Author Topic: Credit card questions.  (Read 4772 times)

sixkids

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Credit card questions.
« on: January 17, 2017, 08:04:12 AM »
I'm curious about this. Since this place is decidedly UN-Dave Ramsey, what are the thoughts on credit cards?
I've got 9 of them. I don't pay interest on them, but I sort of feel like some of them are useless. Is the an official MMM credit card rule?

I've got some store cards--  express, buckle, j.crew, Victoria's Secret (for my wife), overstock.com, and kohls. Of those cards, I used express once for some socks online. It popped up and said I was approved, so I went with it. Never used it again. Same with Victoria's Secret, although my wife uses it occasionally. Overstock.com I got some furniture for my kids rooms and it popped up. 0% for 18 months, so I took it. I'm about six months in and will have it paid off in the next month or two. After that I'll probably never use it again. J.crew I use periodically for work clothes, but not a lot. Kohls, we use for the discounts but it started with a $300 limit and it's still at a $300 limit so it's kinda useless except for the discounts.
As far as major cards, I've got a discover card, American Express and a MasterCard with no reward program. I've got it basically for those times a place doesn't take Amex or discover. Discover is my primary card. 5% cash back in useful revolving areas and Amex I have just because it's my oldest card. Am I wasting time or anything with these?  It seems like I could cancel the store cards without any concern and just use discover if I shop at these stores. Just seeing how credit cards factor into becoming FIRE'd. I don't shop for the sake of shopping with any of them, although I think my wife might buy more than she needs at Victoria's Secret and kohls. Nothing crazy though.

secondcor521

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Re: Credit card questions.
« Reply #1 on: January 17, 2017, 08:21:20 AM »
Credit cards can be negative or positive with respect to FIRE depending on how you use them.

Since FIRE is about accumulating enough assets to live on, if you use credit cards and ever pay interest, buy more than you need (like you mention towards the end of your post), or pay late or overlimit or any other fees, they'd be negative in this case.

Some people on here advocate using credit cards as at least a partial substitute for an emergency fund (not me), and I think most people on here are OK with using them as a substitute for cash and paying them off completely monthly (also not me, but I don't object to this one as much).  This is mostly neutral with respect to FIRE.

Credit cards can be positive for FIRE if you use them for signup bonuses, cash back (to the extent that you don't overspend to get the cash back - I'm dubious on this), piggybacking, or travel hacking.  I'm FIRE'd but I do piggybacking and signup bonuses + churning + travel hacking and guestimate that it is worth about $5K - $10K per year in income.  Using the 4% rule, that's the equivalent of $125,000 to $250,000 worth of savings, so I think it is worth it.

ketchup

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Re: Credit card questions.
« Reply #2 on: January 17, 2017, 08:25:13 AM »
You are correct in saying that the store cards are probably mostly useless.  Maybe hold onto the Kohl's if you shop there often, as that's one place I know has the fun "need the card for the deals" bullshittery.

Discover is a reasonable daily spender.  Maybe look into a 1.5% or 2% cashback card to supplement.  Citi Double Cash or Chase Freedom Unlimited come to mind as options.

For the sake of your credit, I wouldn't cancel any of these cards if they are particularly old.  Old accounts look "good" on your credit.

As long as you're always paying off the statement balance in full every month (barring any special 0% situations like you mentioned) and your spending habits are payment-method-agnostic, there's no harm at all in credit cards.  In fact, there are many benefits.  1-5% cashback, way better fraud resolution (vs a checking account/debit card), and often other perks like rental car insurance, "price protection" (meaning if something drops in price after you buy it, you can file a claim and get the difference), automatically extended warranties, etc.  You can also play the sign-on bonus game (look up credit card "churning").

