Debit vs. Credit Cards

[Oaktree]

Still not convinced the airline miles are better than just getting cash back though...

I suppose if you travel a lot it's handy but I don't so I'll just take the cash back.

 

[Sigarms]

Guess it's what you're use to.

My father only used his checkbook to pay bills, and his credit card to buy things when he shopped for anything. Payed his credit card in full monthly (by writing a check and mailing it in).

I've progressed to the point where I generally use online bank payments for my regular house bills (electric, insurance, propane...) and use my credit card for everything else including auto service work (unlike my father, online payment for the credit card instead of writing a check).

I use the same credit union on my credit card as my father used. Get 2% back on purchases, and within a year, already have $1,600 for next years vacation with the wife.

Considered myself blessed. My wife and work full time, and the only debt we have is our taxes for the house and land (take that back, took out a decent interest rate loan to remodel two bathrooms). I will always play with someone else's money if the interest rate is acceptable.

That said, for the life of me, can't figure out a FICA score. My FICA score actually dropped below 800 AFTER we paid off the house and land in full (and we have money saved). Could be because I took out that loan with the credit union for the bathroom work, but with a dual income, it's a no brainer it will be paid (I could pay it in full now if I wanted to very easily). It's also the ONLY reason why I shop at best buy (only "store" credit card I own). Probably will replace my 15 year old Mac with a new one. 18 month 0% interest is hard to pass up for someone like me LOL

 

[Torvy]

That said, for the life of me, can't figure out a FICO score. My FICO score actually dropped below 800 AFTER we paid off the house and land in full (and we have money saved). Could be because I took out that loan with the credit union for the bathroom work, but with a dual income, it's a no brainer it will be paid (I could pay it in full now if I wanted to very easily). It's also the ONLY reason why I shop at best buy (only "store" credit card I own). Probably will replace my 15 year old Mac with a new one. 18 month 0% interest is hard to pass up for someone like me LOL

FICO is complicated, but depending on some variables, the house could have been a factor. Paying something off is not usually bas good for your credit score as making regular payments. The algorithm does not know if you are super responsible or if you were gifted a payoff. The age of your credit is a positive. If your house was your oldest credit account, that could have dropped you some, too.

The bank I used to work for bought the Credit Card portfolio of another bank. It included the Best Buy card. My bank did some secret shopper investigations around Best Buy's business practices vis-a-vis credit issuance. We sold off the Best Buy portion, even though it was seemingly the 'best' part. It seems Best Buy was too predatory for our tastes. The company did not publish the reasons. I am no longer bound by nondisclosure. Oddly enough we sold it to the other big bank for whom I worked many years.

https://www.washingtonpost.com/business/economy/capital-one-sells-best-buy-credit-card-portfolio-to-citigroup/2013/02/19/9b4ba18a-7ab6-11e2-a044-676856536b40_story.html

 

[Sigarms]

FICO is complicated, but depending on some variables, the house could have been a factor. Paying something off is not usually bas good for your credit score as making regular payments. The algorithm does not know if you are super responsible or if you were gifted a payoff. The age of your credit is a positive. If your house was your oldest credit account, that could have dropped you some, too.

The bank I used to work for bought the Credit Card portfolio of another bank. It included the Best Buy card. My bank did some secret shopper investigations around Best Buy's business practices vis-a-vis credit issuance. We sold off the Best Buy portion, even though it was seemingly the 'best' part. It seems Best Buy was too predatory for our tastes. The company did not publish the reasons. I am no longer bound by nondisclosure. Oddly enough we sold it to the other big bank for whom I worked many years.

https://www.washingtonpost.com/business/economy/capital-one-sells-best-buy-credit-card-portfolio-to-citigroup/2013/02/19/9b4ba18a-7ab6-11e2-a044-676856536b40_story.html

The mistake we made (because we wanted the place we bought because fell in love with the surrounding "land"), is play it safe and went with 30 year mortgage.

Need to check with my wife, but the way we figured it out, it would have saved us money to pay everything off as we saved "extra", per the house insurance and taxes in the Escrow, which was built into the loan and payment. No penalty for paying it off sooner.

Don't get me wrong, we are not financial experts, and we could have made mistakes in our planning, but we're not hurting due to those mistakes if that makes sense.

As far as Best buy, I hate ever having to walk into that store. That said, a 2k desktop only paying $112 a month for 18 months (at a competitive sell price) and paying off within a year at 0% interest, will get me every time when I'm ready to pull the trigger. I'm just odd that I'd rather break the payments into monthly at no interest than take 2k out of the account. Generally with money, I don't make a deal with the devil if that makes sense.

