Author Topic: Very Troubling Quote - Millennials and Credit Cards, MSN Money  (Read 27788 times)

aschmidt2930

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #50 on: October 04, 2014, 07:16:58 PM »
For anyone who has a little cushion in their accounts I see credit cards as a no brainer.  Build a strong credit score, and with the right card you can earn some awesome points and get valuable perks (I.e free rental insurance).  With that said.. Anyone living paycheck to paycheck should avoid them like the plague.  A lack of discipline or a crazier than expected night out at the bar can get you into trouble in a hurry when buying on credit.

I just can't comprehend how that many people don't pay in full each month.  Even carrying a small balance from the previous month would be a brutally painful experience for me.

Gin1984

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #51 on: October 05, 2014, 01:10:22 PM »
Obviously, credit cards are a very good thing for many reasons, as we all know.  However, some people just lack the ability to handle themselves enough to be able to take advantage of the benefits of credit cards.

What are those obviously good qualities?
1. Consumer protection? Debit cards offer the same basic protection.
2. Rewards? How much in 2013 did you make in rewards?
No they don't.  And, $400 which was 1.6% of our gross income at the time because I was in a Master's program and my husband in a PhD program.  The year before though, I paid for hotel rooms and a flight with credit card rewards worth over $2000 for my wedding.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #52 on: October 05, 2014, 02:47:28 PM »
Quote
2. Rewards? How much in 2013 did you make in rewards?

I don't feel like digging back to 2013, but so far this year we've cashed in:

$130 worth of groceries on my main card
$200 in grocery gift cards as a sign-up bonus for a credit card
$20 statement credit on my Amazon visa, which paid most of my internet bill that month
$50 cashback in the form of a cheque
And some small amount for our annual Costco Amex rebate($10-ish)

During that time we paid precisely $0 in interest or fees. It's not hard to avoid fees and interest if you're at all organized. It's not like it just appears out of nowhere.

myrax

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #53 on: October 05, 2014, 03:04:02 PM »
The credit card/casino analogy isn't quite accurate, in that a credit card company has an additional way of making money beyond just screwing you over. Every time you swipe your card, they get a transaction fee, and those fees are probably worth more than your rewards. You get convenience, the credit card company gets money, and the fee gets taken from the vendor's bottom line.

MoneyCat

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #54 on: October 05, 2014, 04:00:14 PM »
Obviously, credit cards are a very good thing for many reasons, as we all know.  However, some people just lack the ability to handle themselves enough to be able to take advantage of the benefits of credit cards.

What are those obviously good qualities?
1. Consumer protection? Debit cards offer the same basic protection.
2. Rewards? How much in 2013 did you make in rewards?
No they don't.  And, $400 which was 1.6% of our gross income at the time because I was in a Master's program and my husband in a PhD program.  The year before though, I paid for hotel rooms and a flight with credit card rewards worth over $2000 for my wedding.

Not sure about your debit card but mine offers "Zero-Liability Protection: You don't pay for any unauthorized debit card transactions when you notify us promptly." & "Guaranteed Reimbursement: Unauthorized purchases and withdrawals are back in your account by the end of the next business day. You don't have to wait while we investigate." Per the account agreement you have 2 business days from when you learn of the fraud or 60 days from when the fraud occurred to contact the bank unless there are special circumstances in which case they may lengthen that period of time. So what special protections does your credit card offer you that my debit card doesn't offer me?

Does your debit card extend warranties on your purchases by an extra year?  Does it provide free flight insurance?  Free auto rental insurance?  Does it waive the currency exchange fee when you travel overseas?  Does it provide free FICO scores?  Does it provide extra 5% - 20% discounts on top of your other rewards at online retailers?  Can you use your reward points from your debit card directly as cash at Amazon.com?  Those are just a few of the perks I get with credit cards.

galliver

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #55 on: October 05, 2014, 04:16:38 PM »


It is too easy to miss/be late with a payment and then have a fee/interest to pay.  Especially with a new card that you haven't set up to at least pay the minimum each month.

I see what you mean...I seem to forget to pay my electric bill a few times a year, too. Just so hard to remember to be an adult...

 Actually, I don't. I've never missed a payment. I sit down when my paycheck and card statements come in and pay everything. It's not hard.

I'm not saying everyone must use CCs; many people have good reasons not to (previous debt issues), but fearing that access to credit will drastically change your spending habits when you are a conscientious consumer is ridiculous. And others have covered that CCs have better fraud protection than DCs  already.

I haven't read the whole thread yet, but another advantage of CCs that I use is carrying reimbursable expenses (at 0%).

I'm concerned about this article, too. But my concern is that, as stupid as the credit score game/scam is, it is important, and they are losing by not playing! (And no, that is not like the lottery, it is a game of skill, not luck.)

Beric01

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #56 on: October 05, 2014, 04:24:16 PM »
I see what you mean...I seem to forget to pay my electric bill a few times a year, too. Just so hard to remember to be an adult...

 Actually, I don't. I've never missed a payment. I sit down when my paycheck and card statements come in and pay everything. It's not hard.

Actually I have to agree with his post. It's very easy to forget to make payments. We all have busy lives. That's why I have everything I need to pay regularly on auto-pay (bill, credit cards, everything). Then I don't need to worry about fees or a damaged credit score because something came up and I forgot to pay.

