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I don't think such an absolute position is warranted. It's true that saving up for a big purchase will end up costing you less money than borrowing to pay for i

I don't think such an absolute position is warranted. It's true that saving up for a big purchase will end up costing you less money than borrowing to pay for it and paying it back. But you will have the item purchased for less time. Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January 1st next year you'll have a new TV and $2.75. In scenario 2, you put $1200 on a credit card with a 10% APR. You pay $100 each month towards the credit card bill. As of January 1st next year you have a TV you've been watching for a year already and owe $69. You've essentially paid $72 for the privilege of getting the TV you wanted a year earlier. Is that worth it? Well that depends on a lot of things, some of them intangible, but I wouldn't say it can't possibly make any sense. The sort of Puritan attitude towards consumption and debt may not be the worst attitude to have, at least for oneself. But when combined with evangelism it is pretty annoying.

dragontamer 11y ago
Now suppose you lose your job in Month 10. The TV-less person will continue not having a TV, and use those funds for emergency day-to-day living expenses as he (or she) gets his life back in order. You can even dip into your credit card credit line for an emergency. But the person who bought the TV on interest is in debt, has less credit to live off of, and only a TV to show for it. ----------- In either case, saving up a pile of 6-months of expenses cash-on-hand is a good strategy. If you have 6-months of expenses saved up, you simply buy the TV with that money, and then in a year you put money back into your cash account. Look, now you have the benefits of all strategies! Saving up money for emergencies, or even large expenses (LONG before you even think about those expenses) is the way to go.
- nmcfarl 11y ago
  There’s a ton of comments on this article that I think are much more nutso. But this is the comment I’m going to reply to, cause people who keep emergency funds are probably open changing their mind via reason. Touching your 6 months emergency expenses fund is completely against the point. The reason you have this cash is for out of the blue, hit by bus kind of events. You need it when you least expect it If you take your TV out of it you no longer have it - and this fund becomes nothing more than a general savings account. The kind of thing that drops low right after you buy a TV, or a car, which from my personal experience is exactly when bad things happen. And often bad things require cash on the barrelhead, not just credit cards. So don’t do this. Either save in a slush fund for your TVº, or put it on a credit card, but don’t take it out of your emergency fund and still call it an emergency fund - 'cause it’s not going to be there for you in an emergency. º or my personal favorite: a throw away, but named, savings account. (Like CapOne360, née Ing Direct, offers.)
  - dragontamer 11y ago
    Well, its the reality of the situation. A typial 6-month Emergency fund is somewhere on the order of $15k, depending on where you live. This is more money than the typical American 40 year old has saved up their entire life (including retirement accounts) http://www.fool.com/investing/general/2015/05/17/americans-average-net-worth-by-age-how-do-you-comp.aspx http://www.fool.com/investing/general/2015/05/17/americans-a... If you manage to have $15k, and you are making a big purchase, do use it before you start using a credit card. Now of course, if you have $15k "Emergency use only" PLUS $5k "discretionary", then yeah, spend the money from your discretionary account first.
    - 2muchcoffeeman 11y ago
      > This is more money than the typical American 40 year old has saved up their entire life (including retirement accounts) Seriously? I feel like an old man. I had that much money saved in less than a year from starting my first part time coding job. In fact the whole not saving money thing seems a bit strange to me. My monthly cost have remained relatively stable for almost a decade while my salary keeps going up.
    - nimblegorilla 11y ago
