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| How much credit card debt is acceptable for you?
Posted: 5/16/2008 10:39:05 PM | I don't ask people for a balance statement, but zero is what is what I accept for myself.
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I can think of only four reasons to incur debt: buy a house, buy a car, finance an education or pay for a dire emergency such as serious illness.
Before I was married, I had zero debts. I've been single almost seven years, and the last five have been totally debt free. I mean zero debts: no credit cards or anything else. I do use credit cards, but only to get the cash rebate my credit card company pays. I pay my bill in full every month. If I can't pay for something when the bill is due, I don't buy it. DUHHHHHHH!!
After we had been married less than a year, we had $20,000 in credit card and other unsecured debt. Part of it was our honeymoon. And I'm not going to plead total innocence: I spent part of it.
But my ex has no sense of restraint whatsoever. She didn't buy expensive clothes or jewelry. Most of it was groceries. You'd think she'd grown up in the Soviet Union with long bread lines and empty store shelves, and then got turned loose in America with a credit card. Half of the food rotted in the fridge and had to be thrown away. And we didn't eat steak every night or caviar either, just ordinary stuff.
I couldn't even get her to grasp the concept of credit card cutoff dates. In other words, if your statement cuts on the 20th of the month, anything you buy that's close to the 20th will be on the next month's bill instead of this one. She didn't understand that. Nor did she understand why I'd ask her to put a charge on my card (if it was closed for the month) instead of hers (which was still open).
I'm now making ends meet on a pension check of $1381 a month. I live in a small town in southern Appalachia, and I keep my budget balanced. Hell, some months I even manage to save a little. I put that $600 check from Big Uncle right into my savings account. I'm surely going to need it for dental work or car repairs before too long.
Can you tell that I'm somebody who has passed the CPA exam? | |
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| How much credit card debt is acceptable for you?
Posted: 5/17/2008 12:32:44 AM | overall, i pay credit cards off monthly. i use them mainly for itemization for my bookkeeping and for points that i use for x-mas gifts. sometimes there is a o interest offer that is ok, as long as it's paid off before the grace period. eg. i have a second mortagage home equity as needed to upgrade this house. recently i used a o interest credit card to pay off the home equity and therefore have no interest payment at all for awhile--just the principal. right before the grace period, i'll put the remaining balance back on home equity. however, i have value in my home. i would not do this and override the value, unless i felt it was a worthy improvement that would increase the value.
once before, i knew i could pay off my balance on a new car in a few months and it was cheaper to put the car loan on a low interest credit card than to take out a car loan. the car was necessary as the old one collapsed and i got a good deal on it. so, in essence i used the credit card for an asset and not to override my means.
if i were to marry, i would worry about any threat to my well earned fico score. i'd want to know way more about a person's credit card balance. i'd want to know the whole picture. once was enough with the ex! he was bankrupt when i met him, i helped to pull him up, and now he's almost bankrupt again. well, he remarried in time at least! seems to be a strategy. | |
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| How much credit card debt is acceptable for you?
Posted: 5/17/2008 1:56:23 AM | not long after my 18th birthday i got a credit card.. and ive always paid it off at the end of every month, i only use it for the internet, or if im buying something big i will sometimes use it, but im not in debt. i pay it off as soon as i get he bill... sorted!
ive been with someone (lived with someone) who was in alot of debt!! it didnt bother me, his money was his money... it was his buisness.. it didnt really affect me.
put it this way, i probably wouldnt not get serious with someone because they are in debt.
credit cards are usefull if you use them sensibly... :) | |
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| How much credit card debt is acceptable for you?
Posted: 5/17/2008 2:25:02 AM | Credit Cards are only of real use to those that don't need them. This statement seems a bit contradictive,but,if you have no discipline in your spending,the worst position you can be in is to have large amounts money you can spend now,and pay back later.
I recently paid off my credit card after nearly five years of not using them,and only changing to a different card when the interest "holiday" was comimg to an end.
It was handy nearly f ive years ago,when I suddenly landed with a flat to furnish,and debt that a previous partner left me with which ,although used for the family ,was in my name.
The cutting up of the credit card was like a ritual to me. A new outlook on life where I can spend what's in my pocket there and then,and ,if I don't have the money in my pocket,I don't buy it.
Even although I didn't buy very much at all,the whole time I had the credit card,and the lending of money is supposed to be very tight,I have been offered numerous credit cards since I stopped using them.