I check my statements occasionally to make sure of no fraud. Auto-payment makes the actual bill-paying work just like a debit card.

galliver

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #57 on: October 05, 2014, 04:40:05 PM »
I see what you mean...I seem to forget to pay my electric bill a few times a year, too. Just so hard to remember to be an adult...

 Actually, I don't. I've never missed a payment. I sit down when my paycheck and card statements come in and pay everything. It's not hard.

Actually I have to agree with his post. It's very easy to forget to make payments. We all have busy lives. That's why I have everything I need to pay regularly on auto-pay (bill, credit cards, everything). Then I don't need to worry about fees or a damaged credit score because something came up and I forgot to pay.

I check my statements occasionally to make sure of no fraud. Auto-payment makes the actual bill-paying work just like a debit card.
I agree that we all forget. I disagree that CC late fees are worse than any other "stupid tax," or harder to automate payments on (I currently trust myself more than automation, but whatever works per individual).

arebelspy

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #58 on: October 05, 2014, 05:58:15 PM »
And not only that, but a late fee is a small percentage of rewards earned. How many late fees are you planning on getting?
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sheepstache

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #59 on: October 05, 2014, 06:30:43 PM »
The credit card/casino analogy isn't quite accurate, in that a credit card company has an additional way of making money beyond just screwing you over. Every time you swipe your card, they get a transaction fee, and those fees are probably worth more than your rewards. You get convenience, the credit card company gets money, and the fee gets taken from the vendor's bottom line.

That's a fair point. My understanding is this raises the prices for all of us. Tragedy of the commons, i.e., the individual is incentivized to get as much as they can out of the cc system or lose out.

MoneyCat

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #60 on: October 05, 2014, 07:07:06 PM »
The credit card/casino analogy isn't quite accurate, in that a credit card company has an additional way of making money beyond just screwing you over. Every time you swipe your card, they get a transaction fee, and those fees are probably worth more than your rewards. You get convenience, the credit card company gets money, and the fee gets taken from the vendor's bottom line.

That's a fair point. My understanding is this raises the prices for all of us. Tragedy of the commons, i.e., the individual is incentivized to get as much as they can out of the cc system or lose out.

Do you honestly think prices would be reduced if everyone stopped using rewards credit cards?  It is what it is and you might as well get what you can out of it.

galliver

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #61 on: October 05, 2014, 07:11:32 PM »
The credit card/casino analogy isn't quite accurate, in that a credit card company has an additional way of making money beyond just screwing you over. Every time you swipe your card, they get a transaction fee, and those fees are probably worth more than your rewards. You get convenience, the credit card company gets money, and the fee gets taken from the vendor's bottom line.

That's a fair point. My understanding is this raises the prices for all of us. Tragedy of the commons, i.e., the individual is incentivized to get as much as they can out of the cc system or lose out.
Your post made me wonder what the overall effect actually is. On one hand, vendors pass on processing fees to customers. On the other hand, I bet electronic payments reduce the need for infrastructure in certain industries like travel and make possible online comparison shopping, which would increase competition and drive down prices...

sheepstache

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #62 on: October 05, 2014, 07:13:30 PM »
The credit card/casino analogy isn't quite accurate, in that a credit card company has an additional way of making money beyond just screwing you over. Every time you swipe your card, they get a transaction fee, and those fees are probably worth more than your rewards. You get convenience, the credit card company gets money, and the fee gets taken from the vendor's bottom line.

That's a fair point. My understanding is this raises the prices for all of us. Tragedy of the commons, i.e., the individual is incentivized to get as much as they can out of the cc system or lose out.

Do you honestly think prices would be reduced if everyone stopped using rewards credit cards?  It is what it is and you might as well get what you can out of it.

Theoretically, it would mean larger profit margins for the stores and therefore some would choose to take a cut in profit margin to cut out competitors and increase their profits through volume. Theoretically. I do take your point that in a lot of cases the price is purely what people are willing to pay.

Your post made me wonder what the overall effect actually is. On one hand, vendors pass on processing fees to customers. On the other hand, I bet electronic payments reduce the need for infrastructure in certain industries like travel and make possible online comparison shopping, which would increase competition and drive down prices...
Are electronic payments by debit card that different? Do merchants pay lower fees on debit card purchases? I genuinely don't know.
« Last Edit: October 05, 2014, 07:15:38 PM by sheepstache »

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #63 on: October 05, 2014, 08:02:54 PM »
I remember when gas stations charged more per gallon if you paid with CC. Made great sense to me, since back then I only used cash!

Also when gas was briefly metered by the half gallon once it topped $1 per gallon, because the mechanic pumps did not have enough digits to be calibrated over 99.9 cents. But enough about how old I am!
 

TomTX

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #64 on: October 05, 2014, 08:37:39 PM »
Again, my problem is that a VERY small percentage of CC users have the ninja skills some of you do.   I'll always be against credit cards.  There are other ways to build credit - safer but slower, through my credit union.

