It's hard to rent a car or reserve a hotel room without one. Also, sometimes they offer perks that debit cards don't. My Citi Click card gives me 1% off all internet purchases. It's not huge, but it adds up.
Debit cards can only be charged up to the amount in your account. Credit cards can be charged up to the credit limit. Which do you think is higher for most people? Which do you think car rental companies want to have as "insurance"?
The card gives me a 1% discount for online purchases. So if I buy $100 worth of books from Amazon, my credit card bill is $99.
The risk when you rent a car has nothing to do with the credit card itself. The risk is that you'll wreck the car and owe the rental company lots of money. The credit card just makes it easier for them to collect the money if you screw up.
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Incidentally, I never carry a balance on my credit cards, but I just took out a loan to buy a car. If you can get a good enough financing rate (lower than what you earn on your investments) then it makes good financial sense to borrow.
I don't think you can't reliably find a financing rate below the market's interest rate for investments. This should be in equilibrium.
Unless your credit card has a deal with every Internet store out there, they are giving you free money. "Free" means they are getting nothing for it. Perhaps customer loyalty. Can you think of any other reasons?
Sure you can. The car dealers offer them as incentives, just as they sometimes offer sales.
The internet card befuddles me a little bit too. Here's my guess: credit card companies have lower costs associated with internet transactions than with Point-of-Sale transactions, and they pass some of the savings on to me? The internet credit card has no magnetic stripe, so it can't be used normally. Only its number works.
I've heard that too. But doesn't the same happen as you pay rent, utility bills, etc.?
There should be a mechanism to maximize your credit-building. You could have a program that tells you how much to put on the card each month, and reminds you to pay your credit card bill on time, automatically (paying small bills won't show them how you'll do with big bills, too much spending is a risk-factor). I wonder how much one ends up paying for credit this way, assuming an empty credit history.
By the way, if you planning to get a mortgage or a car loan, then you are planning to go in the red (that contradicts the premise).
I've heard that too. But doesn't the same happen as you pay rent, utility bills, etc.?
not really - the credit rating you accrue comes from payment of loans mostly (either credit card payments, or actual loans for school/car/house/etc).
You could have a program that tells you how much to put on the card each month, ...
But that assumes you know exactly how the credit agencies calculate your rating - a fact which I don't think is widely publicized, if at all.
By the way, if you planning to get a mortgage or a car loan, then you are planning to go in the red (that contradicts the premise).
Sure, but planning to buy a house, or even a new car, with cash is pretty damn hard to do. Even people who live "in the black" their whole lives otherwise still find this kind of loans pretty useful.
First, it is free money. For 9 years, since I was a college senior, I have had exactly two credit cards, a Discover and a Chase Visa. Two months ago Chase switched me to a Mastercard but that is the only change, I still have those same two cards. I started with paltry credit limits and now I've got insanely high credit limits.
And in 9 years, I have paid a total of FIFTY CENTS in service charges and interest. And I have received many hundreds of dollars, probably over $1,000, in cashback bonuses. I bought a truck a few weeks ago. I put the whole thing on my Discover. That purchase alone will give me $110 in free money at the end of the year.
It is easier to rent a car and get hotel rooms with a credit card than with a debit card. Why? Damned if I know - but it's true.
Also, you build a credit rating. There are two different kinds of credit, good credit and bad credit. When you use a credit card and you keep paying your bills on time, you build good credit. When you have no credit card, you get no credit.
If you don't have good credit you might not get approved for a mortgage - keep in mind that your last name is not Bush :-) And if you don't get a mortgage then you're paying rent and not building equity. And that means you'll be a serf for the rest of your life.
And you know by now how I feel about being a serf. EARLY RETIREMENT GOOOOOOOOOD.
Good point. If you rent you can put your stuff in storage and take a sabbatical. If you buy it may be a bad time in the market to sell just when you need to sell. Also I think you get taxed on your profit from selling a house, if you don't buy another one soon afterwards. There is a concept called 'negative equity' which is when you owe more money on your house than you could sell it for. This happened to a lot of people in Britain in the last recession after Thatcher encouraged people to buy their own homes rather than rent. When US house prices start dropping (soon?) a lot of people who got 100% and 125% mortgages are going to be very sorry.