Stash Engineer

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Re: Credit card questions.
« Reply #3 on: January 17, 2017, 08:39:35 AM »
I think the value of credit cards completely depends on the user.  If you are the type of person that easily over-spends when using credit cards, then don't use them or learn how to track your spending in a way that is meaningful to you and will prevent over-usage.  Most store cards aren't worth having, but since you do have them, keep them at 0 balance and leave the accounts open for the history.  Credit card churning or even just using a good rewards card for all your purchases is well worth the trouble if you disciplined enough.

I used to be a CC over-spender.  After I paid off all my pre-MMM CC debt, I slowly transitioned to putting all expenses on a rewards card.  Then I transitioned into slow churning with the goal of getting at least one (nearly) free family vacation every year.   

FWIW, I don't think too many people here are anti-Dave Ramsey.  Its just that many have moved past that stage in their financial lives and are on to bigger and better goals.  I think the snowball debt payoff method rocks!
« Last Edit: January 17, 2017, 08:43:10 AM by Stash Engineer »

marielle

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Re: Credit card questions.
« Reply #4 on: January 17, 2017, 08:47:52 AM »
If they don't have annual fees, just stick them in a drawer and forget about them. Some companies may cancel them after so long of not spending with them, but it's way better to take that risk than to buy random stuff with your store cards that you don't need just to keep them open.

kms

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Re: Credit card questions.
« Reply #5 on: January 17, 2017, 09:06:14 AM »
I would personally only keep one kind of credit card: free and with a cash rewards program.

Between my wife and me we have a joint American Express account with one card each (free, 3% cash back on groceries, 2% on fuel, 1% on everything else) as well as a BoA VISA card each, also free with 3% on fuel, 2% on groceries, and 1% on everything else. Needless to say we use the AMEX cards for our weekly trips to the grocery store, our VISA cards at gas stations, and sometimes one sometimes the other for everything else. Both AMEX and BoA have special cash rewards programs where I can get up to 10% back at certain stores, hotels, etc. We check those specials every other week - for example there was a 10% special at hotel bills at Best Western hotels in December. Since I travel a lot for my job this is a win/win situation for me. Another one is AMEX's 10% immediate cash back on communications - we have both our AT&T GoPhone plans charged to our respective AMEX cards and get 10% back each month right away (which lowers our monthly smartphone costs by $9 each month, or more than $100 each year). At the end of the month it's not much but it adds up, especially if you try to put large expenses such as business travel on these cards. Some months I end up making between $80-$100 in cash rewards.

As soon as a credit card has an annual fee or no cash back rewards program I would cancel it immediately, though.

ketchup

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Re: Credit card questions.
« Reply #6 on: January 17, 2017, 09:11:03 AM »
FWIW, I don't think too many people here are anti-Dave Ramsey.  Its just that many have moved past that stage in their financial lives and are on to bigger and better goals.  I think the snowball debt payoff method rocks!
I'm fine with Dave Ramsay's advice for people in debt-payoff mode, but is investment advice is bad and the Christy shit is not my cup of tea.  So yeah, when someone "graduates" to debt-free and accumulating wealth, Dave Ramsay stops being useful in my mind (and potentially dangerous).

Playing with Fire UK

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Re: Credit card questions.
« Reply #7 on: January 17, 2017, 09:38:24 AM »
I'm curious about this. Since this place is decidedly UN-Dave Ramsey, what are the thoughts on credit cards?
I've got 9 of them. I don't pay interest on them, but I sort of feel like some of them are useless. Is the an official MMM credit card rule?

There is no rule. We are trusted like grown-ups to make our own decisions (apart from bikes, and giant cars). This is what I like about MMM and what I dislike about Dave Ramsey.

If someone doesn't want to use cards, that's fine.

Stash Engineer

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Re: Credit card questions.
« Reply #8 on: January 17, 2017, 09:54:15 AM »
FWIW, I don't think too many people here are anti-Dave Ramsey.  Its just that many have moved past that stage in their financial lives and are on to bigger and better goals.  I think the snowball debt payoff method rocks!
I'm fine with Dave Ramsay's advice for people in debt-payoff mode, but is investment advice is bad and the Christy shit is not my cup of tea.  So yeah, when someone "graduates" to debt-free and accumulating wealth, Dave Ramsay stops being useful in my mind (and potentially dangerous).