Also, debit cards take care of that convenience factor and once the money's gone, it's gone.  I can't be tempted to impulse buy with the knowledge that I have $10k of imagined wiggle room in my budget.  My savings account is there for emergencies.  It's real money - my money - that I can use without financially enslaving myself to a mega corporation for the duration of the loan.

It's not ninja skills. It's really, really basic. Paying your bills on time every month. Like your electric bill. Not impulse buying. I agree - if you have impulse purchase issues which you restrain better with cash, stick to cash.

Personally, we got over $500 in regular credit card rewards last year, just for buying stuff we would buy anyway (plus my travel for work which is reimbursed) Nothing is less than 1.5% back, most is 2-3% and we time larger purchases to take advantage of 5% rotating categories.

The credit card/casino analogy isn't quite accurate, in that a credit card company has an additional way of making money beyond just screwing you over. Every time you swipe your card, they get a transaction fee, and those fees are probably worth more than your rewards. You get convenience, the credit card company gets money, and the fee gets taken from the vendor's bottom line.

That's a fair point. My understanding is this raises the prices for all of us. Tragedy of the commons, i.e., the individual is incentivized to get as much as they can out of the cc system or lose out.

Maybe, maybe not. Handling cash has expenses for a business too - not just meaning cashiers dip into the till (or just make a mistake and give back change for a $20 instead of a $5) - you need a safe, you have to pay someone for the time to count up the cash from every register every shift, you need to pay someone to go make deposits, et cetera. Even if you are a small business owner and do it all yourself - you could be spending the time doing something else. Ordering. Inventory. Interviewing. Improving your business plan. Advertising. Et cetera.

The 2-3% merchant fee may actually be cheaper, particularly for big business. Maybe not on tiny purchases.
« Last Edit: October 05, 2014, 08:40:36 PM by TomTX »

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #65 on: October 05, 2014, 08:41:42 PM »
common cash back rate of 2% = $684 maximum cash back per year. Less income taxes @15% = $582.

There is no income tax on cash back.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #66 on: October 05, 2014, 08:58:28 PM »
Assuming a median household income of $51,371(1) - housing cost of $17,148(2) = $34,223 maximum credit card spending at a common cash back rate of 2% = $684 maximum cash back per year. Less income taxes @15% = $582. A study has found that "people spend 12-18% more when using credit cards instead of cash"(3). Which is $3,667 taking the lowest rate in the range, 12%.

Conclusion: Assuming you are an average American you spend $3,667 more a year(excluding interest and fees many Americans pay) to get $582.

And like paying interest and fees, you can also choose or choose not to overspend. If what you buy is influenced by your method of payment, you should address whatever decision-making process you're using before anything else.

galliver

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #67 on: October 05, 2014, 09:48:59 PM »


Are electronic payments by debit card that different? Do merchants pay lower fees on debit card purchases? I genuinely don't know.

I was going off the assumption that fees were the same, but my bf read that post over my shoulder and corrected my misconception. They're lower and apparently paid by banks...although I bet the consumer pays in other ways-higher loan/mortgage rates, e.g. (including for commercial loans, which gets passed to customers, etc.)

I still think the debit economy is intimately tied to the CC companies, since they administer most DCs as well. If imagining a what-if, no-credit-card economy I would exclude DCs as well...but that's me!

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #68 on: October 06, 2014, 06:00:50 AM »
69% of Americans carry debt, and the median credit card debt amount is at $3,500. That means half of America owes more than $3,500 on a credit card.


No, it means 34.5% of America owes more than $3,500 on a credit card. On months when I travel for work, that 34.5% may well include me. Until I pay bills for the month.

ETA Wait. Does 69% of the population carry any debt at all, or credit card debt specifically? If that's any debt, then the percentage owing more than $3,500 on credit cards is some unknown number lower than 34.5.
« Last Edit: October 06, 2014, 06:02:37 AM by Rural »

arebelspy

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #69 on: October 06, 2014, 06:58:55 AM »
Assuming a median household income of $51,371(1) - housing cost of $17,148(2) = $34,223 maximum credit card spending at a common cash back rate of 2% = $684 maximum cash back per year. Less income taxes @15% = $582. A study has found that "people spend 12-18% more when using credit cards instead of cash"(3). Which is $3,667 taking the lowest rate in the range, 12%.

Conclusion: Assuming you are an average American you spend $3,667 more a year(excluding interest and fees many Americans pay) to get $582.


(1) http://www.census.gov/prod/2013pubs/acsbr12-02.pdf
(2) http://www.bls.gov/news.release/cesan.nr0.htm
(3) http://www.nerdwallet.com/blog/tips/credit-cards-make-you-spend-more/

And assuming you're not average, which is why you're here, you spend $0 more to get $684.  ;)
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sheepstache

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #70 on: October 06, 2014, 08:33:01 AM »
Maybe, maybe not. Handling cash has expenses for a business too - not just meaning cashiers dip into the till (or just make a mistake and give back change for a $20 instead of a $5) - you need a safe, you have to pay someone for the time to count up the cash from every register every shift, you need to pay someone to go make deposits, et cetera. Even if you are a small business owner and do it all yourself - you could be spending the time doing something else. Ordering. Inventory. Interviewing. Improving your business plan. Advertising. Et cetera.

The 2-3% merchant fee may actually be cheaper, particularly for big business. Maybe not on tiny purchases.