      People able to save 15k of cash usually have decent credit ratings and can get 0% financing for most things.
- GVIrish 11y ago
  I wouldn't use that emergency fund money for something like a TV, because it's not really a necessity. Dipping into the emergency fund for indulgences leads to a depleted emergency fund. Now if your heater breaks and requires replacement, that might be a reason to tap into savings.
  - dragontamer 11y ago
    I think that's a valid point. TV is quite a luxury item, I spent more than half of last year building up my emergency fund without a TV or couch (still missing couch: I'll get that soon). But I recognize that I personally like to live on low expenses, lower than other people. For the spenders out there, even just saving up enough for an emergency fund is a big deal. The important thing is that piles of money are a tool, as is credit (including credit cards). Use the tools as you see fit, but there are definitely "best practices". If you have a large pile of money (ex: Emergency Fund), it makes more sense to buy using that money rather than to dip into credit. After all, you could always use your credit card in an emergency. Spending available cash first will be cheaper in the long run (as long as your spending habits remain in check)
ac29 11y ago
> Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January 1st next year you'll have a new TV and $2.75. In scenario 2, you put $1200 on a credit card with a 10% APR. You pay $100 each month towards the credit card bill. As of January 1st next year you have a TV you've been watching for a year already and owe $69. You've essentially paid $72 for the privilege of getting the TV you wanted a year earlier. I think this is a good point, but the sort of people who would need a year to save $1200 do not have the sort of credit to get a 10% APR credit card, APR's closer to 20% or higher are more likely. Run the math again at 18% APR ($133 in interest over the 14-month payoff period) or even 24% ($185 in interest over the 14-month payoff period), and you quickly see just how much premium it costs to get that TV a year earlier. I'm ignoring the negligible savings rate interest in your example and, probably foolishly, assuming this hypothetical person only has this single CC debt.
- ethbro 11y ago
  > Run the math again at 18% APR ($133 in interest over the 14-month payoff period) or even 24% ($185 in interest over the 14-month payoff period), and you quickly see just how much premium it costs to get that TV a year earlier. I feel like the issue isn't just the TV. It's that it's the TV, plus the next thing, plus the next thing. Or in other words, tiers of debt usage from best to worse: (1) completely avoid paying interest charges, (2) pay interest charges on large purchases with full knowledge and planning and in a responsible manner, (3) pay interest charges without knowledge of what you're paying or what to do about it. Personally, I think it's a failure of financial literacy of the US educational system on one of the most important aspects of kid's lives. I have met incredibly educated people that are still ignorant about how credit cards/interest charges work and only internalized "Never use credit cards!" advice. I've also met less educated people who never think past "This is what it says the minimum payment is, so I pay that." Neither position is good. And they. aren't. that. complicated. The disclosure sheet gives you annual fee (if any), APR when interest is charged, and any penalties that may result in an APR adjustment. After that it's simply "If you have a >$0 statement balance from the previous month after your due date and payment, then you begin accruing interest on the daily total of your balance." Not rocket science.
dazc 11y ago
> Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. If you don't have $1200 for a TV you shouldn't be buying it. It's not as if you can't buy a perfectly reasonable TV for much less is it?
- socalnate1 11y ago
  You're missing the forest for the trees.
- rdrey 11y ago
  Replace the word TV with 'first household car'.
  - tomjen3 11y ago
    No. Tv don't enable you to get a better job/keep your current. If you want the argument to mean anything then you have to trade like for like. A nice couch will last years and it is still a frivolous consumer spending object. Is it worth it to pay ~80 usd to have the couch a year earlier?
