this post was submitted on 26 Dec 2023
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Credit cards are fine for people who can control their spending. I never pay interest, so I get my rewards for free and am building my credit. If you cannot control your spending habits, you might consider a card with a low limit.
You mean you never pay interest by paying off the debt before the next billing cycle, right? Or is it fine to get zero interest for whatever amount of months on certain purchases?
We do both... both are fine. As long as you aren't paying fees or interest, there is no disadvantage to using credit cards.
Ah, okay, I always figured the only way to really be responsible with credit was to use credit cards like debit, but if a big purchase came along that I definitely couldn't pay off within the month, I figured it wouldn't hurt to have zero interest but wasn't sure of the impact on my credit.
As long as you have the discipline to actually pay the thing off it's fine. Many people think, "oh I have 0% interest, I'll pay it off later" but never set aside the money to do so and end up accruing interest.
I never buy something on them I couldn't immediately pay off in full when I hit buy. I've bought things in excess of my checking balance, but that's because I had enough in savings (separate from my emergency fund), and my incoming paycheck would put my checking balance well above my credit card balance.
That’s more or less the right way.
Use credit cards for everything for an automatic minimum 2% discount on all purchases (in the form of cashback or rewards depending on how you value them, and more if you optimize category spending…I.e. you have a certain card you use for gas or groceries or eating out because that card has the best rewards for that category). Enjoy sign up bonuses if you can responsibly make the spend requirement. Always pay off statement balance and never close accounts (downgrade/product-change to free cards if the benefits aren’t more valuable than the annual fee).
And enjoy 0% offers but never slip on payment because that’s how they get you. If it’s not paid in full in time or a payment is late they will charge you backdated interest. 0% financing is free money if you can afford it (and can use it) at this inflation rate. I’d been on the fence about replacing my aging appliances but 0% for 24 mos made that a no-brainer. I could afford to have bought those appliances with cash (it’d sting but it’d be doable), but I’d much rather keep that few grand in a CD or bond or mutual fund and pay a 23rd of the balance every month, making me money instead of the bank.
You lost me a little with that last part, I'm assuming that's more about investing, but I can understand weighing the options between an annual fee and rewards.
That is pretty much the right way to do credit. Treat like debit and/or find a way to have 0% interest over a few months time to spread a big cost across multiple months where it becomes affordable.
My concern is the impact on my credit from not paying back in full, even if there's zero interest for an extended period of time. Like paying an appliance in 3 months with no interest versus the full balance before the next billing cycle. I just assume there's a downside to having that convenience aside from them hoping I'll fall behind.
Short term credit balances like appliances paid off over 3 months don't affect your credit for very long. As soon as they are paid off and the balance falls off your credit report your score will rebound. It's not worth stressing about.
Personally, I pay off before next billing cycle. However, I have been fortunate with my finances. I know friends of mine who carry credit card debt, and they have successfully managed to balance transfer from one card to another using periodic balance transfer deals that let you transfer all your debt from one credit card to another with a 0% interest rate for 12 months or so. They have managed to do this for years.
So there are definitely a variety of options!
I used to feel this way with 2% cash back, but I don’t think it’s worth the privacy loss of giving a for-profit corporation all of my spending data. Where I live now, almost no one accepts credit cards in person & if they do, there’s a high minimum payment & you will be paying the transaction fee. After getting used to carrying cash again, I can confidently say I prefer the anonymity. What weirder in hindsight is many other places either not accepting cash or baking the credit fees into the prices so it’s cash payers getting screwed—meanwhile the credit companies get to skim fixed costs while providing minimal value.
Yes, you definitely need to be vigilant these days about the fees. A lot of places are passing the costs to customers or offering lower prices for cash and debit.