5 ms·

The more I learn about what happens to people who are in debt and fall into hard times, the less I want to buy anything with credit.

chiph 12y ago
It's OK to use credit -- you just need to treat it with respect. Like a loaded gun.
crusso 12y ago
Which is how you should feel about it. Not approaching credit with a healthy amount of respect is a large part of the reason why it's such a general problem. Sure, in the article the first example they posted was of a person down on his luck - but that doesn't explain the epidemic of high credit card debt we've had even during boom periods. In general, I think that people just aren't good at living within their means. Having been on my own .com rollercoaster ride, I know what it's like to have to adjust your lifestyle drastically at times to avoid going into debt. It's difficult, but downsizing your house and selling your luxury car is a lot better than the alternative of living on the edge and losing everything when life throws your the inevitable curve ball.
gretful 12y ago
Credit is a trap for the unwary and those that fail to plan ahead. I include myself in that group, as I have credit debt. Don't do - save your money.
- geebee 12y ago
  My brother asked me for advice, when he was in college, about whether he should get a credit card. I told him that he should, if he was confident that he make a small charge and consistently pay the bill, on time, every month. However, if he wasn't confident that he could do this, he shouldn't. He decided against the credit card. In retrospect, I didn't give him good advice. It's not that the overall approach is a bad one, but I didn't understand or emphasize just how important it is to establish a credit history. When you're in college, credit card companies will offer you a line of credit even if you have no previous credit history. If you can charge $10 a month, and pay it on time every month, for several years… I'm not kidding, banks will lend you $750,000 to buy a house at the most favorable rates 5 years later simply based on your demonstrated ability to pay $10 a month reliably and not run up a $10,000 debt just because you can. It's a test, and it's an important one to pass - but if you aren't going to pass, don't take it (yet). You will need to eventually. If you don't take this test and pass it, banks will at best charge you a higher interest rate that could actually cost you well over 100K over the lifetime of the loan. They might not loan to you at all. So yeah… if you can't handle credit, don't do it, but be aware of how important it is to establish a credit history.
  - gretful 12y ago
    yes, like fire, credit is useful servant but a terrible master. If you relax your attention it's easy to turn the relationship upside down.
- zo1 12y ago
  Would you say the same about buying a large item (such as a home) on credit? They are fundamentally both debt, but drastically different in details.
- allegory 12y ago
  Been there. I now have no debt after spending 14 years paying it off. 14 years lost.
  - zo1 12y ago
    "14 years lost." 14 years lost how? Do you not have the house/item that you spent 14 years paying off? Or was it credit-card debt?
    - allegory 12y ago
      Credit card, new car and catalogue debt. Everything purchased is gone or broken. I threw a lot of money into a mortgage and ended up in negative equity for 2 years as well. This is how I learned that status and material things are not important. Unfortunately my parents taught me the opposite to this and I paid with slavery for a long time. I realised that they too are slaves to their purchases and status. Shit happens! Everything I own is worth about £1000 now and I can afford to just replace it and go "meh".
at-fates-hands 12y ago
Well credit cards are a pretty recent development. The first general purpose card wasn't created until 1966. Sure, you can trace different forms of credit all the way back to the Crusades and the Knights Templar, but credit cards are a recent invention. If you think it about this way, the greatest generation never used credit. They saved until they had the money to buy stuff. My grandparents never had credit cards, and it wasn't until my parents were in their 40's and quite wealthy before they started using credit cards. If anything, you should use them only to maintain your credit rating. Keep a small balance (under $100) and use them to make small purchases. That way, you can reap the benefits to your credit score, without putting yourself in a huge hole.
- gabzuka 12y ago
  And even the relevance of the credit score depends on where you are and what you're planning to do with it. Where I live you can get mortgages without a credit history as they value more that you can live within your means than having a history of going over it.
  - misaelm 12y ago
    Lenders do rely on a variety of factors when deciding who to lend money to but the credit score (as in FICO in the US) doesn't depend "on where you are and what you're planning to do with it".
    - gabzuka 12y ago
      Yes, of course, that was a typo from me. I meant to write "... the relevance of the credit score". Thanks for pointing it out.
- Jtsummers 12y ago
  > If anything, you should use them only to maintain your credit rating. Keep a small balance (under $100) and use them to make small purchases. That way, you can reap the benefits to your credit score, without putting yourself in a huge hole. Don't leave the balance, pay it off every month. It doesn't benefit your credit score. From a Bank of America FAQ [0]: Fiction: You must carry a balance on your credit cards to build a credit history. Fact: You do need to use your credit cards to build a credit history, but that doesn't mean you must carry an unpaid balance. In fact, your best strategy is to use your credit cards and pay off the bill in full each month so you keep your overall debt-to-credit limit low. [0] https://www.bankofamerica.com/credit-cards/education/5-facts-about-credit-cards.go https://www.bankofamerica.com/credit-cards/education/5-facts...
lazythrowaway 12y ago
When I was in college, and my wife and I were in hard times, we had a $10,000 credit line that we ran up to full and I've been slowly paying down. I currently pay around $70 a month in interest on it - and it was so worth it. It's so cheap now that I don't even register it as an expense today, but the value of the money was 100x to me then when I was struggling so much.
sillysaurus3 12y ago
Important note: If you don't buy anything with credit, you could find yourself unable to sign up for internet service at a new apartment because you're an "unknown credit risk." This happened to me, and I would have been completely screwed if I hadn't had a roommate who did have credit. The ISP was the only service available at the apartment, and they absolutely refused to let me sign up. It wasn't because I had bad credit; I had never used credit. From my point of view, it was absolutely crazy. I tried everything in order to persuade them to let me open an account, such as offering to pay for several months of service in advance, but their policy prohibited anyone with "unknown credit risk" from creating a new account under any circumstances. All you have to do is get a credit card, buy all your groceries with it, then pay it off every month. Paying it off every month is the most important part. If you suddenly find yourself in a position where you have much less income, resist the temptation to use your credit card as a supplementary income.
- deleted 12y ago
  [deleted]
shmerl 12y ago
Good point.
JoshTriplett 12y ago
Purchasing on credit is completely fine, as long as you actually have the money to do so. Assuming that you do, credit cards have some significant advantages over cash, notably receiving rewards for purchases that you'd make anyway, and tracking your purchases more easily. The incredibly dangerous thing is purchasing something you don't actually have the money for, and paying for it over time, with interest.