The only time we really bite the bullet is when we buy a used vehicle and pay cash for it and that's pretty rare.

Sidenote - You mentioned a algorithm. God forbid you actually know who you're doing business with

 

[MossRoad]

The mistake we made (because we wanted the place we bought because fell in love with the surrounding "land"), is play it safe and went with 30 year mortgage.

Need to check with my wife, but the way we figured it out, it would have saved us money to pay everything off as we saved "extra", per the house insurance and taxes in the Escrow, which was built into the loan and payment. No penalty for paying it off sooner.

Don't get me wrong, we are not financial experts, and we could have made mistakes in our planning, but we're not hurting due to those mistakes if that makes sense.

As far as Best buy, I hate ever having to walk into that store. That said, a 2k desktop only paying $112 a month for 18 months (at a competitive sell price) and paying off within a year at 0% interest, will get me every time when I'm ready to pull the trigger. I'm just odd that I'd rather break the payments into monthly at no interest than take 2k out of the account. Generally with money, I don't make a deal with the devil if that makes sense.

The only time we really bite the bullet is when we buy a used vehicle and pay cash for it and that's pretty rare.

Sidenote - You mentioned a algorithm. God forbid you actually know who you're doing business with

On our first house we went with a 30 year mortgage instead of a 15. The monthly payments were lower, but the interest was a bit higher... 12.5% AFTER we paid 3 points!

We were concerned that if one of us would lose our employment, we could still make the payments on 1 income. Since we could pay it off with no penalty, and our plan was to pay it off in 5 years regardless, the 30 year with the higher interest rate offered us a bit of affordable insurance at what we considered a reasonable price.

We had an amortization table with all 360 lines of payments printed out and kept it hanging on the wall in our home office. It was 7 pages long. The first month, we made a double payment and applied the overage to the principle. We crossed off 29 future payments with that 1 extra payment. It was beautiful! We did it again the next month and knocked off another 20+ payments. And so on.

The nice thing about that is being a young couple, and being unsure of our future employment, it offered us that safety net of being way ahead in payments quickly, and we could, if necessary, skip payments up to the amount that we pre-paid if necessary. One month we actually had to do that when I was between jobs. At that time, it added about 6-7 payments back on to the end of the mortgage.

We ended up paying that house off in less than 5 years.

Then we used the equity in that house in a blanket mortgage that allowed us to purchase 20 acres of farmland with no money down. We did a 15 year on that one as we were more secure in our employment and had enough money in savings to make payments if we both lost employment. We paid that land off in 4 years.

And 5 years after that, we again used the equity in that house in another blanket mortgage to purchase the house we now live in with no money down. And we would have paid that off in 5 years, too, but my father passed away and left us a nice gift that allowed us to pay it off in 3.

Anyhow, we used the credit in our house to our advantage to keep our sanity/paranoia level down about possibly losing our jobs. It worked well for us.

 

[MossRoad]

I should have said, we used the equity in our house to get credit.

 

[goeduck]

Heaven help me if I ever need to take out a loan. I haven't had debt and monthly payments on debt in forever. I probably have a credit rating of zero.

I do carry a CC and a DC, I tend to use the DC for groceries and gas and the CC for other items. No real logic behind that, just habit. CC is paid off ahead of due date.

 

[goeduck]

We had an amortization table with all 360 lines of payments printed out and kept it hanging on the wall in our home office. It was 7 pages long. The first month, we made a double payment and applied the overage to the principle. We crossed off 29 future payments with that 1 extra payment. It was beautiful! We did it again the next month and knocked off another 20+ payments. And so on.

We did similar, it was better than *** at the time. Well maybe not better, but close.

 

[MossRoad]

Heaven help me if I ever need to take out a loan. I haven't had debt and monthly payments on debt in forever. I probably have a credit rating of zero.

I do carry a CC and a DC, I tend to use the DC for groceries and gas and the CC for other items. No real logic behind that, just habit. CC is paid off ahead of due date.

Don't sell yourself short. We've been debt free since 1995 and have a great credit rating.

What they primarily want to see is that you use the credit you have wisely.

 

[MossRoad]

We did similar, it was better than *** at the time. Well maybe not better, but close.

Yep. It was exciting to see the payments fall off the chart. A real rush.

Wife wants a lake house. We might get to experience that rush again.