    - lkbm 11y ago
      Here's what I just read: > > > > Here's my argument. > > > That argument's too weak. > > Okay, here's a stronger version. > No, you have to stick with the weak version. Personally, I want to hear the strongest version of the arguments when I'm making a decision.
  - nostrademons 11y ago
    Curious what your point is? It's pretty common to pay cash for a used clunker as your first car because you don't have money to buy a new one, and then use it to get to work so you can save up more money to buy a new one. Or at least, it's pretty common among the folks I hang with. The car-loan phenomena is baffling to me; why would you pay interest on a depreciating asset?
    - 11y ago
grecy 11y ago
In scenario 1, when you realize that paying so much money for a TV is nonsense, you can spend that money on something else, and/or stop going to work, or reduce work hours. In scenario 2, you're stuck going to work for the entire 12 months to pay off a TV that will be obsolete by the time you finish paying for it. Scenario 2 robs you of your choices, because you're making a promise of future labor. Scenario 1 leaves all your choices on the table.
- nisse72 11y ago
  Since when does a television become "obsolete" after a year? Or even after 5 years? Just because it doesn't have built-in support for Netflix or whatever the latest thing is? This is the sort of idea that lures people into overspending in the first place. For the record, mine is close to 18 years old and continues to work just fine for watching broadcast television. Yes it's fatter than those newfangled flat things, but it doesn't watch me watching it, it doesn't record my conversations, and it doesn't report my viewing habits back to the mother ship. One day it will fail and I'll be forced to get a new one.
  - TeMPOraL 11y ago
    > For the record, mine is close to 18 years old and continues to work just fine for watching broadcast television. That's the key point. Your TV is fine because it's old. New ones are built with planned and unplanned obsolescence (unplanned is when your "smart" TV loses half of its functionality because some service goes off-line or even changes their URL or something).
    - modfodder 11y ago
      There still isn't a TV on the market (that I know of) that is obsolete after a year, not even five years. As long as the inputs (hdmi, dvi, RCA) work then the TV is not obsolete. It may not have the newest features (4k, "smart" connectivity) but it is every bit as usable (and many of the smart features can be added with a ROKU, Apple TV or the like). Video and Films are my business and my TV is a nearly 5 year old LG plasma that still performs great. And I only bought it because my ex kept the Panasonic plasma after the break-up or I'd probably be using an 8 year old TV. Are there any reports of smart TVs not working completely (inputs stop working) because the "smart" connected features stop working?
tamana 11y ago
In practical reality though, if you can't afford to pay cash for it, you can't afford it. People ignore a lot of the hidden/maintenance costs in their lives.
mtgx 11y ago
This video on economic theory basically says that it's credit that causes booms and busts, and it's especially bad when credit is not used for investments because it inevitably creates a situation in the future where millions of people at once will have less money to spend, thus creating a bust: https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0
- icebraining 11y ago
  Oh, well, if an Youtube video says so, it must be true. Does it show any evidence for that theory?
  - notlefthanded 11y ago
    The video is by Ray Dalio, founder of Bridgewater, and it states that it's just his personal mental framework to understanding the economy; not claiming gospel or anything. Either way, he's kind of a big deal.
- forgetsusername 11y ago
  >and it's especially bad when credit is not used for investments It doesn't even have to be "not investments", it can be appropriately risky investments that just don't pan out (perhaps even systemically due to a "black swan"). There's inherent variation, ebbs and flow, in the economy that we won't ever be able to smooth. Booms and busts will occur because those on the credit margins always represent "going too far".
