(originally posted
here∞)
Why in the hell would I want a card that links directly to my checking account? With a credit card, Discover pays me cash for me to borrow money from them, and charges no interest if I pay them back in reasonably short order. In the meantime, the money I spent pays me interest sitting in my checking account for another 30 days or so until I pay Discover.
If there's fraud, I just dispute the charges and never pay them. If I dispute/alert within 3 days, I am not liable for anything. Ever. If I dispute later, I am at most liable for $50. Ever. With a debit card, the amount is immediately removed from my interest-bearing checking account, and if there is ever fraud, my checking account can be totally wiped out, my checks then all bounce incurring multiple NSF fees, and it may take months and months for me to get reimbursed - if I ever see the money again.
No wonder Visa spends big bucks promoting their debit card - more of the risk is shifted (shafted?) to the consumer.
I see that there have been a few minor exceptions to this argument like irresponsible kids, but otherwise he's right on the money. Although there are a couple of bank/debit cards in my possession, I would never consider using them. Mead_maker
Carrying debt on a credit card is dumb. Saying anything else just puts off the day when you develop the intestinal fortitude to deal with your spending habits.
This quote, on the other hand, merely reflects ignorance of what debt management can do for you. First of all, intelligently acquired CC debt is very cheap. I get 5 offers a day from companies begging me to put balances on their accounts for 6 months at 0.0%. Second, doing a cost/benefit analysis takes all of 10 seconds and can be done by any middle schooler. This equation has severe roundoff errors if you're being geeky about it, but it works: toy price * months until you can pay it off * APR / 10 = cost of having it now rather than later, not counting depreciation. For example, if I buy $1000 of sound equipment in March knowing I can't actually afford it until I get a summer job, that means my 3 extra months of gigging cost me a whopping $30 (without any balance-transfering mojo, even), whereas rental equipment would probably be $500/gig.
Wallet contains:
Amex Blue, $10k, 9.9% fixed, had for 4 years
USAA Mastercard, $5k, 9.9% fixed, had for 3 years
Every now and then one of the zillions of credit card offers that comes through the mail makes me consider switching to something (not the advertised one!) that would get me cash back and/or airline miles, but so far none of them has been worth the effort. I don't think I've ever spent more than $15k in a year on a card.
What is happening is the people are rationalizing their choice not to live within their means, nothing more, nothing less.
"Living within your means" is a nice concept if you have a steady income. It means very little if you make $15k in the summers and $0k the other nine months of the year. Shifting that income structure into something that's satisfying, much less sustainable, requires debt management. Doing so on a 20.9% CC would be idiocy, since you're paying far more than market rate for that service, but you have yet to offer a reason against doing so on CCs with rates lower than prime.
If our example person had turned out to be unable to finance a mere $1k, he would've had far greater problems than prematurely eBaying a few toys.
Buying toys on credit instead of saving money is stupid.
The stupidity of buying things on credit has little to do with their "toy" factor and much to do with their status as assets. A valid argument might be made that buying a car on credit is stupid, since you're paying interest on an item whose value depreciates tremendously. That argument clearly cannot be generalized to houses. If you want to argue that (eg) used microphones lie on one side or the other, you have to (1) make that argument in the first place (2) prove that it applies to the items in question.
Making discretionary purchases based upon probable future earnings is stupid.
On my side of the debate I offer a discrete calculation of interest payments vs. marginal utility. On your side you have...???
Making discretionary purchases using cash without having a savings buffer is stupid.
Not having savings is stupid, period. Who argued otherwise? In case you missed the memo, using credit allows you to avoid dipping into savings.
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