I only ever really followed Dave R. through my debt payoff phase.  Never paid much attention to his investment + 'other' advice since that's about the time I found MMM and there is so much awesome here.  :)

sixkids

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Re: Credit card questions.
« Reply #9 on: January 17, 2017, 10:19:56 AM »
Great. I'm ending up canceling a few of the store card. The express and buckle are both under a year old. Same with the MasterCard. It's go an annual fee, so maybe I'll check with Chase or PenFed about a no annual fee card since I have accounts at both.

That'll leave me with Amex, discover, kohls, overstock, jcrew, and Victoria's Secret. My oldest is discover, which I've had since 1996 and Amex since 2001, so I'm not too worried about the impact of closing a few new cards.
Dave Ramsey helped me out a lot with getting out of debt. I used to have a whole lot of credit card debt that I didn't see anything wrong with. Plus loans on two motorcycles, a Lexus, a four wheeler..  you get the point. Even though I'm not where I want to be, I'm in a much better spot, and it'll only get better.

Laura33

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Re: Credit card questions.
« Reply #10 on: January 17, 2017, 10:50:07 AM »
Great. I'm ending up canceling a few of the store card. The express and buckle are both under a year old. Same with the MasterCard. It's go an annual fee, so maybe I'll check with Chase or PenFed about a no annual fee card since I have accounts at both.

That'll leave me with Amex, discover, kohls, overstock, jcrew, and Victoria's Secret. My oldest is discover, which I've had since 1996 and Amex since 2001, so I'm not too worried about the impact of closing a few new cards.
Dave Ramsey helped me out a lot with getting out of debt. I used to have a whole lot of credit card debt that I didn't see anything wrong with. Plus loans on two motorcycles, a Lexus, a four wheeler..  you get the point. Even though I'm not where I want to be, I'm in a much better spot, and it'll only get better.

Personally, I'd keep the Kohl's, because you do need the card to get some of the deals, and combining the deals and coupons can make kid clothes relatively cheap.  The rest, meh.

Does you Amex have an annual fee?  If so, do you get benefits that more than offset that cost?  We have one that gives us cash toward travel, and DH compared the payout to other options to ensure that it was the best choice for us and would pay us back significantly more than the annual fee (although we have not been good about re-doing that analysis since then).  But without that I don't see much reason for it. 

sixkids

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Re: Credit card questions.
« Reply #11 on: January 17, 2017, 10:55:06 AM »
I'm keeping the kohls. My Amex has no annual fee, either.

ketchup

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Re: Credit card questions.
« Reply #12 on: January 17, 2017, 11:17:54 AM »
Great. I'm ending up canceling a few of the store card. The express and buckle are both under a year old. Same with the MasterCard. It's go an annual fee, so maybe I'll check with Chase or PenFed about a no annual fee card since I have accounts at both.

That'll leave me with Amex, discover, kohls, overstock, jcrew, and Victoria's Secret. My oldest is discover, which I've had since 1996 and Amex since 2001, so I'm not too worried about the impact of closing a few new cards.
Dave Ramsey helped me out a lot with getting out of debt. I used to have a whole lot of credit card debt that I didn't see anything wrong with. Plus loans on two motorcycles, a Lexus, a four wheeler..  you get the point. Even though I'm not where I want to be, I'm in a much better spot, and it'll only get better.
Sounds like a good plan.  And congrats on being in a much better spot now.

yachi

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Re: Credit card questions.
« Reply #13 on: January 17, 2017, 12:13:26 PM »
Not only are Mustachian's OK with Credit Cards, they're encouraged for everything from % cash back and churning for points, to selling Authorized User spots.
OP, you might check out the Share your Badassity section for getting more usefulness out of your Discover card.

hunt2eat

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Re: Credit card questions.
« Reply #14 on: January 17, 2017, 12:24:36 PM »
I view credit cards as a tool to help me to FIRE.  You can do a lot or a little with them.  Check out the Dr of Credit Blog or r/churning for some ways to use them.  Sign up bonuses are the way to go.