  - icebraining 11y ago
    It's obvious that there will always be booms and busts; the important question is why they are synchronized, instead of localized, like the dotcom boom and bust mostly was.
marcosdumay 11y ago
> You've essentially paid $72 for the privilege of getting the TV you wanted a year earlier. And that's almost an entire month of savings. Now, correct your rates with what's on the other replies, and we are suddenly talking about 2 or 3 months of savings. Just for getting that TV an year earlier. Yes, that may be worth it. But almost always isn't.
- ChristianBundy 11y ago
  > Yes, that may be worth it. But almost always isn't. I don't disagree with you, but until you provide some evidence this is just the opinion of some random stranger on the internet, and should be taken with a pound of salt.
anexprogrammer 11y ago
The old, and conveniently oft forgotten, advice applies: Never borrow against a depreciating asset. If you need to clear down you may have a problem. A job loss, recession, illness could all mean you want to clear the debt. Selling the now second hand TV is not going to clear the debt. Add in a few more debts justified thus and you have a bankruptcy or house loss on your hands. Perhaps you can guarantee you will not get ill or lose your job during the loan? So many of the people bitten hard by the 2008 recession applied logic such as yours, and often drew down on their mortgages (cheaper than credit card) to buy TVs, cars and holidays. Borrowing against a growing asset is different. I'm a "reformed" credit card user. I haven't borrowed for anything apart from the house in around 15 years. It's not a problem, and the kids don't miss out on having too much stuff either!
- Sir_Substance 11y ago
  >I'm a "reformed" credit card user. I haven't borrowed for anything apart from the house in around 15 years. It's not a problem, and the kids don't miss out on having too much stuff either! I've never used a credit card, because people like you got to me before I was old enough to apply for one and warded me off, so thanks :) However, what's your experience with taking out that home loan? I'm worried that I might one day ask the bank for a serious loan (with a suitable amount of pre-savings) and be informed I cannot be lent to because I have no credit history at all. I know I can get a credit card and always pay it off at the end of the month to get a credit history, but by golly does playing that game sit ill with me.
  - lr4444lr 11y ago
    Capital One has a 1.5% cash back on all purchases card. I put everything I can on it, and pay off in full very month on time. Does the prospect of paying only 98.5% of almost every price before your eyes not interest you? If not, then I don't know much what will. Your financial prudence will be rewarded with these residuals if you help the banks get their merchant fees. Over a lifetime, it can add up, and the fraud protection is great peace of mind.
    - 11y ago
Shivetya 11y ago
Outside of the big purchases, home and transportation, it is safe to say if you cannot save for it in a reasonable time you really cannot afford it. The only time I buy anything on credit is when it is zero percent on the terms and even then if I could buy it outright or save for it quickly. It just is too easy to get in the trap of credit and reasoning it out is the first indication you have a problem. If its important save for it, if you cannot save for it get credit counseling
Consultant32452 11y ago
You're forgetting a very important topic in finance: positive cash flow. While saving that $100/mo I have an additional $100 in my cash flow that can be diverted in the event of an emergency. Instead I have a $107.20 credit card bill. So how will I pay for that flat tire? You guessed it, I'll put it on the card. If you're the type of person who has a sufficiently large emergency fund and savings, you're probably also the type of person who doesn't need to spread the cost of a TV out over a year.
lithander 11y ago
I assume that you had a TV before you upgraded, too? And the one you bought and used for a year is now one year closer to getting replaced. You lost more money then the 72$ depending on how often you replace your TV. In the end you can afford to replace more things more often when you don't have to pay interest on loans.