chiph 12y ago

It's OK to use credit -- you just need to treat it with respect. Like a loaded gun.

crusso 12y ago

Which is how you should feel about it. Not approaching credit with a healthy amount of respect is a large part of the reason why it's such a general problem. Sure, in the article the first example they posted was of a person down on his luck - but that doesn't explain the epidemic of high credit card debt we've had even during boom periods. In general, I think that people just aren't good at living within their means. Having been on my own .com rollercoaster ride, I know what it's like to have to adjust your lifestyle drastically at times to avoid going into debt. It's difficult, but downsizing your house and selling your luxury car is a lot better than the alternative of living on the edge and losing everything when life throws your the inevitable curve ball.

gretful 12y ago

Credit is a trap for the unwary and those that fail to plan ahead. I include myself in that group, as I have credit debt. Don't do - save your money.

geebee 12y ago
My brother asked me for advice, when he was in college, about whether he should get a credit card. I told him that he should, if he was confident that he make a small charge and consistently pay the bill, on time, every month. However, if he wasn't confident that he could do this, he shouldn't. He decided against the credit card. In retrospect, I didn't give him good advice. It's not that the overall approach is a bad one, but I didn't understand or emphasize just how important it is to establish a credit history. When you're in college, credit card companies will offer you a line of credit even if you have no previous credit history. If you can charge $10 a month, and pay it on time every month, for several years… I'm not kidding, banks will lend you $750,000 to buy a house at the most favorable rates 5 years later simply based on your demonstrated ability to pay $10 a month reliably and not run up a $10,000 debt just because you can. It's a test, and it's an important one to pass - but if you aren't going to pass, don't take it (yet). You will need to eventually. If you don't take this test and pass it, banks will at best charge you a higher interest rate that could actually cost you well over 100K over the lifetime of the loan. They might not loan to you at all. So yeah… if you can't handle credit, don't do it, but be aware of how important it is to establish a credit history.
- gretful 12y ago
  yes, like fire, credit is useful servant but a terrible master. If you relax your attention it's easy to turn the relationship upside down.
zo1 12y ago
Would you say the same about buying a large item (such as a home) on credit? They are fundamentally both debt, but drastically different in details.
allegory 12y ago
Been there. I now have no debt after spending 14 years paying it off. 14 years lost.
- zo1 12y ago
  "14 years lost." 14 years lost how? Do you not have the house/item that you spent 14 years paying off? Or was it credit-card debt?
  - allegory 12y ago
    Credit card, new car and catalogue debt. Everything purchased is gone or broken. I threw a lot of money into a mortgage and ended up in negative equity for 2 years as well. This is how I learned that status and material things are not important. Unfortunately my parents taught me the opposite to this and I paid with slavery for a long time. I realised that they too are slaves to their purchases and status. Shit happens! Everything I own is worth about £1000 now and I can afford to just replace it and go "meh".

