Very Troubling Quote - Millennials and Credit Cards, MSN Money

[OSUBearCub]

Jeanine Skowronski, a credit card analyst with Bankrate.com, says millennials are debt averse because they grew up witnessing the Great Recession and have already faced struggles with student loan debt and a struggling job market...
"Using credit cards responsibly comes down to a mentality shift: Don't think of it as debt," said Skowronski.

"Debt-avers Millennials Steer Clear of Credit Cards" MSN Money 9/8/14
http://www.msn.com/en-us/money/bankingloans/debt-averse-millennials-steer-clear-of-credit-cards/ar-BB2enUD

For they typical Millennial who's not a ninja level mustashian that can utilize credit cards like a financial samurai sword, I'd say that they better damn well consider credit cards debt. 

It's all well and good that we know one needs to pay the balance in full each month on a card.  It's also fine that we know this has a dramatic impact on credit scores.  The problem I have is this - if I had $800 to spend using a card and paid it all off all at once, I had that $800 in my pocket (or bank earning interest).  Why the hell do I need to involve a middle man in MY money who's just waiting for me to trip up or fall on sudden hard times to wring money (exorbitant interest rates and insane fees) out of me?!  The credit score system is a goddam racket - "use it, put yourself at risk, or we'll make trouble for you".  So for a Millennial to think of the money they're putting at risk using this "financial tool" as any less risky than outright debt would be foolish.  I learned the hard way, first hand, paying off $11k of consumer debt coming out of college.

[Philociraptor]

Another quote from the article: "Of the 37 percent of millennials that do have at least one credit card, only 40 percent pay their balances in full each month, compared with the 53 percent of adults 30 plus. "

THAT is a problem.  I too carried a balance while I was in school because I didn't work, so I used it to feed myself. But I paid it off with my first paycheck at a real job, and didn't shy away from credit cards after that, the rewards are just too good.

[Emilyngh]

I am a millennial.   I love credit cards and pretty much never carry cash.   I've paid off my balance in full every month except for my last year of undergrad when I chose not to work (but quickly paid it off after). 

CC's are easy to carry around and use (without having to "get cash" or other nonsense), super easy to use to track spending with pretty much no effort, and if one has a good credit score and uses responsibly, can actually act as insurance (can use in an emergency and transfer to 0% card for interest free loan), and free up cash for investing.

Oh, and I use cc's for both regular expenses and extra churning, and have made over $2k in the last year in cash rewards (and we have a relatively low spending rate).  Easiest $2k (tax free) I've ever made.

So, for the 40% who do pay off their cards in full, I don't think cc's should necessarily be associated with debt at all.   For those who carry a balance, of course it's debt.   

[OSUBearCub]

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.

To put a finer point on the "emergency cushion" BS (in my opinion) - say you've found yourself in a rough spot financially.  Why compound and complicate the issue by putting yourself at the mercy of a financial institution?  FIRE is all about building the nest egg, emergency funds, etc with real money.  Transferring balances to a zero credit card buys you at best 12 months of interest free cushion using fake money.  If you're juggling around a few thousand dollars on cards, are you really going to be able to find a job, draw a paycheck, and pay off those few thousands of bucks within 12 months?  This is especially problematic in this economy where joblessness can easily stretch 6-12 months.  You then run the risk of this balloon touching the ground at which point the financial institution will stomp your ass to get their money - it's how they make their money in the first place.  There is no benevolence in finance.

[Sylly]

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.

Another quote from the article: "Of the 37 percent of millennials that do have at least one credit card, only 40 percent pay their balances in full each month, compared with the 53 percent of adults 30 plus. "

I wouldn't say 40 or 53 percent is a "VERY small percentage". You don't need to be able to churn 2k in cc rewards to benefit from cc usage. It mostly takes being able to avoid the interests, which based on the above quote, is 40 or 53%, depending on the group considered. Even if you use a single 1% reward card for everything, that's 1% of your spending coming back in free money.

[Breaker]

+1 to OSUBearCub.

I use CCs but sparingly.  There have been studies that show that most people spend more money when using a CC vs cash.  About 12% more if I remember right. 

I use my CCs for groceries, if buying for the week and gasoline if not buying at my usual Station which gives a 10 cent/gal discount for cash or debit.

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. 

In the article the high percentage of people who pay off their cards *every month* probably don't count the 1 or 2 times a year they miss and incur fees.  Fees which usually wipe out any cash rewards for the year.

Then of course there is the constant problem of your accounts being hijacked by someone else.  Just not worth it for such small gains.

[Philociraptor]

Disagree 100% with the CC hate. Just buy what you need, the same as you would with cash, and reap the benefits. I use the fact that I could easily get an 18 month no interest card as part in my emergency fund too. Just because some people can't use CC's intelligently doesn't mean I shouldn't abuse the rewards.

[unseenstache]

I think the person being quoted in this article is talking about not carrying a balance and paying it  off monthly.  Seems to just not be articulated that well.  I think the "mentality shift" she is talking about is to start thinking like a mustachian level ninja.  There are many positive aspects of using a CC that a millennial could benefit from if they looked at it this way.   

 

[Gin1984]

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.

To put a finer point on the "emergency cushion" BS (in my opinion) - say you've found yourself in a rough spot financially.  Why compound and complicate the issue by putting yourself at the mercy of a financial institution?  FIRE is all about building the nest egg, emergency funds, etc with real money.  Transferring balances to a zero credit card buys you at best 12 months of interest free cushion using fake money.  If you're juggling around a few thousand dollars on cards, are you really going to be able to find a job, draw a paycheck, and pay off those few thousands of bucks within 12 months?  This is especially problematic in this economy where joblessness can easily stretch 6-12 months.  You then run the risk of this balloon touching the ground at which point the financial institution will stomp your ass to get their money - it's how they make their money in the first place.  There is no benevolence in finance.