Are electronic payments by debit card that different? Do merchants pay lower fees on debit card purchases? I genuinely don't know.

I was going off the assumption that fees were the same, but my bf read that post over my shoulder and corrected my misconception. They're lower and apparently paid by banks...although I bet the consumer pays in other ways-higher loan/mortgage rates, e.g. (including for commercial loans, which gets passed to customers, etc.)

I still think the debit economy is intimately tied to the CC companies, since they administer most DCs as well. If imagining a what-if, no-credit-card economy I would exclude DCs as well...but that's me!

Good point about consumers paying in other ways, Galliver.

And yeah, if we're talking about plastic in general I can definitely get onboard with the idea that it's cheaper than cash.

My understanding, after a couple google clicks, is that credit cards with high rewards cost merchants even more than basic credit cards. Then there are rules that credit cards put into their contracts specifying no minimum transactions (I assume because there is a base fee to the merchant) and forbidding cash discounts. Some stores ignore them and I believe there's been some recent court cases questioning whether they're legal. So, just some stuff I think about when I think about the potential for collusion among credit card companies in an industry with a very high threshold for competition to come in. At a certain point, it doesn't even have to be cheaper than cash because consumers will get so out of the habit of using cash that they can't imagine going back.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #71 on: October 06, 2014, 08:35:56 AM »
In college I had a credit card that I payed with my debit card every month. However, my jobs (waitressing, babysitting, etc.) were mostly cash.

One month I had about $300 due, but I realized that despite the stacks of cash in my dorm room drawer, I only $22 in my checking account (I had a few thousand in a savings account, but it would have taken a day or two to transfer). I couldn't even make the minimum payment without overdrafting, so I just decided to pay the late fee ($25 for the first penalty) and the interest.

I got so pissed that I never used a credit card again. I probably don't even have a credit score.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #72 on: October 06, 2014, 08:50:50 AM »
In college I had a credit card that I payed with my debit card every month. However, my jobs (waitressing, babysitting, etc.) were mostly cash.

One month I had about $300 due, but I realized that despite the stacks of cash in my dorm room drawer, I only $22 in my checking account (I had a few thousand in a savings account, but it would have taken a day or two to transfer). I couldn't even make the minimum payment without overdrafting, so I just decided to pay the late fee ($25 for the first penalty) and the interest.

I got so pissed that I never used a credit card again. I probably don't even have a credit score.

If it had been your electric bill instead would you have gotten pissed off and moved into a cave?

Gin1984

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #73 on: October 06, 2014, 08:52:27 AM »
Maybe, maybe not. Handling cash has expenses for a business too - not just meaning cashiers dip into the till (or just make a mistake and give back change for a $20 instead of a $5) - you need a safe, you have to pay someone for the time to count up the cash from every register every shift, you need to pay someone to go make deposits, et cetera. Even if you are a small business owner and do it all yourself - you could be spending the time doing something else. Ordering. Inventory. Interviewing. Improving your business plan. Advertising. Et cetera.

The 2-3% merchant fee may actually be cheaper, particularly for big business. Maybe not on tiny purchases.



Are electronic payments by debit card that different? Do merchants pay lower fees on debit card purchases? I genuinely don't know.

I was going off the assumption that fees were the same, but my bf read that post over my shoulder and corrected my misconception. They're lower and apparently paid by banks...although I bet the consumer pays in other ways-higher loan/mortgage rates, e.g. (including for commercial loans, which gets passed to customers, etc.)

I still think the debit economy is intimately tied to the CC companies, since they administer most DCs as well. If imagining a what-if, no-credit-card economy I would exclude DCs as well...but that's me!

Good point about consumers paying in other ways, Galliver.

And yeah, if we're talking about plastic in general I can definitely get onboard with the idea that it's cheaper than cash.

My understanding, after a couple google clicks, is that credit cards with high rewards cost merchants even more than basic credit cards. Then there are rules that credit cards put into their contracts specifying no minimum transactions (I assume because there is a base fee to the merchant) and forbidding cash discounts. Some stores ignore them and I believe there's been some recent court cases questioning whether they're legal. So, just some stuff I think about when I think about the potential for collusion among credit card companies in an industry with a very high threshold for competition to come in. At a certain point, it doesn't even have to be cheaper than cash because consumers will get so out of the habit of using cash that they can't imagine going back.
The court cases have required there be a minimum allowed, and that minimum is small stores in $10.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #74 on: October 06, 2014, 10:18:42 AM »
In college I had a credit card that I payed with my debit card every month. However, my jobs (waitressing, babysitting, etc.) were mostly cash.

One month I had about $300 due, but I realized that despite the stacks of cash in my dorm room drawer, I only $22 in my checking account (I had a few thousand in a savings account, but it would have taken a day or two to transfer). I couldn't even make the minimum payment without overdrafting, so I just decided to pay the late fee ($25 for the first penalty) and the interest.

I got so pissed that I never used a credit card again. I probably don't even have a credit score.


If it had been your electric bill instead would you have gotten pissed off and moved into a cave?