at-fates-hands 12y ago

Well credit cards are a pretty recent development. The first general purpose card wasn't created until 1966. Sure, you can trace different forms of credit all the way back to the Crusades and the Knights Templar, but credit cards are a recent invention. If you think it about this way, the greatest generation never used credit. They saved until they had the money to buy stuff. My grandparents never had credit cards, and it wasn't until my parents were in their 40's and quite wealthy before they started using credit cards. If anything, you should use them only to maintain your credit rating. Keep a small balance (under $100) and use them to make small purchases. That way, you can reap the benefits to your credit score, without putting yourself in a huge hole.

gabzuka 12y ago
And even the relevance of the credit score depends on where you are and what you're planning to do with it. Where I live you can get mortgages without a credit history as they value more that you can live within your means than having a history of going over it.
- misaelm 12y ago
  Lenders do rely on a variety of factors when deciding who to lend money to but the credit score (as in FICO in the US) doesn't depend "on where you are and what you're planning to do with it".
  - gabzuka 12y ago
    Yes, of course, that was a typo from me. I meant to write "... the relevance of the credit score". Thanks for pointing it out.
Jtsummers 12y ago
> If anything, you should use them only to maintain your credit rating. Keep a small balance (under $100) and use them to make small purchases. That way, you can reap the benefits to your credit score, without putting yourself in a huge hole. Don't leave the balance, pay it off every month. It doesn't benefit your credit score. From a Bank of America FAQ [0]: Fiction: You must carry a balance on your credit cards to build a credit history. Fact: You do need to use your credit cards to build a credit history, but that doesn't mean you must carry an unpaid balance. In fact, your best strategy is to use your credit cards and pay off the bill in full each month so you keep your overall debt-to-credit limit low. [0] https://www.bankofamerica.com/credit-cards/education/5-facts-about-credit-cards.go https://www.bankofamerica.com/credit-cards/education/5-facts...

lazythrowaway 12y ago

When I was in college, and my wife and I were in hard times, we had a $10,000 credit line that we ran up to full and I've been slowly paying down. I currently pay around $70 a month in interest on it - and it was so worth it. It's so cheap now that I don't even register it as an expense today, but the value of the money was 100x to me then when I was struggling so much.

sillysaurus3 12y ago

Important note: If you don't buy anything with credit, you could find yourself unable to sign up for internet service at a new apartment because you're an "unknown credit risk." This happened to me, and I would have been completely screwed if I hadn't had a roommate who did have credit. The ISP was the only service available at the apartment, and they absolutely refused to let me sign up. It wasn't because I had bad credit; I had never used credit. From my point of view, it was absolutely crazy. I tried everything in order to persuade them to let me open an account, such as offering to pay for several months of service in advance, but their policy prohibited anyone with "unknown credit risk" from creating a new account under any circumstances. All you have to do is get a credit card, buy all your groceries with it, then pay it off every month. Paying it off every month is the most important part. If you suddenly find yourself in a position where you have much less income, resist the temptation to use your credit card as a supplementary income.

deleted 12y ago
[deleted]

shmerl 12y ago

Good point.

JoshTriplett 12y ago

Purchasing on credit is completely fine, as long as you actually have the money to do so. Assuming that you do, credit cards have some significant advantages over cash, notably receiving rewards for purchases that you'd make anyway, and tracking your purchases more easily. The incredibly dangerous thing is purchasing something you don't actually have the money for, and paying for it over time, with interest.