What ways do you speak of, that don't require me to pay any interest?  And how am I more at risk with a -1000 balance on my credit card and $1000 in the bank vs zero in both?  As long as you don't overspend credit cards are not a problem.

[arebelspy]

I don't think of it as debt.  I use it and pay it off monthly.

I think of it as a convenient way to not have to carry around cash.

Carrying a balance = debt, but credit card card use by itself does not necessarily = debt.

[DecD]

I don't think of it as debt either, if you pay it off in full every month.    I've never carried a balance.

For me, it's a great way to track spending- I know exactly what I've spent in each category and at every vendor.  I've saved hundreds - probably thousands- in cashback rewards, which I always simply credit back to my account.  Yes, I've forgotten to pay on time...but perhaps three times in the past 20 years.  Once or so per decade isn't that bad.  At that rate you can call, fess up, and they'll remove the charges.  Set up automatic bill pay and it's not an issue at all.

I've never been a spender.  I'm quite confident that I don't spend more because I use cards instead of cash.  My parents taught me from a young age that you NEVER EVER spend more than you have.  So I've never been tempted to buy something on credit that I can't properly afford (thanks, Mom and Dad!)

Of course, this is my anecdotal case.  But that's the point.  They work for me.  They might not work for someone else, but I'm not trying to convince anyone else to use them, just as it doesn't make sense to try to talk me into avoiding them. 

[Vilgan]

I use my credit cards as an alternative to cash and always pay them off, so they work well for me. I also know people that have no restraint and will just max out their limit whatever it us before they curb spending. People like that should NEVER have a credit card imo.

[Beric01]

I pay off my balance in full every month. But technically it IS debt - debt the company lets you carry at 0% interest for 1 month, plus get rewards on.

Many millennials shy away from credit cards, which I think is a big mistake IF (and only if) they pay off the balances in full each month, just like using a debit card. I just set mine to auto-pay in full.

[Kaspian]

My mentality over the last 3 or 4 years has shifted so that a credit card is just a convenient way to pay for something immediately while earning points.  By "immediately", I don't mean a year down the road or even at the end of the month, it's right away.  As soon as I get home, I transfer the exact amount I just spent from my bank to my CC.  Takes what?  Less than 5 seconds to do online?  Another 3 seconds if you count logging into your bank?  I'm not down with the "Oh, I can't be bothered to do that now," mentality when the computer is already turned on, I'm sitting in front of it, and an entire transaction can be done in less time than it takes for one single TV commercial to go by.

[Zikoris]

We're millenials and don't consider our credit card usage debt. We put everything we possibly can on them - would even pay our rent on credit if they'd allow it! We sit down with Mint and calculators and pay everything off in full twice a month, and let the rewards roll in. This lets us keep the bulk of our money in investments growing, rather than sitting in the chequing accounts.

[surfhb]

I think the article is a positive one.    Younger folks are seeing what bad debt can do first hand.   

Another vote for using CCs.   Everything I purchase is protected and it's an easy way to track spending.....I think that's what the quote you mentioned is talking about

[Emilyngh]

To put a finer point on the "emergency cushion" BS (in my opinion) - say you've found yourself in a rough spot financially.  Why compound and complicate the issue by putting yourself at the mercy of a financial institution?  FIRE is all about building the nest egg, emergency funds, etc with real money.  Transferring balances to a zero credit card buys you at best 12 months of interest free cushion using fake money.  If you're juggling around a few thousand dollars on cards, are you really going to be able to find a job, draw a paycheck, and pay off those few thousands of bucks within 12 months?  This is especially problematic in this economy where joblessness can easily stretch 6-12 months.  You then run the risk of this balloon touching the ground at which point the financial institution will stomp your ass to get their money - it's how they make their money in the first place.  There is no benevolence in finance.

FIRE is all about building up a stache.   I haven't seen anyone here advocate *not* building up a stache b/c they have cc's, but just possibly using the CC instead of keeping some of the stache out of the market as "emergency" money.   Worst case, someone with a stache doesn't have the income to pay off the cc (or isn't able to transfer to avoid interest), they can always withdraw some of the stache *then* to do so (vs keeping it out ahead of time just in case).   

And if we're talking about some horrible, horrible situation where all hope is lost of ever again having an income, I actually would be even *more* likely to rely on credit cards vs reducing retirement funding.   All of the money in my retirement accounts is safe from bankruptcy, and cc debt is dis chargeable.   

[shitzmagee]

So I'm a millennial and my own experience has been that when I have cash it burns a hole in my pocket until I spend it (needlessly most of the time). But when I use plastic, I actually ask myself how necessary that purchase is. I understand this isn't the norm, but I can't be alone.

Also, credit cards offer consumer protections that debit cards simply don't (at least in the US). With the proliferation of card skimmers I keep my debit card out of sight as much as possible. See #s 4 & 5 from the FDIC (https://www.fdic.gov/consumers/consumer/information/ncpw/cardstopten.html) and put your nefarious hat on. If I skimmed your credit card at a checkout, a gas pump, an ATM or any other place and then made fraudulent purchases, your maximum liability is only ever $50 and most of the time $0. But if I skimmed your debit card and then started slowly siphoning money out of your account and you happen to not notice it for a few months, you're SOL. Now if you have a mustache you would notice immediately that some of your little green employees were missing from break room, but how many people in this country don't check their monthly statements or their online accounts regularly? Of course if you NEVER check your statements then credit or debit doesn't really matter.