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The 1% deal sounds crazy. I bet they don't let you pay before the interest / use charges accrue. Otherwise, it's giving you free money.
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Debit cards can only be charged up to the amount in your account. Credit cards can be charged up to the credit limit. Which do you think is higher for most people? Which do you think car rental companies want to have as "insurance"?
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But it's free money if you are buying a computer online, and that makes no sense.
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The card gives me a 1% discount for online purchases. So if I buy $100 worth of books from Amazon, my credit card bill is $99.
The risk when you rent a car has nothing to do with the credit card itself. The risk is that you'll wreck the car and owe the rental company lots of money. The credit card just makes it easier for them to collect the money if you screw up.
--
Incidentally, I never carry a balance on my credit cards, but I just took out a loan to buy a car. If you can get a good enough financing rate (lower than what you earn on your investments) then it makes good financial sense to borrow.
Re:
I don't think you can't reliably find a financing rate below the market's interest rate for investments. This should be in equilibrium.
Unless your credit card has a deal with every Internet store out there, they are giving you free money. "Free" means they are getting nothing for it. Perhaps customer loyalty. Can you think of any other reasons?
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The internet card befuddles me a little bit too. Here's my guess: credit card companies have lower costs associated with internet transactions than with Point-of-Sale transactions, and they pass some of the savings on to me? The internet credit card has no magnetic stripe, so it can't be used normally. Only its number works.
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that's what people tell me, at least, I've never asked for a credit card in my life, though, personally - let's see how far I get! :)
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There should be a mechanism to maximize your credit-building. You could have a program that tells you how much to put on the card each month, and reminds you to pay your credit card bill on time, automatically (paying small bills won't show them how you'll do with big bills, too much spending is a risk-factor).
I wonder how much one ends up paying for credit this way, assuming an empty credit history.
By the way, if you planning to get a mortgage or a car loan, then you are planning to go in the red (that contradicts the premise).
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not really - the credit rating you accrue comes from payment of loans mostly (either credit card payments, or actual loans for school/car/house/etc).
You could have a program that tells you how much to put on the card each month, ...
But that assumes you know exactly how the credit agencies calculate your rating - a fact which I don't think is widely publicized, if at all.
By the way, if you planning to get a mortgage or a car loan, then you are planning to go in the red (that contradicts the premise).
Sure, but planning to buy a house, or even a new car, with cash is pretty damn hard to do. Even people who live "in the black" their whole lives otherwise still find this kind of loans pretty useful.
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But I doubt it's a secret. Even if it is, it can't be too hard to figure it out.
Credit card GOOD, dependence on them BAD
First, it is free money. For 9 years, since I was a college senior, I have had exactly two credit cards, a Discover and a Chase Visa. Two months ago Chase switched me to a Mastercard but that is the only change, I still have those same two cards. I started with paltry credit limits and now I've got insanely high credit limits.
And in 9 years, I have paid a total of FIFTY CENTS in service charges and interest. And I have received many hundreds of dollars, probably over $1,000, in cashback bonuses. I bought a truck a few weeks ago. I put the whole thing on my Discover. That purchase alone will give me $110 in free money at the end of the year.
It is easier to rent a car and get hotel rooms with a credit card than with a debit card. Why? Damned if I know - but it's true.
Also, you build a credit rating. There are two different kinds of credit, good credit and bad credit. When you use a credit card and you keep paying your bills on time, you build good credit. When you have no credit card, you get no credit.
If you don't have good credit you might not get approved for a mortgage - keep in mind that your last name is not Bush :-) And if you don't get a mortgage then you're paying rent and not building equity. And that means you'll be a serf for the rest of your life.
And you know by now how I feel about being a serf. EARLY RETIREMENT GOOOOOOOOOD.
Re: Credit card GOOD, dependence on them BAD
Re: Credit card GOOD, dependence on them BAD
There is a concept called 'negative equity' which is when you owe more money on your house than you could sell it for. This happened to a lot of people in Britain in the last recession after Thatcher encouraged people to buy their own homes rather than rent. When US house prices start dropping (soon?) a lot of people who got 100% and 125% mortgages are going to be very sorry.