Credit Cards -- Good or bad?

[James Hayden]

I'd like to erase my ignorance surrounding the issue of credit cards. I'm sure there are people here who have had both positive and negative experiences with them.

Here's a basic list of "what I've heard" about them.

• Credit cards are like the black plague and should be avoided no matter what
• Credit cards should never be treated like Extra Cash -- It is a high interest loan in disguise.
• Having lots of credit cards in good standing improves your credit rating.
• One should only use a credit card if they plan to pay the balance before the interest kicks in.

I personally have quite a few credit cards in my wallet, but I simply never use them. The credit card issued through my bank recently doubled my credit limit, even though I've charged less than 100 dollars to it all the time I've had it.

So what is the real deal behind credit cards? The only benefit I can perceive to having them is it's a quick way to build (or more likey ruin!) one's credit history.

[Zukin]

I think you should only use credit cards if you can completely pay off the balance at the end of each month. That's what I've done so far. I've probably charged around $30,000 to one of my credit cards over the past couple of years, but I've paid the balance in full at the end of the month.

Also, make sure you don't lose the bill and forget to pay it. That happened to me one time and I had to pay interest plus a stupid late fee.

[Erin Pavlina]

Don't buy something unless you can pay for it. Use the card for convenience, to build a credit history, for security (as opposed to carrying thousands in your wallet), frequent flier miles, and always pay it off at the end of the month.

If you don't, you're paying more for the item than you originally bought it for. Lot of people end paying like $500 for something that cost $300.

If you can't afford something, save up, then buy it.

[GuerillaInternetMarketing]

All I can say is, BE CAREFUL with them. Many people get carried away with them. They are good for building up your credit, but having too much available credit can actually negatively effect your credit because you have that much potential liability.

[Shamou]

I don't know if it is the same all over, but here in Quebec, if you want to mortgage a house... they will count all that you can borrow on credit cards as being personal debts even if those cards have nothing charged on them...

I know because my wife is a Realtor and some of her clients could not be approved for a mortgage because they had too many credit cards...
.

[dgorila1]

Do as mentioned and only use them if you can pay them off in full each month. I have been caught in the credit card trap for 20 yrs (i.e. charge ithem up, pay it off eventually, charge them up even higher again..........). You get to the point where its like "Oh, I'll go ahead and use it and pay it down soon..." and soon never comes. I am the deepest I have been in CC debt and am working to figure a way out. Its going to take a lomg time and not something I like having hanging over me (debt). Take everyones advice and avoid all debt. Pay cash or don't buy something until you have the cash. This way you are free of "the system" and will sleep much better at night. They are good to have for true emergencies, but avoid them for regular use. As far as a credit score, this is a huge "need" that the banking industry as perpetuated on the public in the last 20 years(look at the past..example 1950's. There were no credit scores then and no credit like nowdays. People didn't have the huge debt burdens like they do nowdays.They paid cash). If you have no debt and pay cash, you could care less what your "score" is and it shouldn't matter since you won't be a slave to the banking system. Same goes for buying a home vs. renting........vastly over rated and another perpetuated scam by the industry. Yes, over the long term(>15 yrs) a house generally appreciates in value, but it also ties you down and forces you to pay taxes, utilities, repairs, etc. You could rent and invest this same money somehwhere else and get the same or better return if you desired and be free of one of the biggest debts in your life (a mortgage). Just some food for thought.

[Addict]

I'd say this is pretty much the only thing you need to know:

One should only use a credit card if they plan to pay the balance before the interest kicks in.

[Peter S C]

Credit cards are simply a potential source of funds. Used well they provide convenience, rewards, good credit history, etc. Used badly people get stuck with a bad credit history and trapped paying off debt which incurs a relatively high rate of interest. So in a nutshell... it all comes down to the person. Personally I have never had a problem with them.

[jdub]

i agree that it depends on the person. If you are a big spender and don't have much control over your wallet, credit cards probably aren't for you. But if you are frugal and don't buy stuff unless you know you can pay it off at the end of the month, then go for it. Also, when you get a card make sure to get one with rewards. There are a lot of good rewards cards out there, and if you use it enough they can be a really good deal.
One technique i use for credit cards is online statements. I have a Discover Card, and I can pay off the balance any time. So if I buy something or i'm afraid I'll miss the payment date, I just pay it off early.

[UHF]

The only thing I have to add is that having lots of credit cards may assist your credit rating if you have no debts, but I would get rid of all but one. Your less likely to get problems with ID theft with just one.

I just use them to pay for things with security of a chargeback if there are problems. I've never paid any interest as I treat it just like my normal bank debit card. I don't buy what I can't pay for.

People who get into problems do so because it's an easy way to get a loan - no talking and paperwork involved. Once you start missing repayments, you get a penalty on top of the interest. Some people end up in serious debt as they simply owe interest and penalties, plus the interest of the penalties. The original amount they had credit for was long since paid off.

I know the story of a man who ended up commiting suicide from debt. He started with one card to pay for an operation, got more cards, couldn't pay back, used cards to pay off other cards, got offered more cards (card companies love debtors), lost the house and took his life. He had 22 cards. The real galling fact is that after the inquest into his death, the card companies simply wrote off the debt.

[tomjen]

Credit cards are a tool - you can use it for good or evil. If the tool use you, it will ruin you. If you use the tool you can build some amazing things with it.

There is no reason to be afraid of credit cards - if you cannot control your spending, you have a problem that you need to work on.

As for the always pay the amount before the intrest kick in, this is sound advice in most, but by no means all cases.

Credit should not be used to by uneeded luxuries - but if your car breaks down paying 18% on a mechanics bill may be a better solution than changing to a job that is closer, but pays much less.

Credit cards can be used to bootstrap a company, allowing you to live a few months on borrowed time - that might be enough to allow your blog to generate enough income that you can easily pay it of.

If you look at Steves income figures, they increase dramatically (when he posted them last year, he had an income of more than 1000$/day). He started this blog for cheap, but had this not been an option borrowing the money might be a good way to start it.

When you consider whether paying 500$ for something that normaly cost 300$ by putting it on a credit card, consider whether or not the increased price is worth it. If really is, then your using your credit card as a tool to make sure your are better of than before.

Absolutes in a single sentence is often useless in the real world anyway.

[lightthecandle]

which is the best credit card company or credit card???
is it smart to get a credit card, and only purchase say 50$ on it each month, then pay it off full at the end of the month?