Along those same lines, if you skimmed my debit card and then emptied my checking account, even if I noticed right away and notified my bank I'm still left with a $0 balance until the bank fixes it. On the other hand, if you skimmed my credit card and maxed out the card, I still have cash in the bank while the credit card company fixes the problem. Again, this doesn't matter if you have a mustache because you have little green employees everywhere that can hold you over. But how many people live paycheck to paycheck that a $0 balance before the end of the month would be very bad?

[arebelspy]

So I'm a millennial and my own experience has been that when I have cash it burns a hole in my pocket until I spend it (needlessly most of the time). But when I use plastic, I actually ask myself how necessary that purchase is. I understand this isn't the norm, but I can't be alone.

Yup, I'm the same way.  Cash flows out of my hands, and I don't know where it's gone at times.   Plus I hate dealing with the stuff, trying not to lose it, etc.  I try to have as little of it in my life as possible.  I consider before I make a purchase with credit (not that I don't consider with cash, but I just want to get rid of it sometimes).

The studies that people spend more on credit than cash seems weird to me, and I wonder if that will have shifted in 20 years.

[Cpa Cat]

I don't consider my CCs debt. I also don't understand why anyone is missing payments and getting interest charges.

I put everything I can on CCs for rewards. I have auto-payments set to pay them off in full every month. I don't even think about it.

We know what our budget is, so we can monitor the balance in our checking account to make sure we never come up short.

I've never had a CC company miss an autopayment or mess it up. I have never paid a cent in interest or late fees.

[OSUBearCub]

Cheese in a mouse trap is also a reward.  Maybe everything works out perfectly 9 out of 10 times.  It's the tenth time that's the killer.

For me, the risk of working a creditor into my game plan doesn't make sense.  Their sole business model is making money off the interest of borrowed money.  Creditors are positioned to gain at our loss unlike investment companies that gain as I gain.  They are gambling that the shoe will eventually drop, and winning.  There are too many risk factors when I can keep it simple and plan a cushion for myself.

Emilyngh You do make a good point with the dischargable idea.  But in bankruptcy they're going to go after your savings any way they can to recoup the loss; or you're going to have to hire a lawyer to ensure your savings are properly exempted.  This is time taken away from finding a job and money taken out of your nest egg for a lawyer when you're probably at your most cash-strapped.

(edited - ironed out a little of my rambling)

[tofuchampion]

So I'm a millennial and my own experience has been that when I have cash it burns a hole in my pocket until I spend it (needlessly most of the time). But when I use plastic, I actually ask myself how necessary that purchase is. I understand this isn't the norm, but I can't be alone.

Yup, I'm the same way.  Cash flows out of my hands, and I don't know where it's gone at times.   Plus I hate dealing with the stuff, trying not to lose it, etc.  I try to have as little of it in my life as possible.  I consider before I make a purchase with credit (not that I don't consider with cash, but I just want to get rid of it sometimes).

Same here.  With cash, since there's no record of it, it feels like... I can't think of the word.  But there's no accountability.  No bank or cc statement telling me I spent $xx.xx at whatever overpriced place, so I spend freely and forget about it.  I spend WAY more with cash than plastic.

[Emilyngh]

Emilyngh You do make a good point with the dischargable idea.  But in bankruptcy they're going to go after your savings any way they can to recoup the loss; or you're going to have to hire a lawyer to ensure your savings are properly exempted.  This is time taken away from finding a job and money taken out of your nest egg for a lawyer when you're probably at your most cash-strapped.

If my savings are in retirement accounts, under federal law, they're safe in a chapter 7 (unless I have more than a 1.2 million per person in IRAs, which even that amount would be safe in 401ks).  http://www.nolo.com/legal-encyclopedia/retirement-plan-bankruptcy-chapter-7-13-32410.html

This is very clear in the law and would not take any extra lawyers, effort, etc.

[OSUBearCub]

Emilyngh You do make a good point with the dischargable idea.  But in bankruptcy they're going to go after your savings any way they can to recoup the loss; or you're going to have to hire a lawyer to ensure your savings are properly exempted.  This is time taken away from finding a job and money taken out of your nest egg for a lawyer when you're probably at your most cash-strapped.

If my savings are in retirement accounts, under federal law, they're safe in a chapter 7 (unless I have more than a 1.2 million per person in IRAs, which even that amount would be safe in 401ks).  http://www.nolo.com/legal-encyclopedia/retirement-plan-bankruptcy-chapter-7-13-32410.html

This is very clear in the law and would not take any extra lawyers, effort, etc.

The money would be safe but questionably liquid unless you're already at retirement age.  IRAs have a 60 day loan and 401Ks have a five year option to repay the amount taken out without penalty (if I understand it correctly).  Again, another situation where you would have to gamble for the future and could lose significant tax and penalties.

My thought is this, and I'm not just trying to stir the pot, why bother with all this heartache for 5% cash back or points to use on Amazon?  For me it doesn't make any sense.  I can invest for a 5% return and budget anything I need into my life without perks.   I treat creditors like Vegas - the house always has the edge.

[arebelspy]

I don't think of it as debt.  I use it and pay it off monthly.

I think of it as a convenient way to not have to carry around cash.

Carrying a balance = debt, but credit card card use by itself does not necessarily = debt.