At this moment,I reckon I could get about £35,000 of debt if I asked for it,and I haven't worked for nearly three years. That shows you how much checking up a bank does on you. The fact is that if you tell lies,but always pay off the debt,you can get as much money as you want.In my opinion,the temptation of being able to have a much better life,for a while anyway,is just too much for a lot of people,and much more severe tests should be made before a banking institution allows anyone a credit card. | |
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| How much credit card debt is acceptable for you?
Posted: 5/17/2008 4:42:34 AM | If you pay the balance in full before the end of the month so that you owe no fees or interest a credit card can be used as a convenience BUT Credit cards inevitably have much higher interest rates than any other loan and so to carry a balance beyond the grace period just isn't smart. There are always exceptions to every rule but in general my answer is:
ZERO! | |
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| How much credit card debt is acceptable for you?
Posted: 5/17/2008 12:41:27 PM | several of you say don't use a credit card at all or use a debit card instead. i suppose this makes sense if you have no impulse control. BUT, having been defrauded twice via my checking account, i will say this for those who do pay balances monthly and are not using them because they "need" more money-- but rather for accounting purposes:
in the usa, credit cards are way more insured (based upon legislation) than checking accounts with attached debit cards. furthermore, there are less audits of checking account oddities because of the way the credit protection and banking laws are structured. so, you "might" get your money back, depending upon how long it took you to discover the fraud and individual bank policy. but you also might not. if the amount stolen from you, is "only" a few thousand--this is peanuts to a bank and they'd rather write it off.
it usually starts with small random amounts which you may not detect if you only eyeball your balances. with a credit card, you can see every itemization easily. you cannot really get the losses declared on taxes, unless you have huge, huge amounts in proportion to your income. after all, the rich are always taken care of when it comes to banking!
debit cards, short of using them for cash at the bank machine, are fraught with problems with respect to fraud because in essence they follow banking laws and not credit card laws. especially depending upon the place that you use them, your info may not necessarily be protected by respective vendors. nowadays, many places do not even require signatures or even check your ID, unless under a certain amount is surpassed.
this is all further exacerbated by check scanning machines nowadays which are easier for vendors, but which can scan/store your info instead of putting through a paper trail. some will argue this stops mail fraud. others will point to the televised story of a couple years ago, where vendors sent their ATM machines to be recycled. they ended up in a foreign waste dump and individual ID numbers were retreived by thieves.
it almost seems that the old mattress trick may be safer nowadays. cell phone cameras just take a click and there is a copy of your info on the way to the cash register. i would therefore suggest being up on fraud laws and protection and keep constant vigil on your accounts. i'd use credit cards and pay them monthly unless a regular account like a mortgage or utility bill --given the protection credit cards, and not checking accounts, afford under law--at least in the usa. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 3:57:19 AM | Your question is based on an idiotic premise. You want to exclude home, car & student loans, and only focus on credit cards? What's the point?
If Joe Smith is 40 years old, owns his own home worth $500K outright, has paid off all his student loans, as well as his car -- yet, he has a $10,000 balance on his credit card -- it wouldn't phase me in the least. He likely isn't struggling financially. Is likely a very savvy businessman, who may have a credit card with a $50K limit -- and likes to keep an open line of credit open, along with showing he can make regular payments -- and perhaps even extra payments on time.
On the other hand, if the same Joe Smith had a home loan for $500K that he just bought two years ago with just 5 percent down, was in an upside down mortgage, where his home was now worth far less than what he bought it for, was driving around a car he was still making payments on and still was paying off student loans -- and was struggling to make ends meet -- I'd be more hesitant to be in a relationship with him -- even if he had a zero credit card balance.
In the past few years I've had one longterm relationship with a construction guy and another with a retired hedge fund guru. While both were at completely different ends of the spectrum as far as how much money they had in the bank -- it didn't phase me in the least. One guy lived in a modest single family ranch with his daughter, paid his bills on time, and worked overtime or took some side jobs when he needed a little extra cash -- while the hedge fund guy has a magnificent home in Jersey as well as a penthouse in New York and a chauffeur who drive him around. The fact is, they both could afford their own lifestyles -- and my dates with both guys were fairly similar -- movies, Chili's, bowling, etc. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 5:39:03 AM | Been divorced 2 years and now have zero credit card debt and self-imposed $1,000 limit on the card.
I have 3 more payments on my car and it is mine and I live very frugally in a 3rd-world country. Every possible cent (Rupiah) goes in the bank. I have a great job with a decent salary but I deliberately save as much as possible.
Before I married I owned my own flat, car & had zero debts.