dragontamer 11y ago

Now suppose you lose your job in Month 10. The TV-less person will continue not having a TV, and use those funds for emergency day-to-day living expenses as he (or she) gets his life back in order. You can even dip into your credit card credit line for an emergency. But the person who bought the TV on interest is in debt, has less credit to live off of, and only a TV to show for it. ----------- In either case, saving up a pile of 6-months of expenses cash-on-hand is a good strategy. If you have 6-months of expenses saved up, you simply buy the TV with that money, and then in a year you put money back into your cash account. Look, now you have the benefits of all strategies! Saving up money for emergencies, or even large expenses (LONG before you even think about those expenses) is the way to go.

nmcfarl 11y ago
There’s a ton of comments on this article that I think are much more nutso. But this is the comment I’m going to reply to, cause people who keep emergency funds are probably open changing their mind via reason. Touching your 6 months emergency expenses fund is completely against the point. The reason you have this cash is for out of the blue, hit by bus kind of events. You need it when you least expect it If you take your TV out of it you no longer have it - and this fund becomes nothing more than a general savings account. The kind of thing that drops low right after you buy a TV, or a car, which from my personal experience is exactly when bad things happen. And often bad things require cash on the barrelhead, not just credit cards. So don’t do this. Either save in a slush fund for your TVº, or put it on a credit card, but don’t take it out of your emergency fund and still call it an emergency fund - 'cause it’s not going to be there for you in an emergency. º or my personal favorite: a throw away, but named, savings account. (Like CapOne360, née Ing Direct, offers.)
- dragontamer 11y ago
  Well, its the reality of the situation. A typial 6-month Emergency fund is somewhere on the order of $15k, depending on where you live. This is more money than the typical American 40 year old has saved up their entire life (including retirement accounts) http://www.fool.com/investing/general/2015/05/17/americans-average-net-worth-by-age-how-do-you-comp.aspx http://www.fool.com/investing/general/2015/05/17/americans-a... If you manage to have $15k, and you are making a big purchase, do use it before you start using a credit card. Now of course, if you have $15k "Emergency use only" PLUS $5k "discretionary", then yeah, spend the money from your discretionary account first.
  - 2muchcoffeeman 11y ago
    > This is more money than the typical American 40 year old has saved up their entire life (including retirement accounts) Seriously? I feel like an old man. I had that much money saved in less than a year from starting my first part time coding job. In fact the whole not saving money thing seems a bit strange to me. My monthly cost have remained relatively stable for almost a decade while my salary keeps going up.
  - nimblegorilla 11y ago
    People able to save 15k of cash usually have decent credit ratings and can get 0% financing for most things.
GVIrish 11y ago
I wouldn't use that emergency fund money for something like a TV, because it's not really a necessity. Dipping into the emergency fund for indulgences leads to a depleted emergency fund. Now if your heater breaks and requires replacement, that might be a reason to tap into savings.
- dragontamer 11y ago
  I think that's a valid point. TV is quite a luxury item, I spent more than half of last year building up my emergency fund without a TV or couch (still missing couch: I'll get that soon). But I recognize that I personally like to live on low expenses, lower than other people. For the spenders out there, even just saving up enough for an emergency fund is a big deal. The important thing is that piles of money are a tool, as is credit (including credit cards). Use the tools as you see fit, but there are definitely "best practices". If you have a large pile of money (ex: Emergency Fund), it makes more sense to buy using that money rather than to dip into credit. After all, you could always use your credit card in an emergency. Spending available cash first will be cheaper in the long run (as long as your spending habits remain in check)

ac29 11y ago

> Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. In scenario 1, you save $100 each month. The bank pays you 0.5% interest. As of January 1st next year you'll have a new TV and $2.75. In scenario 2, you put $1200 on a credit card with a 10% APR. You pay $100 each month towards the credit card bill. As of January 1st next year you have a TV you've been watching for a year already and owe $69. You've essentially paid $72 for the privilege of getting the TV you wanted a year earlier. I think this is a good point, but the sort of people who would need a year to save $1200 do not have the sort of credit to get a 10% APR credit card, APR's closer to 20% or higher are more likely. Run the math again at 18% APR ($133 in interest over the 14-month payoff period) or even 24% ($185 in interest over the 14-month payoff period), and you quickly see just how much premium it costs to get that TV a year earlier. I'm ignoring the negligible savings rate interest in your example and, probably foolishly, assuming this hypothetical person only has this single CC debt.

ethbro 11y ago
> Run the math again at 18% APR ($133 in interest over the 14-month payoff period) or even 24% ($185 in interest over the 14-month payoff period), and you quickly see just how much premium it costs to get that TV a year earlier. I feel like the issue isn't just the TV. It's that it's the TV, plus the next thing, plus the next thing. Or in other words, tiers of debt usage from best to worse: (1) completely avoid paying interest charges, (2) pay interest charges on large purchases with full knowledge and planning and in a responsible manner, (3) pay interest charges without knowledge of what you're paying or what to do about it. Personally, I think it's a failure of financial literacy of the US educational system on one of the most important aspects of kid's lives. I have met incredibly educated people that are still ignorant about how credit cards/interest charges work and only internalized "Never use credit cards!" advice. I've also met less educated people who never think past "This is what it says the minimum payment is, so I pay that." Neither position is good. And they. aren't. that. complicated. The disclosure sheet gives you annual fee (if any), APR when interest is charged, and any penalties that may result in an APR adjustment. After that it's simply "If you have a >$0 statement balance from the previous month after your due date and payment, then you begin accruing interest on the daily total of your balance." Not rocket science.