Not trying to be mean but it doesn't matter what you consider it, it is debt. After you slide your card and sign you are legally liable for the amount of money you spent and interest. Even if you have double what you spent in the bank any purchase on a credit card is still debt. And if you have read the fine print you know credit cards are dangerous. Some credit cards reserve the right to retroactively charge you 24.99% interest on all debt outstanding if you miss a payment on other debt with the lender (for example a car loan or mortgage).

If you want to use debt because of the rewards that is your choice but don't deceive yourself into thinking it isn't debt and that it is free. You have changed your habits to receive the rewards and taken on additional risk.

That's dynamite.

If I slide a debit card, is it debt?

No?

If I slide a credit card, and the credit card is auto-paid from the bank account and no interest is ever paid, it is debt?

It's a pretty fine line, and while we can argue semantics, the practicality of it is that it's very different than most types of debt and much more similar to the "non-debt" debit card.  Real world use is more important to me than semantic, pedantic definitions.  :)

[arebelspy]

Maybe everything works out perfectly 9 out of 10 times.  It's the tenth time that's the killer.

9 out of 10?  If 10% of the time you're fucking up, yes, you shouldn't be using CCs.

For me it's more like - been successful 10,000 times, never messed up once.

I consider the odds on that pretty darn good.

Now let's look at payouts.  When you mess up, you get a late fee.  Not sure how much this is, as it's never happened.  $25?  Most of the time you can call and get this waived.

So downside risk is potentially zero, but could be a small amount.

The upside? Well, I've earned (literally) thousands from CCs in the last few months.

Even if the odds are 1 in 100 (and I'd say it should be much less) to lose $25, if the other 99 times you're making more than 99/25, it's worth it.

By all means - if you can't handle it, don't do it.  And most non-Mustachians apparently can't.

But if you can, it's a game like any other, and you can play it a variety of ways (to reduce the amount of work it takes, to maximize the rewards you get, etc.).

Investing is another parallel example.  If you can't handle investing, you may be better off sticking your money under a matress and losing to inflation.  But I'd suggest instead you educate yourself and learn the psychology and self discipline to profit, instead of lose out.

[Sylly]

So I'm a millennial and my own experience has been that when I have cash it burns a hole in my pocket until I spend it (needlessly most of the time). But when I use plastic, I actually ask myself how necessary that purchase is. I understand this isn't the norm, but I can't be alone.

Yup, I'm the same way.  Cash flows out of my hands, and I don't know where it's gone at times.   Plus I hate dealing with the stuff, trying not to lose it, etc.  I try to have as little of it in my life as possible.  I consider before I make a purchase with credit (not that I don't consider with cash, but I just want to get rid of it sometimes).

The studies that people spend more on credit than cash seems weird to me, and I wonder if that will have shifted in 20 years.

I can see how for people who doesn't consciously consider every purchase CC can lead to greater spending. When you're buying everything with cash, there's a hard limit to how much you can spend at any given time -- how much cash you have on you. With a CC, you can pretty much spend up to your limit. It's entirely possible I'm more likely to do a spontaneous, unnecessary spending because I don't need to worry about having the cash on me. But with conscious spending, that amount is likely small, and also likely to be splurges I'd be willing to drop cash on anyway.

Other than that, I don't think I spend more cash than I otherwise would on CC. I just won't be able to track it. And as someone who used to to keep a 'Cash' account down to the penny, you can guess that inability to track bothers me.

[arebelspy]

So I'm a millennial and my own experience has been that when I have cash it burns a hole in my pocket until I spend it (needlessly most of the time). But when I use plastic, I actually ask myself how necessary that purchase is. I understand this isn't the norm, but I can't be alone.

Yup, I'm the same way.  Cash flows out of my hands, and I don't know where it's gone at times.   Plus I hate dealing with the stuff, trying not to lose it, etc.  I try to have as little of it in my life as possible.  I consider before I make a purchase with credit (not that I don't consider with cash, but I just want to get rid of it sometimes).

The studies that people spend more on credit than cash seems weird to me, and I wonder if that will have shifted in 20 years.

I can see how for people who doesn't consciously consider every purchase CC can lead to greater spending. When you're buying everything with cash, there's a hard limit to how much you can spend at any given time -- how much cash you have on you.

Yeah, that makes sense.  Hard to spend more than you earn if using all cash.

[Emilyngh]

The money would be safe but questionably liquid unless you're already at retirement age.

Incorrect.   Roth accounts are as safe as the others, and the contributions are completely liquid at any time with no taxes or penalties.  ANd if one doesn't currently have a ton in a Roth, when one has a low income it's the perfect time to transfer from other accounts into one while still avoiding taxes and penalties (search this site for info on a Roth pipeline).

My thought is this, and I'm not just trying to stir the pot, why bother with all this heartache for 5% cash back or points to use on Amazon?  For me it doesn't make any sense.  I can invest for a 5% return and budget anything I need into my life without perks.   I treat creditors like Vegas - the house always has the edge.

(a) B/c it really sin't a bother.   Using CC is *far* easier for me (and I suspect others) than cash.   Spending is automatically tracked, purchases are protected, payments are automatic, no trips to the bank, no fear of losing a wallet, etc.

(b) I too can invest for a (hopefully greater than) 5% return.   Actually, I can make my rewards % on anything I put on a card, *plus* invest even more money than I could if I did not use the CC and needed to keep extra cash on hand.   Oh, and, like I mentioned, with signup bonuses, one can make even more than the simple reward percent if they want to invest a small amount of time for tax free money.