Probably :)

My main point was that its tough to use credit cards responsibly unless you are very responsible, but I suppose that I only proved that I am a spaz with a low/non-existant credit score.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #75 on: October 06, 2014, 11:13:14 AM »
In college I had a credit card that I payed with my debit card every month. However, my jobs (waitressing, babysitting, etc.) were mostly cash.

One month I had about $300 due, but I realized that despite the stacks of cash in my dorm room drawer, I only $22 in my checking account (I had a few thousand in a savings account, but it would have taken a day or two to transfer). I couldn't even make the minimum payment without overdrafting, so I just decided to pay the late fee ($25 for the first penalty) and the interest.

I got so pissed that I never used a credit card again. I probably don't even have a credit score.


If it had been your electric bill instead would you have gotten pissed off and moved into a cave?

Probably :)

My main point was that its tough to use credit cards responsibly unless you are very responsible, but I suppose that I only proved that I am a spaz with a low/non-existant credit score.

Well... not really. Just set up auto pay of some sort or set some sort of reminder (phone, computer, email from Mint, etc) to pay once or twice a month.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #76 on: October 06, 2014, 11:43:20 AM »
I mis-used my college credit cards as I had zero financial education in my upbringing (no one's fault but my own, not passing the buck).  But I can tell you from a more advance standpoint of paying off over $10k in mostly interest and fees that the credit card companies are VERY much at odds with the financial well-being of their customers.  Then having taken on the task of fixing errors on my credit report that had nothing to do with this college spending (my dad and I share a name), I can doubly-affirm that the major credit companies give exactly zero fucks when it comes to fixing even the errors that THEY made.

So many comments have noted "weaklings" and individuals who just don't "get it" when it comes to how simple credit cards are to use effectively.  And I don't disagree.  As long as you are responsible and stay in front of the obligation they can become a lucrative tool.  The problem for me is that I've been on the other side of the equation.  Minor screw-ups can turn into major nightmares.  I literally spent years digging out of the compounding debt and fees.  I'm also on my third year and third binder of printed communications trying to fix errors on my credit score (which you have to do individually with three different reporting agencies).  There are significant risks using this tool - I've lived them first hand.

I want those reading this thread to know that even someone who is intelligent, generally responsible, and money-minded like myself, can find him/herself in a world of hurt at the hands of Visa, Mastercard, Discover, and Amex.  Why, as a culture, would we encourage the use of credit cards in the Millennial demographic - most of whom don't read FI blogs like this for fun and sport?  For us on here it's not an irresponsible quote.  For the rest of the world, I genuinely think it is.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #77 on: October 06, 2014, 11:46:16 AM »
69% of Americans carry debt, and the median credit card debt amount is at $3,500. That means half of America owes more than $3,500 on a credit card.


No, it means 34.5% of America owes more than $3,500 on a credit card. On months when I travel for work, that 34.5% may well include me. Until I pay bills for the month.

ETA Wait. Does 69% of the population carry any debt at all, or credit card debt specifically? If that's any debt, then the percentage owing more than $3,500 on credit cards is some unknown number lower than 34.5.

69% of Americans carry some amount of debit.

The median amount of credit card debt for all Americans is $3,500. You see the median is the middle number. The data set is all Americans. That means 50% of people have more then $3,500 in credit card debt and 50% of Americans have less than $3,500. Now if you added up all credit card debt and divided by the number of US households you would get $7,115 which would be the average. This is logical that the average would be higher than the median in this case as every person with more credit card debt that $7,000 will pull the average higher than the median.


If you meant that the median credit card debt for all Americans is $3,500, then that is what you should have said instead of saying, "69% of Americans carry debt, and the median credit card debt amount is at $3,500."

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #78 on: October 06, 2014, 12:01:05 PM »

Merely saying "using a credit card has risks" is pretty meaningless.  Compare it to the alternatives.

Exactly.   Or compare it to the risks of using cash:

-risk of losing a wallet full of it
-risk of having a problem with a service or a product and not having additional recourse
-risk of *not* having the cash you keep on-hand in the market
-risk of using it to rent a car, having an accident, and having to pay your deductible (which many cc's cover)
-risk of not being able to track your spending accurately (vs with a cc it's automatically done for you; american express even does a great job of sorting by categories/time periods if you don't use mint)
-risk of having credit score lower, affecting future mortgage/loan rates

Now, some of these risks may not always apply and/or can be mitigated (just as they can for cc's).   But, everything has risks, and as such it's shortsighted to reject something b/c it's "risky" unless you really assess the risks of the alternatives.
+1

I enjoy CC rewards but don't chase/churn for them, I mostly utilize them for the fraud protection and convenience.  While the balance of a card is "debt" at any given point in the month, so is an electric bill.  When I turn on the lights I'm obligating myself to pay the energy company just as much as I'm obligating myself to AmEx when I buy gas.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #79 on: October 06, 2014, 12:13:19 PM »
Is money owed to a credit card debt?  Depends:

- If you've bought a cartload of groceries today, paid on credit, and the bill won't arrive for several weeks . . . no, it is not debt.  You don't yet owe the money. 

- On the other hand, if you've bought groceries on your credit card, and the bill has arrived, and you can't pay it, or if you're not paying in full . . . yes, it is debt.  Why the difference?  Because the time to pay has come and gone, and you didn't pay.  Or didn't pay in full. 