dazc 11y ago

> Suppose you have enough disposable income to pay for a new $1200 TV over the course of 12 months. If you don't have $1200 for a TV you shouldn't be buying it. It's not as if you can't buy a perfectly reasonable TV for much less is it?

socalnate1 11y ago
You're missing the forest for the trees.
rdrey 11y ago
Replace the word TV with 'first household car'.
- tomjen3 11y ago
  No. Tv don't enable you to get a better job/keep your current. If you want the argument to mean anything then you have to trade like for like. A nice couch will last years and it is still a frivolous consumer spending object. Is it worth it to pay ~80 usd to have the couch a year earlier?
  - lkbm 11y ago
    Here's what I just read: > > > > Here's my argument. > > > That argument's too weak. > > Okay, here's a stronger version. > No, you have to stick with the weak version. Personally, I want to hear the strongest version of the arguments when I'm making a decision.
- nostrademons 11y ago
  Curious what your point is? It's pretty common to pay cash for a used clunker as your first car because you don't have money to buy a new one, and then use it to get to work so you can save up more money to buy a new one. Or at least, it's pretty common among the folks I hang with. The car-loan phenomena is baffling to me; why would you pay interest on a depreciating asset?
  - 11y ago

grecy 11y ago

In scenario 1, when you realize that paying so much money for a TV is nonsense, you can spend that money on something else, and/or stop going to work, or reduce work hours. In scenario 2, you're stuck going to work for the entire 12 months to pay off a TV that will be obsolete by the time you finish paying for it. Scenario 2 robs you of your choices, because you're making a promise of future labor. Scenario 1 leaves all your choices on the table.

nisse72 11y ago
Since when does a television become "obsolete" after a year? Or even after 5 years? Just because it doesn't have built-in support for Netflix or whatever the latest thing is? This is the sort of idea that lures people into overspending in the first place. For the record, mine is close to 18 years old and continues to work just fine for watching broadcast television. Yes it's fatter than those newfangled flat things, but it doesn't watch me watching it, it doesn't record my conversations, and it doesn't report my viewing habits back to the mother ship. One day it will fail and I'll be forced to get a new one.
- TeMPOraL 11y ago
  > For the record, mine is close to 18 years old and continues to work just fine for watching broadcast television. That's the key point. Your TV is fine because it's old. New ones are built with planned and unplanned obsolescence (unplanned is when your "smart" TV loses half of its functionality because some service goes off-line or even changes their URL or something).
  - modfodder 11y ago
    There still isn't a TV on the market (that I know of) that is obsolete after a year, not even five years. As long as the inputs (hdmi, dvi, RCA) work then the TV is not obsolete. It may not have the newest features (4k, "smart" connectivity) but it is every bit as usable (and many of the smart features can be added with a ROKU, Apple TV or the like). Video and Films are my business and my TV is a nearly 5 year old LG plasma that still performs great. And I only bought it because my ex kept the Panasonic plasma after the break-up or I'd probably be using an 8 year old TV. Are there any reports of smart TVs not working completely (inputs stop working) because the "smart" connected features stop working?

tamana 11y ago

In practical reality though, if you can't afford to pay cash for it, you can't afford it. People ignore a lot of the hidden/maintenance costs in their lives.

mtgx 11y ago

This video on economic theory basically says that it's credit that causes booms and busts, and it's especially bad when credit is not used for investments because it inevitably creates a situation in the future where millions of people at once will have less money to spend, thus creating a bust: https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0

icebraining 11y ago
Oh, well, if an Youtube video says so, it must be true. Does it show any evidence for that theory?
- notlefthanded 11y ago
  The video is by Ray Dalio, founder of Bridgewater, and it states that it's just his personal mental framework to understanding the economy; not claiming gospel or anything. Either way, he's kind of a big deal.
forgetsusername 11y ago
>and it's especially bad when credit is not used for investments It doesn't even have to be "not investments", it can be appropriately risky investments that just don't pan out (perhaps even systemically due to a "black swan"). There's inherent variation, ebbs and flow, in the economy that we won't ever be able to smooth. Booms and busts will occur because those on the credit margins always represent "going too far".
- icebraining 11y ago
  It's obvious that there will always be booms and busts; the important question is why they are synchronized, instead of localized, like the dotcom boom and bust mostly was.