And the house only has the edge for cc's if one doesn't know exactly what they're doing and doesn't have the cash to pullout at any time.   I don't see using CC's as a lack of control considering that at any time I can tell the CC company to go fuck themselves, pay the card off, and close it.   Avoiding situations that are logically beneficial out of fear is not how I choose to live.

[Beric01]

So I'm a millennial and my own experience has been that when I have cash it burns a hole in my pocket until I spend it (needlessly most of the time). But when I use plastic, I actually ask myself how necessary that purchase is. I understand this isn't the norm, but I can't be alone.

I'm the same! All of this advice to "spend only cash" is bad for me - the opposite is true for me.

That's dynamite.

If I slide a debit card, is it debt?

No?

If I slide a credit card, and the credit card is auto-paid from the bank account and no interest is ever paid, it is debt?

It's a pretty fine line, and while we can argue semantics, the practicality of it is that it's very different than most types of debt and much more similar to the "non-debt" debit card.  Real world use is more important to me than semantic, pedantic definitions.  :)

Yes, that is debt. In business we would call this accounts payable, net 30 days, which is a type of debt. It's zero percent interest debt. It's not bad debt (actually very good debt if you pay in full!), but it definitely is debt.

[arebelspy]

Yes, I agreed, it is debt.

In a practical sense, it doesn't look like or act like debt, and so for practical purposes it's not.

If someone had a paid off house, no student loans, no car payment, and claimed to be "debt free" but bought groceries on a credit card each month and paid in full before the bill was due, would you go rappelling through their window to insist: "No!  You technically aren't debt free because of semantics!"?

Or would you realize that there's a difference between a minor technical definition and the pragmatic real world?

I agree, it is technically "debt."

But that doesn't mean one has to treat it or think of it as debt, and it may be beneficial to not do so.

[Emilyngh]

'If you use a credit card, then you don't want to be rich" - Mark Cuban

Ah-ha-ha-ha!   Great!   Mark Cuban quotes.    Here are some others:

- “I’ve taken a whole different approach than most people in investing. I think buy and hold is a crock of *%&# (bleeped).  I’ve always been of the attitude that unless you really have a committment to something, just keep your money in cash … knowing that at some point in time, there’s going to be a week or two like we’ve just had.”

– He says portfolio diversification “is for idiots.” You can’t diversify enough “to know what you’re doing,” he adds. You’ve got to do your homework and play your best bets, according to Cuban.

http://blogs.barrons.com/focusonfunds/2011/08/15/mark-cuban-diversification-is-for-idiots-apple-needs-to-fall-more-to-be-attractive/

Mark Cuban is an idiot.

[arebelspy]

I wouldn't say he's an idiot, but he is a loudmouth who capitalizes on saying controversial things like that.  I don't think he believes a lot of them, but says it for the sake of publicity.  So I take anything he says with a VERY large grain of salt.

[sheepstache]

Another quote from the article: "Of the 37 percent of millennials that do have at least one credit card, only 40 percent pay their balances in full each month, compared with the 53 percent of adults 30 plus. "

THAT is a problem.  I too carried a balance while I was in school because I didn't work, so I used it to feed myself. But I paid it off with my first paycheck at a real job, and didn't shy away from credit cards after that, the rewards are just too good.

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. 

This is probably wishful thinking, but perhaps the reason the number of people who pay their cards off every month is so low is because the people with the money to do this are more likely to use debit cards, due to sharing an attitude with OSUBearCub.

Personally, I don't feel any risk of spending more money due to credit cards.  Psychologically, I'm very aware that I can only spend what I have, which, in cash holdings, is a lot less than my combined credit limit. If my psychology were different, I would act accordingly, so I applaud anyone who chooses what's best for themselves.

And I agree with others about the benefits of credit cards in terms of fraud protection, points, car rentals, etc. And I don't see the risks as being greater. There's the risk that I might forget a payment but there's also the risk that I might overdraw my checking account that a debit card is linked to. Both are highly unlikely, but at least with the credit card there's only 1 fee per month whereas I might rack up several overdraft fees in one day before checking my account and realizing what had happened.  (I know you also pay a hefty interest on the whole balance if you miss a payment but my spending is small enough that it's still a better deal than overdraft fees.)

My thought is this, and I'm not just trying to stir the pot, why bother with all this heartache for 5% cash back or points to use on Amazon?  For me it doesn't make any sense.  I can invest for a 5% return and budget anything I need into my life without perks.   I treat creditors like Vegas - the house always has the edge.

But I can't invest money that I just spent on groceries :) Or maybe you were talking about churning.

[OSUBearCub]

The money would be safe but questionably liquid unless you're already at retirement age.

Incorrect.   Roth accounts are as safe as the others, and the contributions are completely liquid at any time with no taxes or penalties.  ANd if one doesn't currently have a ton in a Roth, when one has a low income it's the perfect time to transfer from other accounts into one while still avoiding taxes and penalties (search this site for info on a Roth pipeline).

My thought is this, and I'm not just trying to stir the pot, why bother with all this heartache for 5% cash back or points to use on Amazon?  For me it doesn't make any sense.  I can invest for a 5% return and budget anything I need into my life without perks.   I treat creditors like Vegas - the house always has the edge.

(a) B/c it really sin't a bother.   Using CC is *far* easier for me (and I suspect others) than cash.   Spending is automatically tracked, purchases are protected, payments are automatic, no trips to the bank, no fear of losing a wallet, etc.