I love using my credit card.  I genuinely don't spend more when I'm using credit, and I always pay in full every month.  I profit from credit cards.  However, I agree with the person who says society would be better off if we didn't have credit cards.  Why?  Because MOST PEOPLE aren't as skilled as I am ( and as most people on this board are) at using credit.  MOST PEOPLE are using credit poorly (at least for a portion of their lives), and that makes their lives worse.  Since so many people are suffering because of these things, it would be better to get rid of them altogether. 

Not that that'll ever happen. 



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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #80 on: October 06, 2014, 12:41:09 PM »
I mis-used my college credit cards as I had zero financial education in my upbringing (no one's fault but my own, not passing the buck).  But I can tell you from a more advance standpoint of paying off over $10k in mostly interest and fees that the credit card companies are VERY much at odds with the financial well-being of their customers.  Then having taken on the task of fixing errors on my credit report that had nothing to do with this college spending (my dad and I share a name), I can doubly-affirm that the major credit companies give exactly zero fucks when it comes to fixing even the errors that THEY made.

So many comments have noted "weaklings" and individuals who just don't "get it" when it comes to how simple credit cards are to use effectively.  And I don't disagree.  As long as you are responsible and stay in front of the obligation they can become a lucrative tool.  The problem for me is that I've been on the other side of the equation.  Minor screw-ups can turn into major nightmares.  I literally spent years digging out of the compounding debt and fees.  I'm also on my third year and third binder of printed communications trying to fix errors on my credit score (which you have to do individually with three different reporting agencies).  There are significant risks using this tool - I've lived them first hand.

I want those reading this thread to know that even someone who is intelligent, generally responsible, and money-minded like myself, can find him/herself in a world of hurt at the hands of Visa, Mastercard, Discover, and Amex.  Why, as a culture, would we encourage the use of credit cards in the Millennial demographic - most of whom don't read FI blogs like this for fun and sport?  For us on here it's not an irresponsible quote.  For the rest of the world, I genuinely think it is.
Thank you for the thoughtful, personal post.  I have a better understanding of your position.  I've received a lot of benefit from my cards, so it's hard for me to understand how people can be so adverse to using credit cards. 

I've had a completely different experience.  Before I found MMM, I used cc regularly, but I assumed it was something I would pay off every month (maybe it was because I saw my parents struggling under huge cc bills).   I also had an issue with my credit report, but it was handled quickly (a few forms and it was fixed). 

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #81 on: October 06, 2014, 01:17:59 PM »
I don't consider my credit card balance debt because it is paid off every month from my checking account before it accrues interest. It is simply a middleman between my checking account and the purchase point that gives me additional consumer protections and cash back points. A lot of people utilize credit cards this way and you shouldn't paint them all with your brush.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #82 on: October 06, 2014, 01:20:55 PM »
Obviously, credit cards are a very good thing for many reasons, as we all know.  However, some people just lack the ability to handle themselves enough to be able to take advantage of the benefits of credit cards.

What are those obviously good qualities?
1. Consumer protection? Debit cards offer the same basic protection.
2. Rewards? How much in 2013 did you make in rewards?

I made over $500 in rewards last year. Even if it was just $50 it would be worth it because there is minimal cost to not doing so.

(I also got a refund for bad service I likely wouldn't have received until I mentioned I would have to pursue my consumer protections with Master Card.)

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #83 on: October 06, 2014, 05:11:51 PM »
I mis-used my college credit cards as I had zero financial education in my upbringing (no one's fault but my own, not passing the buck).  But I can tell you from a more advance standpoint of paying off over $10k in mostly interest and fees that the credit card companies are VERY much at odds with the financial well-being of their customers.  Then having taken on the task of fixing errors on my credit report that had nothing to do with this college spending (my dad and I share a name), I can doubly-affirm that the major credit companies give exactly zero fucks when it comes to fixing even the errors that THEY made.

So many comments have noted "weaklings" and individuals who just don't "get it" when it comes to how simple credit cards are to use effectively.  And I don't disagree.  As long as you are responsible and stay in front of the obligation they can become a lucrative tool.  The problem for me is that I've been on the other side of the equation.  Minor screw-ups can turn into major nightmares.  I literally spent years digging out of the compounding debt and fees.  I'm also on my third year and third binder of printed communications trying to fix errors on my credit score (which you have to do individually with three different reporting agencies).  There are significant risks using this tool - I've lived them first hand.

I want those reading this thread to know that even someone who is intelligent, generally responsible, and money-minded like myself, can find him/herself in a world of hurt at the hands of Visa, Mastercard, Discover, and Amex.  Why, as a culture, would we encourage the use of credit cards in the Millennial demographic - most of whom don't read FI blogs like this for fun and sport?  For us on here it's not an irresponsible quote.  For the rest of the world, I genuinely think it is.

Very good post.

I think a big part of the problem is how our culture encourages irresponsibility with credit. IMO it's really not hard to manage credit responsibility, and you don't need above average intelligence. But the resources are not readily available. I stayed on my debit card for fear of credit cards until I was 22 and missed out on a lot of rewards. Only when I did a lot of research was I able to conclude I could manage credit cards easily.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #84 on: October 06, 2014, 05:21:22 PM »
My main point was that its tough to use credit cards responsibly unless you are very responsible, but I suppose that I only proved that I am a spaz with a low/non-existant credit score.