After I got married we bought a house, built another 2, got into heavy debt, bought a second car on hire-purchase and owed over $5,000 on credit card debt. My ex-wife had an entirely different attitude towards debt than me.
It all came crashing down when I lost a great job and spent 6 years trying to survive and manage our debt as a contractor.
My attitude to debt is no debt is acceptable and I will go without if I can't afford to buy something without borrowing. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 9:17:20 AM | Living off credit cards is a very expensive way to live.
I used them a lot when i was married and paid the price.
Now i am single I always pay them off at the ened of the month. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 9:28:40 AM |
How much credit card debt is acceptable for you?
Zero. Nought. Nada. Nil.
If you cannot afford it then don't end up paying more for it during a longer time. Period.
Is it that difficult to grasp? Dammit!
Always pay your credit card balance IMMEDIATELY.
Debt is a delicate instrument to handle with only extreme care. You can have 'good' debt if it's meant to purchase assets that will put money into your pocket (rental house, business, you name it...) and which you cannot afford with only equity. And even then you need to be extremely sure to evaluate all possible risks, or the 'leverage' may work against you. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 9:40:50 AM | in the usa, credit cards are way more insured (based upon legislation) than checking accounts with attached debit cards.
One of the main reasons I prefer the CC vs. debit in *most* cases. I use the CC to buy gas (just convenience, pay at the pump), and for anything online where risk is higher, renting a car or hotel on a trip, etc. Credit, I can claim it as fraudulent, and will not have to pay or owe interest in the amount, and still have the use of my money. Debit, the money is *gone* from my checking account, and in general won't get put back (ie, I lose the use of my cash) until they handle the fraud claim. As long as I have the money to pay it off at the end of the month, its just a safer way to make transactions.
Plus, its handy in an emergency. Not that its common, but when my car was out of commission, I needed the CC to rent a car while it was getting fixed, and paid for the repairs with it. Took me a couple months (3) to pay it all off (which I don't like doing), but when it relates to your ability to get to work to earn money to pay for it, or say if your furnace dies in the middle of winter, it behooves you to have *some* kind of alternative.
Don't "live off my card" by any means, but there are good reasons to have one, even if only for an emergency. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 11:46:47 AM |
If Joe Smith is 40 years old, owns his own home worth $500K outright, has paid off all his student loans, as well as his car -- yet, he has a $10,000 balance on his credit card -- it wouldn't phase me in the least.
There is one reason why it would make sense for a man to do this. If he invests his money and earns more return on it than the amount of interest he pays on his credit card then it would make sense for him to pay the card slowly and keep his money invested. If on the other hand the interest rate is high and he CAN afford to pay it off but is just too stupid or too lazy to pay the bill....then yes this would definitely "phase me". At least if I were considering marriage or a long term relationship with him.
I'm curious????? Under what circumstances would it make good business sense to pay off a low interest mortgage but keep paying high interest on a credit card balance?
One person mentioned using the card and paying the balance in full each month to get the cash back benefit. This makes sense and I essentially do the same thing. My main credit card gives rewards points. I have received a free flight within the USA about once each year for the past 3 years due to these "points" and I have never paid a penny of interest. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 11:57:39 AM | I'm curious????? Under what circumstances would it make good business sense to pay pay off a low interest mortgage but keep paying high interest on a credit card balance?
I actually did this once, but... the "writing was on the wall" at work (new boss came in and "had it out" for us, started on setting unrealistic goals - ie, 3 weeks work "by friday" - and writing people up to get rid of them, to bring in "her own" people from her prior job)... I cashed in some stock I had and paid my house off, paid the CC off the next month. It was early 2003, the job market still kinda sucked, so I did what I could to lower my monthly bills, and then saved for the next 10 months until she "had her way with me" (haha) - I quit rather than be fired (and as it happens, had a job offer a week later - but I was prepared for even 6 months having saved for it). It bought me the financial freedom to get work done on the car (clutch, major engine service, new exhaust, new tires, etc) before "the end".
Bought me the comfort of knowing other than my normal utility bills, I could survive quite a while unemployed. But, ordinarily I'd agree with your statement, not the best of ideas as far as financial management is concerned. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 6:07:34 PM | any amount that can be safely paid off by the end of the month.
avoid rolling charges and you never pay a dime but you get the advantage of a 30 day loan, unfortunately many people see them as bank instead of the loan shark (complete with astonishing vigorish) that they are more like. ;) | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 6:18:31 PM | The best I can say about your response to what I wrote is to write it off as being an uninformed asinine remark.