marcosdumay 11y ago

> You've essentially paid $72 for the privilege of getting the TV you wanted a year earlier. And that's almost an entire month of savings. Now, correct your rates with what's on the other replies, and we are suddenly talking about 2 or 3 months of savings. Just for getting that TV an year earlier. Yes, that may be worth it. But almost always isn't.

ChristianBundy 11y ago
> Yes, that may be worth it. But almost always isn't. I don't disagree with you, but until you provide some evidence this is just the opinion of some random stranger on the internet, and should be taken with a pound of salt.

anexprogrammer 11y ago

The old, and conveniently oft forgotten, advice applies: Never borrow against a depreciating asset. If you need to clear down you may have a problem. A job loss, recession, illness could all mean you want to clear the debt. Selling the now second hand TV is not going to clear the debt. Add in a few more debts justified thus and you have a bankruptcy or house loss on your hands. Perhaps you can guarantee you will not get ill or lose your job during the loan? So many of the people bitten hard by the 2008 recession applied logic such as yours, and often drew down on their mortgages (cheaper than credit card) to buy TVs, cars and holidays. Borrowing against a growing asset is different. I'm a "reformed" credit card user. I haven't borrowed for anything apart from the house in around 15 years. It's not a problem, and the kids don't miss out on having too much stuff either!

Sir_Substance 11y ago
>I'm a "reformed" credit card user. I haven't borrowed for anything apart from the house in around 15 years. It's not a problem, and the kids don't miss out on having too much stuff either! I've never used a credit card, because people like you got to me before I was old enough to apply for one and warded me off, so thanks :) However, what's your experience with taking out that home loan? I'm worried that I might one day ask the bank for a serious loan (with a suitable amount of pre-savings) and be informed I cannot be lent to because I have no credit history at all. I know I can get a credit card and always pay it off at the end of the month to get a credit history, but by golly does playing that game sit ill with me.
- lr4444lr 11y ago
  Capital One has a 1.5% cash back on all purchases card. I put everything I can on it, and pay off in full very month on time. Does the prospect of paying only 98.5% of almost every price before your eyes not interest you? If not, then I don't know much what will. Your financial prudence will be rewarded with these residuals if you help the banks get their merchant fees. Over a lifetime, it can add up, and the fraud protection is great peace of mind.
  - 11y ago

Shivetya 11y ago

Outside of the big purchases, home and transportation, it is safe to say if you cannot save for it in a reasonable time you really cannot afford it. The only time I buy anything on credit is when it is zero percent on the terms and even then if I could buy it outright or save for it quickly. It just is too easy to get in the trap of credit and reasoning it out is the first indication you have a problem. If its important save for it, if you cannot save for it get credit counseling

Consultant32452 11y ago

You're forgetting a very important topic in finance: positive cash flow. While saving that $100/mo I have an additional $100 in my cash flow that can be diverted in the event of an emergency. Instead I have a $107.20 credit card bill. So how will I pay for that flat tire? You guessed it, I'll put it on the card. If you're the type of person who has a sufficiently large emergency fund and savings, you're probably also the type of person who doesn't need to spread the cost of a TV out over a year.

lithander 11y ago

I assume that you had a TV before you upgraded, too? And the one you bought and used for a year is now one year closer to getting replaced. You lost more money then the 72$ depending on how often you replace your TV. In the end you can afford to replace more things more often when you don't have to pay interest on loans.