People who don't use credit cards are often the worst of all at money management.  I know people personally who have sworn off credit cards, and yet regularly miss rent, utilities, phone bills, bum money off people for food, and so on.  There's always money for cigarettes and gasoline to drive wherever they want though.  People who are bad with money will be bad with money regardless if they have credit cards or not.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #85 on: October 07, 2014, 11:36:45 AM »
Assuming a median household income of $51,371(1) - housing cost of $17,148(2) = $34,223 maximum credit card spending at a common cash back rate of 2% = $684 maximum cash back per year. Less income taxes @15% = $582. A study has found that "people spend 12-18% more when using credit cards instead of cash"(3). Which is $3,667 taking the lowest rate in the range, 12%.

Conclusion: Assuming you are an average American you spend $3,667 more a year(excluding interest and fees many Americans pay) to get $582.


(1) http://www.census.gov/prod/2013pubs/acsbr12-02.pdf
(2) http://www.bls.gov/news.release/cesan.nr0.htm
(3) http://www.nerdwallet.com/blog/tips/credit-cards-make-you-spend-more/

Several here have pointed out that the CC=spend more is nonsense and probably due to other issues. If you make purchasing decisions based on your method of payment there's a lot of other problems.

It doesn't even make any sense. I don't know exactly how much cash is in my wallet until I'm at the checkout, where I decide to pay cash or with card. So how would that have influenced me to pick up some candy earlier or whatever? I go into a store, pick up what I need and then I go pay. Is this not normal? Do most people stand outside counting their cash, go in and add up cost of items until they've used all the cash? Unless you're among the extremely poor I doubt this is the case.

Ok, I read the citation.

Quote
“impulse buying is related to anxiety and unhappiness … The impulse buyer may feel unhappy, and may think that being seen with an expensive new purchase will bring respect and happiness. This perceived road to happiness motivates the impulse buyer to go shopping … likes [a] product, and experiences pleasure at the thought of being able to purchase it immediately and go home with it.”

It stands to reason that the impulse purchase compulsion would be tempered if the person had to pay cash instead of using plastic"

Per my guess that is not how anyone here behave! If anyone shop like this they are idiots and would find a way to waste their money even if they had to carry around gold doubloons!

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #86 on: October 07, 2014, 11:57:17 AM »
Assuming a median household income of $51,371(1) - housing cost of $17,148(2) = $34,223 maximum credit card spending at a common cash back rate of 2% = $684 maximum cash back per year. Less income taxes @15% = $582. A study has found that "people spend 12-18% more when using credit cards instead of cash"(3). Which is $3,667 taking the lowest rate in the range, 12%.

Conclusion: Assuming you are an average American you spend $3,667 more a year(excluding interest and fees many Americans pay) to get $582.


(1) http://www.census.gov/prod/2013pubs/acsbr12-02.pdf
(2) http://www.bls.gov/news.release/cesan.nr0.htm
(3) http://www.nerdwallet.com/blog/tips/credit-cards-make-you-spend-more/

Several here have pointed out that the CC=spend more is nonsense and probably due to other issues. If you make purchasing decisions based on your method of payment there's a lot of other problems.

It doesn't even make any sense. I don't know exactly how much cash is in my wallet until I'm at the checkout, where I decide to pay cash or with card. So how would that have influenced me to pick up some candy earlier or whatever? I go into a store, pick up what I need and then I go pay. Is this not normal? Do most people stand outside counting their cash, go in and add up cost of items until they've used all the cash? Unless you're among the extremely poor I doubt this is the case.

Ok, I read the citation.

Quote
“impulse buying is related to anxiety and unhappiness … The impulse buyer may feel unhappy, and may think that being seen with an expensive new purchase will bring respect and happiness. This perceived road to happiness motivates the impulse buyer to go shopping … likes [a] product, and experiences pleasure at the thought of being able to purchase it immediately and go home with it.”

It stands to reason that the impulse purchase compulsion would be tempered if the person had to pay cash instead of using plastic"

Per my guess that is not how anyone here behave! If anyone shop like this they are idiots and would find a way to waste their money even if they had to carry around gold doubloons!

Very well said.

I'm not going to say that a lot of consumeristic people don't actually act this way (who knows?). But this is not a Mustachian way of shopping.

I buy what I need according to my planned level of spending. How much cash I happen to have on hand doesn't influence me one way or the other. I buy with a credit card because I get cashback. If I got a cash discount for not using a credit card I wouldn't change my spending habits whatsoever, I'd just carry more cash.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #87 on: October 07, 2014, 12:35:14 PM »
In college I had a credit card that I payed with my debit card every month. However, my jobs (waitressing, babysitting, etc.) were mostly cash.

One month I had about $300 due, but I realized that despite the stacks of cash in my dorm room drawer, I only $22 in my checking account (I had a few thousand in a savings account, but it would have taken a day or two to transfer). I couldn't even make the minimum payment without overdrafting, so I just decided to pay the late fee ($25 for the first penalty) and the interest.

I got so pissed that I never used a credit card again. I probably don't even have a credit score.