MichaelB

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Re: Credit card questions.
« Reply #15 on: January 17, 2017, 01:00:17 PM »
Credit cards are like alcohol. Good if used properly, but they will ruin your life if out of control.

I swipe everything, but pay the balance each month. They give you rewards freebies and give you credit history.

homelesshobbit

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Re: Credit card questions.
« Reply #16 on: January 17, 2017, 03:07:49 PM »
Didn't read the replies but I'm on vacation #5 with just points for a family of 4, (flights and hotels covered)

2 Hawaii vacations and 2 week long Charleston/Savannah/Myrtle Beach getaways

I have enough points for maybe 2-3 more Hawaii vacations saved up.

Oh and Used 2 American Express platinum to purchase our Washer & Dryer from best buy with points.

I don't do cash back I strictly redeem for vacations

sixkids

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Re: Credit card questions.
« Reply #17 on: January 17, 2017, 03:13:19 PM »
That's what I need to do is find a good points one that I can use for a vacation for my family of 8. 

Another Reader

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Re: Credit card questions.
« Reply #18 on: January 17, 2017, 03:20:27 PM »
http://www.travelmiles101.com/travel-rewards-course-registration

http://www.cardratings.com/advisors/travelmiles101?SRC=610622

The two gentlemen that run the travel rewards site and the free class got their start from this site.

SpareChange

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Re: Credit card questions.
« Reply #19 on: January 17, 2017, 11:21:43 PM »
I use a credit card for safety, cash back rewards, and it's effect on my credit report and score. I just have one, and it happens to be the only open line on my credit (paid off last student loan 2 years ago). Credit Karma estimates that if I closed it my score would drop 135 points lol. Think I'll keep it.

catccc

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Re: Credit card questions.
« Reply #20 on: January 18, 2017, 02:25:56 PM »
If the cards are older, keep them open.  Average account age helps your credit score. 

I personally use CCs for everything I can.  Never carry a balance, reap the rewards.

Just started some light churing, so hopefully I can fly my family of 4 to Hawaii for free in the near future.

MoonLiteNite

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Re: Credit card questions.
« Reply #21 on: January 19, 2017, 06:55:07 AM »
I opened up my first one at age 19... (11 years ago), current credit limit is 10k
Then like 7 years ago i opened up another one, FORGOT i opened it, never got the card in the mail, and just 6 months ago found out i had one. Was going to close it since i already have one. But then they offered me a huge sign on bonus, and then, i learned of all these sign on bonus you can get!
6 months later, I have 7 open cards now :D


honestly use them just for their sign on and then for their little cash back.
I suppose in all together the credit limit is around 45k, so that is a decent 911 fund!

edit:
Also used the capitalone, and nerdwallet websites to view my credit score.
i went from 814 points to 811 after opening 5 new cards within a month or so of each other. I guess the credit openings where evened out by the new huge line of credit limit? I dunno. I would have assumed it would have tanked.
« Last Edit: January 19, 2017, 06:57:54 AM by MoonLiteNite »

Dezrah

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Re: Credit card questions.
« Reply #22 on: January 19, 2017, 05:09:44 PM »
If I may, I have a question about credit cards myself.

My cash back card allows me to redeem my credit in the form of gift cards.  What on earth is the point of this?  It's not like I get a better exchange rate.  $20 cash back reward gets you a $20 gift card.  It's literally less good than money.  Plus, if I really wanted something from Chipotle, why wouldn't I just buy it with the card and get the cash back?  Am I missing something here?

