Thread: Managing credit

Seems I am the complete opposite! I use my card for absolutely everything. Even if I get 1 litre of milk at the local Foodland - on the card.

Gives a great history of where your money goes.

I only get paid once a year, so I have to just make sure my projected spending is on track, but so far have always paid off the card at the end of every month and haven't paid any interest for as long as I can remember.

Couldn't get by so easily without my MasterCard!

It is easy to assume that all of those who are struggling to keep their debt under control are inept.

It may not always be the case.

At different stages of my life I have found that I have had to arrange things differently.

For a long time I paid cash for everything and had no debt whatsoever. Mind you that made it interesting when I decided to get a small personal loan to buy a car suitable for the family we were about to start. I had no credit history so was considered a risk. I eventually got the loan and paid it off in about a quarter of the agreed term.

At another stage I went over my credit limit and got a call from my bank. As I explained to the bank, I had sold my house, so was about to get a healthy balance again, but needed a few items to furnish the cottage I was renting. I had expected the money to be available much more quickly, so thought that just using the credit card was a simple, cheap way to deal with what I expected to be a very brief shortage of funds.

Several years later, I built a house and found myself paying about 18% interest at the same time as I was paying for orthodontic work for both my children and paying for their tertiary education. At that time I found myself having to use my credit card to pay for such frivolous things as food for the family, electricity bills and petrol to drive to work. Paying off the whole amount each month was out of the question.

I have paid no credit card interest for the last decade. I have one with a small limit that I use for online transactions, fuel purchases and a few direct debits like electricity bills. So when I buy fuel, I don't have to really pay for it for between 30 and 50 days. I would have liked to have spent my whole life in that position, but circumstances didn't permit it.

I don't doubt that some people will point out that my earlier difficulties were at least partially my fault. I have to acknowledge that is true. It was my genes that made it necessary for the kids to need orthodontic work. It was my wish to have them acquire tertiary qualifications that added to my expenses. My inability to foresee that just at the time I finished building my house, that interest rates would soar to 18% meant that I struggled to pay my slightly increased but still modest mortgage.

Of course I could have done things differently, but I am satisfied that I made reasonable decisions at the time. While there are some people who have made bad decisions that have created financial difficulties, there are sometimes extenuating circumstances that mean that not everyone with credit card debt is stupid.

We got rid of all our credit cards and loans about 18-24months ago. If we don't have the cash we don't buy. We buy a lot less stuff these days .

When you think of credit as "future earnings", the use of the credit card gets a whole different meaning.....

If I don't have the money in the bank means I can't afford it. Saving up for a purchase is frustrating sometimes, but means it gets paid from "past earnings". Works for me.....

Originally Posted by SimonM

We got rid of all our credit cards and loans about 18-24months ago. If we don't have the cash we don't buy. We buy a lot less stuff these days .

Using a credit card to buy something doesn't necessarily mean you don't have the cash.

It can be just a way to hang onto your cash for a bit longer before you use it to pay off the full amount on the card at the end of the month. Some people find it a good way to keep track of expenditure.

Several years ago a survey reported about on a TV show revealed that there were a significant number of people with credit card debt who had enough money in a savings account to pay off all or most of the credit card debt.

Their reason was that they wanted to keep the savings cash "for a rainy day". They didn't seem to understand that the interest they were paying each month constituted a significant amount of rain.

It's interesting how many people have said they don't buy things unless they have the cash, which is a good policy.
Of course, the retailers and banks hate it and want us to bend the plastic to keep their profits flowing. Slugging people with 18% credit card interest is just unacceptable greed by the banks, I reckon.
It's clear that the GFC frightened a lot of people and they have responded by cutting debt and living more frugally. For example, while it would be nice to be able to swan around in a new D4, the responsible thing for us is to just keep maintaining the old D1 and not care how old-fashioned it looks.
So, if retail spending is down because people are saving more and spending less, that's a good thing, isn't it? So why are we being told that sluggish retail sales are a bad sign, when really it's just proof that people are being more responsible with their money?

Originally Posted by DiscoMick

Slugging people with 18% credit card interest is just unacceptable greed by the banks, I reckon.

Well they are not all that high - if you shop around you can get rates certainly around 12% or lower and that is not honeymoon rates either.

The higher interest rates for credit cards reflect the higher risks in the sector. Credit Card purchases are unsecured and if there is a default it costs the banks a bit to recover and often they cannot recover.

Now while the risks in the Credit Card sector justify increased rates over other sector interest rates, I certainly don't believe they should be as high as they are, but there have been a few investigations and the banks arguments have been accepted.

Garry

I have had credit cards for many years, I only use it if I can afford it and I have never paid a cent in interest.....and the bank gives me a few freebie