 

[Sigarms]

Heaven help me if I ever need to take out a loan. I haven't had debt and monthly payments on debt in forever. I probably have a credit rating of zero.

I sincerely believe credit can be a good thing, as long as it's used wisely.

When my wife convinced me to get high dollar hearing aids through the doctor, 0% interest was my friend, even though I understand that in life, generally things are not free.

 

[two_bit_score]

We did similar, it was better than *** at the time. Well maybe not better, but close.

A famous person once said “Money makes women ho***y“.

 

[two_bit_score]

Best Credit Card Bonuses of 2022

Your guide to the best in personal financial products such as credit cards, mortgages, bank accounts, and brokerages.

www.fool.com

 

[JethroB]

Heaven help me if I ever need to take out a loan. I haven't had debt and monthly payments on debt in forever. I probably have a credit rating of zero.

I do carry a CC and a DC, I tend to use the DC for groceries and gas and the CC for other items. No real logic behind that, just habit. CC is paid off ahead of due date.

You have reason to be concerned, in a funny sort of way. It’s been 15 years since I have had debt. I went to buy a second Kubota recently and take the 0% financing rather than raid my investments to pay for it. Kubota Credit balked. I gave them a peek at my retirement portfolio and all was good to go. I’m retired with no wage income.

 

[MossRoad]

I sincerely believe credit can be a good thing, as long as it's used wisely.

When my wife convinced me to get high dollar hearing aids through the doctor, 0% interest was my friend, even though I understand that in life, generally things are not free.

Yep.

Buy a new air conditioner, get a free furnace!

Who are they kidding?

 

[Fuddyduddy1952]

Credit card can be cheaper than cash if you get 1%-2% off purchases and on autopay paying balance in full.

 

[Oaktree]

I sincerely believe credit can be a good thing, as long as it's used wisely.

When my wife convinced me to get high dollar hearing aids through the doctor, 0% interest was my friend, even though I understand that in life, generally things are not free.

Agreed. Obviously, no one is lending you money for free, interest charge most likely baked into the price. I wonder if you'd get a discount to pay in full.

Credit card can be cheaper than cash if you get 1%-2% off purchases and on autopay paying balance in full.

I always pay in full each month, though I pay by check, never autopay. Again, no one is giving you cashback bonus out of the goodness of their heart, I'm sure they just charge the merchant more who adjusts his prices to compensate. No free lunch, but you might as well take advantage of the gimmickry.

 

[Sigarms]

Agreed. Obviously, no one is lending you money for free, interest charge most likely baked into the price. I wonder if you'd get a discount to pay in full.

I can speak from my own industry and say that when someone offers 0% financing, the finance price is built into the cost. Some guys will offer a cash discount and some guys will just pocket the difference even if you do pay cash.

However, since my hearing aids were the same price even if I paid cash from the doctors office, I would be dumb IMO not to take up the offer of financing. I have no doubt that the doctors office is rolling in the dough.

Like I said, when it comes to Best Buy, I really hate that company, but I'll save the 5% off and use 18 months same as cash. When you drop a couple of grand on a computer, I'd much rather pay $112 a month for 18 months vs than taking 2k out of the bank. Generally on buys like that, I'll just double the payment to cut the time in half.

 

[Fuddyduddy1952]

Agreed. Obviously, no one is lending you money for free, interest charge most likely baked into the price. I wonder if you'd get a discount to pay in full.

I always pay in full each month, though I pay by check, never autopay. Again, no one is giving you cashback bonus out of the goodness of their heart, I'm sure they just charge the merchant more who adjusts his prices to compensate. No free lunch, but you might as well take advantage of the gimmickry.

Well, no...when I had my company I started accepting credit cards early on and I was charged $0.35 per transaction and 1.9% fee (retired 9 years now...from memory). I never added this into my fee or gave a discount for cash. My business jumped when I started accepting cards so to me that offset this charge. Rarely someone wanted to charge something for, say, $1.00 and we would ask for cash.
Autopay saves stamps & writing checks. I'm on autopay for everything.

 

[TheMan419]

Agreed. Obviously, no one is lending you money for free, interest charge most likely baked into the price. I wonder if you'd get a discount to pay in full.

When I bought my tractor they had a 0% "deal" going. I asked this question, what is the price if I bring in a bank check? They said same price. Great sign me up for the 0% financing. My investments can keep earning a return and you will get a few bucks a month from me. Seems like a silly idea, but what do I know.