JLee

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Re: Credit card questions.
« Reply #23 on: January 19, 2017, 05:15:41 PM »
If I may, I have a question about credit cards myself.

My cash back card allows me to redeem my credit in the form of gift cards.  What on earth is the point of this?  It's not like I get a better exchange rate.  $20 cash back reward gets you a $20 gift card.  It's literally less good than money.  Plus, if I really wanted something from Chipotle, why wouldn't I just buy it with the card and get the cash back?  Am I missing something here?

Sometimes promotions may make gift cards a little cheaper than cash, but I agree - I don't understand the point of gift cards in general. May as well just give someone cash instead of forcing them to spend money at XYZ establishment.

boarder42

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Re: Credit card questions.
« Reply #24 on: January 19, 2017, 05:17:16 PM »
I'm building up a ton of cards to put into the program ars talks about   this time next year I will be pulling 3k per month if it all goes according to plan.

GoBigRed

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Re: Credit card questions.
« Reply #25 on: January 19, 2017, 05:58:42 PM »
If your store cards/credit cards have no fees, I would just keep them open.  I have several store cards that just sit in a drawer.  If they have fees, I am usually in the camp of cancelling and signing up for something better/getting a sign-up bonus.  Sometimes Kohls and Old Navy have benefits for their card holders, which may come in handy. 

I am in the camp of using credit cards to travel hack for free trips and travel.  Many of the financial bloggers travel hack and use credit cards for free travel.  So long as you pay off the balance and it does not increase your normal spending levels/pattern, I think it is a great tool for saving money.  If you don't pay off the balance or it increases spending, then you negate any benefits though.   We are taking our first trip this summer using this method.  8 nights at a resort and $800 in flights completely free for 2 people.   

Even when you don't spend much in a given year, it is very easy to rack up points using sign-up bonus and spend categories.  If married, each person can sign up for their own card for the bonus.  Meeting minimum spend can be tricky, but we try to sign up for a new one before our car insurance is due or other big purchases, and alternate between who is getting the new card.  Many cards provide lots of benefits, but I would recommend reading some of the travel blogs and forums and you can get a sense of some of the benefits.  If you don't travel, there are products that offer 2.5% on all purchases, or 2-3% at categories (such as grocery, for no annual fee). 

Some of my favorite sites are Flyertalk, Mommy Points, Travel Codex, Richmond Savers, View from the Wing, Frugal Travel Guy, The Points Guy and Doctor of Credit.  I would recommend checking these out. 


Playing with Fire UK

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Re: Credit card questions.
« Reply #26 on: January 20, 2017, 12:21:48 AM »
If I may, I have a question about credit cards myself.

My cash back card allows me to redeem my credit in the form of gift cards.  What on earth is the point of this?  It's not like I get a better exchange rate.  $20 cash back reward gets you a $20 gift card.  It's literally less good than money.  Plus, if I really wanted something from Chipotle, why wouldn't I just buy it with the card and get the cash back?  Am I missing something here?

Sometimes promotions may make gift cards a little cheaper than cash, but I agree - I don't understand the point of gift cards in general. May as well just give someone cash instead of forcing them to spend money at XYZ establishment.

I think it stems from (IMO) old fashioned ideas about giving cash being cheap or common or generally undesirable. I agree that this is a little crazy.

Having said that there are a couple of occasions when I've given people gift cards (often for a supermarket or baby store) for the exact reason that I didn't trust them, I was trying to force/nudge them towards spending the money on what they'd asked for rather than their addition or making terrible financial choices. [I know this isn't fool proof].

Metric Mouse

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Re: Credit card questions.
« Reply #27 on: January 20, 2017, 03:29:50 AM »
If the cards are older, keep them open.  Average account age helps your credit score. 

I personally use CCs for everything I can.  Never carry a balance, reap the rewards.

Just started some light churing, so hopefully I can fly my family of 4 to Hawaii for free in the near future.

And you can use them for easy cash by selling tradelines.