(b) I too can invest for a (hopefully greater than) 5% return.   Actually, I can make my rewards % on anything I put on a card, *plus* invest even more money than I could if I did not use the CC and needed to keep extra cash on hand.   Oh, and, like I mentioned, with signup bonuses, one can make even more than the simple reward percent if they want to invest a small amount of time for tax free money.

And the house only has the edge for cc's if one doesn't know exactly what they're doing and doesn't have the cash to pullout at any time.   I don't see using CC's as a lack of control considering that at any time I can tell the CC company to go fuck themselves, pay the card off, and close it.   Avoiding situations that are logically beneficial out of fear is not how I choose to live.

I'm going to leave it at this.  Everyone on here is a potential example or role model for someone else reading.  That someone could be a CC ninja like you or a keep-it-simple minimalist like me.  There's room for both of us in the world.  For me, any time I have managed to simplify a process in my life, I've gained time and money.  Complicating my finances with credit cards will never be part of my plan.  I personally don't see the rewards outweighing the risks.

[Emilyngh]

I'm going to leave it at this.  Everyone on here is a potential example or role model for someone else reading.  That someone could be a CC ninja like you or a keep-it-simple minimalist like me.  There's room for both of us in the world.  For me, any time I have managed to simplify a process in my life, I've gained time and money.  Complicating my finances with credit cards will never be part of my plan.  I personally don't see the rewards outweighing the risks.

Just keep in mind that one should not necessarily rule out being both a CC ninja and keep-it-simple minimalist.   As I've mentioned, I find the use of CC's to actually simplify my finances.

[arebelspy]

I'm going to leave it at this.  Everyone on here is a potential example or role model for someone else reading.  That someone could be a CC ninja like you or a keep-it-simple minimalist like me.  There's room for both of us in the world.  For me, any time I have managed to simplify a process in my life, I've gained time and money.  Complicating my finances with credit cards will never be part of my plan.  I personally don't see the rewards outweighing the risks.

Just keep in mind that one should not necessarily rule out being both a CC ninja and keep-it-simple minimalist.   As I've mentioned, I find the use to CC's to actually simplify my finances.

Ditto. My finances would be much more of a hassle if I had to use cash for everything.

I'm with you in keeping it simple - I posted in a CC thread the other day that was asking who uses what CC for what various expenditures, and I said I use the same CC, no matter what, cause I like it simple.  They were shocked and asked if that even included groceries.  But by using CCs, I've literally earned $3,000 cash in the last few months.  It's well worth it to me to add them into my life, and definitely makes my finances more simple, not more complicated.

It seems like you're speaking more out of fear than knowledge.  It's something you may want to think about.

/shrug

But to each his own.  Best of luck OBC!  :)

[Beric01]

Yes, I agreed, it is debt.

In a practical sense, it doesn't look like or act like debt, and so for practical purposes it's not.

If someone had a paid off house, no student loans, no car payment, and claimed to be "debt free" but bought groceries on a credit card each month and paid in full before the bill was due, would you go rappelling through their window to insist: "No!  You technically aren't debt free because of semantics!"?

Or would you realize that there's a difference between a minor technical definition and the pragmatic real world?

I agree, it is technically "debt."

But that doesn't mean one has to treat it or think of it as debt, and it may be beneficial to not do so.

Yes I would go rappelling through their window! mostly because I think rappelling through a window would just be awesome.

How would it be beneficial to not think of it as debt? You have just admitted it is debt. And it is important to remember that debt always increases risk. Putting groceries on a credit card and paying it off every month would not add very much risk, but it adds risk. If you don't think of it as debt people may forget that credit cards increase risk.

Well stated. I think it's a very profitable risk to take. But it's still risk, even if very small.

One should assess this risk in terms of:

• Remembering to pay on time (automatic payments can mitigate this)
• Available funds to pay in full on time (keeping a minimum balance in your checking account can mitigate this)
• Potential interest and fees if money is not available for some reason (such as emergency)
• Total balance as a percentage of credit limit (this can affect your credit score when applying for loans or other credit)
• Risk of fraud/data loss due to leaving payment in the hands of a third party (with cash, your transaction is done, period)

Assessing these risks, I have decided to use credit cards for every purchase possible. But that doesn't mean I should blind myself to the fact that a credit card is debt, and that debt comes with risks even if used responsibly.

[4alpacas]

I'm going to leave it at this.  Everyone on here is a potential example or role model for someone else reading.  That someone could be a CC ninja like you or a keep-it-simple minimalist like me.  There's room for both of us in the world.  For me, any time I have managed to simplify a process in my life, I've gained time and money.  Complicating my finances with credit cards will never be part of my plan.  I personally don't see the rewards outweighing the risks.

Just keep in mind that one should not necessarily rule out being both a CC ninja and keep-it-simple minimalist.   As I've mentioned, I find the use to CC's to actually simplify my finances.

Ditto. My finances would be much more of a hassle if I had to use cash for everything.

I'm with you in keeping it simple - I posted in a CC thread the other day that was asking who uses what CC for what various expenditures, and I said I use the same CC, no matter what, cause I like it simple.  They were shocked and asked if that even included groceries.  But by using CCs, I've literally earned $3,000 cash in the last few months.  It's well worth it to me to add them into my life, and definitely makes my finances more simple, not more complicated.

It seems like you're speaking more out of fear than knowledge.  It's something you may want to think about.

/shrug

But to each his own.  Best of luck OBC!  :)

I'm also in the credit card simplifying life club.  I don't chase rewards or "churn", but I do appreciate the credit card rewards.  I have a lot of my bills set-up for automatic payment through either my credit card or checking account.  I have my credit card automatically paid through my checking account in full every month.  I hate going to the ATM, and carrying cash is annoying (I hate change).  I also like the fraud protection.  I had a bad experience with a debit card when I was younger, and I had to pay a few overdraft charges due to fraudulent purchases. 