I have been late on 2 credit card payments during my whole life and both times I just called the company and asked for the penalty and interest to be waived. It really is that simple as picking up the phone and calling. If it is your first time they will almost always waive the fee for you. That being said it is better to not use CC if you won't be able to manage them properly. I on the other hand enjoy all the perks- rewards, protection, and convenience, all for free because most consumers are irresponsible and make the CC big bucks. So in a way they are subsidizing my lifestyle.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #88 on: October 07, 2014, 03:01:47 PM »
Assuming a median household income of $51,371(1) - housing cost of $17,148(2) = $34,223 maximum credit card spending at a common cash back rate of 2% = $684 maximum cash back per year. Less income taxes @15% = $582. A study has found that "people spend 12-18% more when using credit cards instead of cash"(3). Which is $3,667 taking the lowest rate in the range, 12%.

Conclusion: Assuming you are an average American you spend $3,667 more a year(excluding interest and fees many Americans pay) to get $582.


(1) http://www.census.gov/prod/2013pubs/acsbr12-02.pdf
(2) http://www.bls.gov/news.release/cesan.nr0.htm
(3) http://www.nerdwallet.com/blog/tips/credit-cards-make-you-spend-more/

Most of my rewards come from sign up bonuses for new credit cards, not spending.  I've received at least $1000 in tax free rewards (airline miles, statement credits, cash back, etc.) each year for the past 3 years, and my credit card spending is about $8000 a year for normal purchases.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #89 on: October 07, 2014, 06:00:47 PM »
I think it's a bit more nuanced than that. Bonuses for opening a checking/savings account are considered interest and taxable as such. If a credit card gave you some cash back immediately upon opening the account, it would probably get the same treatment. The bank would have to send you a 1099 reporting the interest at the end of the year, and you would be obligated to list this amount as interest income on your tax return. By contrast, most of the credit cards with "sign-up" bonuses are really set up to give you $x cash back after you use the card to purchase at least $y within z months after opening the account. Thus the bonus is just a higher-than-normal discount off of the purchase price, rather than taxable interest.

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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #90 on: October 07, 2014, 08:07:10 PM »
For what it's worth, I just paid all my utilities bills for the month using credit card cash back and I have some left over for next month's bills.  I was able to do that even though my spending has actually been reduced over the past few years since I took up Mustachianism.


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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #91 on: October 07, 2014, 08:34:55 PM »
If the reward is earned through the process of signing up for a credit card it is considered income. If the rewards are earned based on making purchases it is considered a discount on what you buy and not taxable. If you did not factor the rewards considered income into your taxes you are practicing tax evasion and are breaking federal law.

If it's just by signing up, sure.

Most require you to make at least one purchase, or spend X amount within Y time.

Those don't count as income, but as a discount.

http://www.bankrate.com/finance/credit-cards/credit-card-rewards-count-taxable-income.aspx
Quote
If you get the credit card rewards only after some kind of financial transaction, such as a purchase, the rewards are considered rebates and are not taxable. The IRS thinks of the rewards as a discount on the purchase rather than some kind of gain in income or wealth. These "rebates" include cash back, miles or points toward merchandise.

Many credit card sign-up bonuses are exempt, as well, because they often require some kind of financial action on your part to get the reward. Some sign-up incentives require that you charge a certain amount of money to your card within a specific time frame before getting the reward. Others are easier and give out the reward after the first purchase. But in both instances, a financial transaction was required of you before the reward was given, so it's a discount rather than an award in the IRS' eyes.

However, if no transaction is needed to get the reward, except for signing up, then the IRS considers these rewards an award that does add to your income or wealth.

I've signed up for 21ish CCs in the last few months, and all fall under that distinction (of needing some financial action), not a single one was just for signing up.
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Re: Very Troubling Quote - Millennials and Credit Cards, MSN Money
« Reply #92 on: October 08, 2014, 08:55:49 AM »
Assuming a median household income of $51,371(1) - housing cost of $17,148(2) = $34,223 maximum credit card spending at a common cash back rate of 2% = $684 maximum cash back per year. Less income taxes @15% = $582. A study has found that "people spend 12-18% more when using credit cards instead of cash"(3). Which is $3,667 taking the lowest rate in the range, 12%.

Conclusion: Assuming you are an average American you spend $3,667 more a year(excluding interest and fees many Americans pay) to get $582.


(1) http://www.census.gov/prod/2013pubs/acsbr12-02.pdf
(2) http://www.bls.gov/news.release/cesan.nr0.htm
(3) http://www.nerdwallet.com/blog/tips/credit-cards-make-you-spend-more/

Most of my rewards come from sign up bonuses for new credit cards, not spending.  I've received at least $1000 in tax free rewards (airline miles, statement credits, cash back, etc.) each year for the past 3 years, and my credit card spending is about $8000 a year for normal purchases.

If the reward is earned through the process of signing up for a credit card it is considered income. If the rewards are earned based on making purchases it is considered a discount on what you buy and not taxable. If you did not factor the rewards considered income into your taxes you are practicing tax evasion and are breaking federal law.

lol, as Arebelspy stated, these are sign up bonuses that are provided for spending $1k-2k in 3 months and considered discounts, not income, by the IRS.