works, since I would spend no more or less even if I used cash, so the rewards that I can get from my CC are worth it for me.
Last edited by Waterboy526; 07-30-2008 at 06:44 AM..
This is a huge pet peeve of mine - I hate this example because it provides a false sense of the reality of real estate investing.
It's simply not an accurate portrayal of the costs and profits associated with running multi unit buildings.
I beg your pardon! It is accurate as far as capital invested and credit is concerned-- which is the point I was trying to make and what the question was about. Of course you are going to have maintenance and property taxes and vacancies etc etc you have to deal with, but the percentage of profit on the money you invest is going to be greater when you put less down.
If the question had been about buying rental properties I would have gotten more specific (Sheesh!)
Can you explain something else to me? How and when did you learn about using credit cards, about all these concepts like "credit", "interest", "line of credit", I feel really dumb that I don't know how all these things work!!
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