I personally don't see the rewards outweighing the risks.

OSUBearCub, what risks do you see with your credit card usage?  What kind of "awards" would you need to switch over to credit cards? 

[Zikoris]

My credit card system is pretty simple as well - one that we use when traveling that has no currency/foreign transaction fees, one for groceries, and one for everything else. We have a fourth one that used to be the only one accepted at Canadian Costco stores, but that's changed so that one will be gone soon. We don't do churning or deal hunting, just buy what we would normally buy.

As far as forgetting to pay or whatever, we just have set dates twice a month that are set in stone - the 15th and the last day of the month. We always have enough money to pay because the balances are not a surprise - we know what we buy. Anything strange/fraudy would be spotted within a day, due to Mint.

[arebelspy]

Yes, I agreed, it is debt.

In a practical sense, it doesn't look like or act like debt, and so for practical purposes it's not.

If someone had a paid off house, no student loans, no car payment, and claimed to be "debt free" but bought groceries on a credit card each month and paid in full before the bill was due, would you go rappelling through their window to insist: "No!  You technically aren't debt free because of semantics!"?

Or would you realize that there's a difference between a minor technical definition and the pragmatic real world?

I agree, it is technically "debt."

But that doesn't mean one has to treat it or think of it as debt, and it may be beneficial to not do so.

Yes I would go rappelling through their window! mostly because I think rappelling through a window would just be awesome.

How would it be beneficial to not think of it as debt? You have just admitted it is debt. And it is important to remember that debt always increases risk. Putting groceries on a credit card and paying it off every month would not add very much risk, but it adds risk. If you don't think of it as debt people may forget that credit cards increase risk.

Because thinking of it as debt means one might be tempted to carry it.  If it's not debt, but just a bill that needs to be paid (an electric bill, for example, is technically debt as well, but one most responsible people pay off monthly without incurring fees), then you reduce your psychological risk of treating it as most people treat debt.

Yes, I agreed, it is debt.

In a practical sense, it doesn't look like or act like debt, and so for practical purposes it's not.

If someone had a paid off house, no student loans, no car payment, and claimed to be "debt free" but bought groceries on a credit card each month and paid in full before the bill was due, would you go rappelling through their window to insist: "No!  You technically aren't debt free because of semantics!"?

Or would you realize that there's a difference between a minor technical definition and the pragmatic real world?

I agree, it is technically "debt."

But that doesn't mean one has to treat it or think of it as debt, and it may be beneficial to not do so.

Yes I would go rappelling through their window! mostly because I think rappelling through a window would just be awesome.

How would it be beneficial to not think of it as debt? You have just admitted it is debt. And it is important to remember that debt always increases risk. Putting groceries on a credit card and paying it off every month would not add very much risk, but it adds risk. If you don't think of it as debt people may forget that credit cards increase risk.

Well stated. I think it's a very profitable risk to take. But it's still risk, even if very small.

One should assess this risk in terms of:

• Remembering to pay on time (automatic payments can mitigate this)
• Available funds to pay in full on time (keeping a minimum balance in your checking account can mitigate this)
• Potential interest and fees if money is not available for some reason (such as emergency)
• Total balance as a percentage of credit limit (this can affect your credit score when applying for loans or other credit)
• Risk of fraud/data loss due to leaving payment in the hands of a third party (with cash, your transaction is done, period)

Assessing these risks, I have decided to use credit cards for every purchase possible. But that doesn't mean I should blind myself to the fact that a credit card is debt, and that debt comes with risks even if used responsibly.

Sure, there's minor risks.  But compare it to the risks of using a debit card, which is not debt:
Still have the same "not enough balance" problem you mention, have the same emergency funds problem, have a credit risk of not having enough credit to qualify for a loan (or a lower rate) when applying for things, the fraud/loss when dealing with an account without consumer protections that credit cards have.

Overall I'd say comparing your list of risks, nearly all of them are the same or greater with a debit card. Cash adds the "it can get lost/stolen" risk.

Everything in life has risks. Getting out of bed does.  Not getting out of bed does also.

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

[Shor]

One should assess this risk in terms of:

• Remembering to pay on time (automatic payments can mitigate this)
• Available funds to pay in full on time (keeping a minimum balance in your checking account can mitigate this)
• Potential interest and fees if money is not available for some reason (such as emergency)
• Total balance as a percentage of credit limit (this can affect your credit score when applying for loans or other credit)
• Risk of fraud/data loss due to leaving payment in the hands of a third party (with cash, your transaction is done, period)

Assessing these risks, I have decided to use credit cards for every purchase possible. But that doesn't mean I should blind myself to the fact that a credit card is debt, and that debt comes with risks even if used responsibly.

I still disagree on the actual risks being taken up here. In all of the risks mentioned, there is only a real issue if the source of funds (debit account) actually ended up being less than the amount spent. In such a case, anyone using only a debit account would still be screwed, and have even less of a chance to recover from the problem as they overdraw the account. The CC will at least float the debt until you can pay it off, even with penalty. I would say that the CC, being used responsibly is actually mitigating the risks that could occur.

And of course, for all of those issues listed, if you're on top of things then it's not a problem. If you're not on top of things, you probably shouldn't be playing the game.

In conclusion, CCs are a great tool. How it's used will be what determines whether that tool is toxic or beneficial to the owner.

[Emilyngh]

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.

[seattlecyclone]

I'm going to leave it at this.  Everyone on here is a potential example or role model for someone else reading.  That someone could be a CC ninja like you or a keep-it-simple minimalist like me.  There's room for both of us in the world.  For me, any time I have managed to simplify a process in my life, I've gained time and money.  Complicating my finances with credit cards will never be part of my plan.  I personally don't see the rewards outweighing the risks.

The risks outweigh the rewards? For someone who already spends within their means, I have strong doubts.

What are the risks, really? If your spending is within your means (i.e. you have enough money somewhere to pay off your credit card at all times), and you have your card set to auto-pay the full balance every month (as you should), the only thing that can go wrong is that you might not have enough money in your checking account at the end of the month to cover the balance. If this happens you'll have to transfer some money around and pay a late fee plus a few dollars of interest. Not fun, but not the end of the world either. You'll probably just wipe out the credit card cash back for a few months. Life goes on.

So the question then becomes: how often will this actually happen? If you don't trust yourself to maintain a high enough cushion in your checking account, rewards cards may not be for you. You may find yourself better off using a debit card and dealing with the occasional inconvenience that occurs when you're trying to buy something and your debit card is denied due to insufficient funds in your account. However, I don't have any problem keeping a few thousand dollars in my checking account, so the rewards definitely outweigh the risks. To each his own though.

[Datastache]

As a millennial who used to be very CC-averse, I can relate to the people the article is talking about. I saw all the risks and none of the benefits. Then I realized that as long as I just used the card exactly like I was using my debit card and then paid it off in full at least once every month, it was a great way to build up my credit score, improve the security of many transactions, and - best of all - make a little extra money.

But no, thinking of it as "not debt" isn't the way to go, in my opinion. Debt is debt. You just have to commit to keeping your spending low and always paying off the debt soon enough to avoid interest. Which is easy for me, since I'm frugal by nature and I check my bank account online every day.

[GuitarStv]

I don't think of it as debt.  I use it and pay it off monthly.

I think of it as a convenient way to not have to carry around cash.

Carrying a balance = debt, but credit card card use by itself does not necessarily = debt.

Yeah, this is pretty much how I see it as well.  I haven't used cash for anything for years, and have never paid interest on my card.  Cash is incredibly inconvenient so I never have it on me.  This behaviour doesn't require any special ninja training, just treat your CC like your debit card.

[darkadams00]

For a wide swath of society, credit cards are like a drug. If you don't think so, volunteer in a church or community financial counseling program. Good folks who make the median income plus or minus a few percentiles but are in horrible financial shape. They can't tell you anything about their monthly expenses--they're just paying bills, including credit card payments, until the money is gone and then they put as much back on the card the last few days before payday as they paid on the card a week earlier. Ask them to bring one month's of statements and bills to start putting together a budget, and they'll retreat and try to cover their tracks as if they had been caught in a hotel room with the pianist. The fact that they made a bad choice to spend $100 on cable, $150 on cellphones, and $205 on a car payment per month doesn't matter. They just know that they're $250-300 short every month and don't know where their money is going. To prove their thrift, they skip vacations, buy clothes from the thrift store, and use coupons, but they'll eat out four times a week (have to eat, you know) and buy gas for their 4x4 truck or SUV (have to buy gas) on a card. They're "paying the bills" and "buying what they have to buy" but they just don't understand that their discretionary bills and expenditures are the result of their own choices.

A gambler can beat the house, but the game usually favors the house in the long run. Likewise, corporate America has recognized the power of the plastic, and nearly every regional and national company that deals with daily consumers has moved to the swipe. Corporations are winning, and individuals are losing. People on this forum and elsewhere might criticize the anti-credit card argument, but honestly, it would be a toss up to determine if our society was better off today with the available credit than it was a couple generations ago when you had to know the shop owner to get store credit, and the only credit most folks had was a mortgage. It bothers me that we push bills into laws over a behavior that affects 0.001% of the population but do nothing about behaviors that negatively affect 40, 50, 60% of the population--finances are the leading cause of divorce. I understand the concept of personal choice, but many business practices are unethical at best and predatory at worst.

If I had my choice, I would vote to toss credit cards to the curb as a society. I use them responsibly and enjoy the benefits mentioned in this thread, but I know too many people who might be better off were they to live in a cash society. Not every advancement that is available is positive. Losing the rewards that I currently get wouldn't bother me at all. I think we could make up the difference in other ways.   

[MoneyCat]

There are, unfortunately, a lot of weaklings in this world who cannot handle credit cards the way they are supposed to.  I know lots of Millennials who prefer having thousands of dollars on hold in their checking accounts when someone defrauds their debit card instead of just safely using a credit card instead, because they are afraid of losing control of themselves and running up massive bills by purchasing lots of pointless crap.  Some people also can't handle being around alcohol.  It's just the way it is.

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.

[TonyPlush]

The problem I have is this - if I had $800 to spend using a card and paid it all off all at once, I had that $800 in my pocket (or bank earning interest).  Why the hell do I need to involve a middle man in MY money who's just waiting for me to trip up or fall on sudden hard times to wring money (exorbitant interest rates and insane fees) out of me?!

Because I earn $500+ a year in credit card rewards doing exactly this.

People with OP's line of thinking are equivalent to the people who "don't trust" the stock market. They're just passing up on free money due to an irrational fear.

[arebelspy]

If you mess up with credit cards, you have no one to blame but yourself.

If you can't handle them, fine. But don't assume others can't as well. Plenty of us use them all the time and never get burned, but get paid to do so. :)