The simple fact is most successful people who have paid off their homes by the time they are in their 40s, as well as their cars and student loans, actually make a point of always maintaining a balance on their credit cards. Because their FICO scores are so good, they are issued cards with zero to little interest. Many purposely keep a balance -- just to prove they are a continually good credit risk -- as well as to easily have the credit available to them when a whim hits. For some they may purposely keep anywhere from 5K to 100K on a credit card, knowing anytime they wish, they could easily sell some of their stocks, etfs, cds, bonds, mutual funds -- or wherever else they choose to keep their money where they are getting a higher return than the rate they are paying the credit card company. It's basic simple economic sense.
Let me give you a precise example. Any person at all who is savvy with their money diversifies it in the market -- and most have had a chunk in oil stocks. So let's say someone bought 1,400 shares of US Oil (USO) in February when it had a pullback to around 68 bucks. Then over March and April they decided to take a few trips. So they pulled out their credit card and charged up say $10K. In the meantime their investments in key commodities and oil, etc. are continuing to go up and up. They are simply paying the minimum due on their credit card, and at the same time having the credit card with a zero to 3 percent interest rate. And let's just say they decided last Friday that golly, it's just too much effort for me to log on to my computer and send that automatic payment to the credit card company each month -- I'm just going to pay the darn thing off... No big deal. Because by simply leaving their money in USO, they rode their stock up from 68 bucks to a close on Friday of $102, making around a $47,000 profit on an investment of a little over $95,000. So, even by skimming some of the gains of $10K off the top and paying off their credit card -- they're still way ahead of the game with still having a $37,000 profit.
So, again, credit card "debt" isn't really "debt" if you're making a higher interest on your money elsewhere and have the ability to pay it off anytime you choose.
As to the answer to your question -- the answer is never. It absolutely never makes sense to pay off a low interest mortgage and keep paying a high-interest credit card. Nevermind the obvious fact of one being higher interest than the other, and your mortgage is a tax write-off -- but the main reason is a mortgage is a secured debt -- a credit card is unsecured. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 7:33:13 PM | with the market the way it is, most people who are paid off in other areas would not put a "large" long standing debt on their high interest credit card--unless there were tax advantages. if their credit was that good, they would be offered an interest free or low interest credit card. for example, i have one zero interest and one less than two percent. in my situation, after taxes, these are more lucrative for me to use then my home equity loan (second mortgage), so i'll use them until they are due, just to save interest, then go back to the home equity loan which is not fixed. home equity loans right now are also very low but more around 4 percent, plus or minus. on top of that are tax deduction advantages. sometimes a credit card is attached to the equity loan.
FICO scores are based upon a ratio of total lending potential to what is outstanding any month. so, even if you pay the debt monthly, correct me if i'm wrong, but your FICO would remain as high as someone who kept remaining debt. if you were late in monthly installments, then that would affect the score. but if you paid on time, that would not or maybe just minimally and indirectly affect your FICO== because it lowered your "total" monthly borrowing. it's all about ratios and not just the amount.
rich people might not pay off the mortgage and balance instead with their investing. however, if they needed that much money in an emergency they could offset a needed loan with their assets and not just borrow for the sake of borrowing. | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 7:42:42 PM |
The simple fact is most successful people who have paid off their homes by the time they are in their 40s, as well as their cars and student loans, actually make a point of always maintaining a balance on their credit cards. Because their FICO scores are so good, they are issued cards with zero to little interest. Many purposely keep a balance -- just to prove they are a continually good credit risk -- as well as to easily have the credit available to them when a whim hits. For some they may purposely keep anywhere from 5K to 100K on a credit card, knowing anytime they wish, they could easily sell some of their stocks, etfs, cds, bonds, mutual funds -- or wherever else they choose to keep their money where they are getting a higher return than the rate they are paying the credit card company. It's basic simple economic sense.
Gee, just where DO you get your financial information????
Nobody with financial knowledge would recommend intentionally keeping a credit card balance past the grace period. Paying your bills on time increases credit rating. Paying off loans promptly or early, especially large loans, increases credit score. Owing a large balance on a card and paying only the minimum payment LOWERS your FICO. Every credit card has zero interest during the intraductory period. Yes... you could just keep moving the balance to new cards when the interest rate went into effect but each time you apply for a new card it decreases your FICO score a little until you show a good payment record on that card for about 2 years. If you charge thousands of dollars every month AND pay it off before the end of the month, this raises your FICO. Anyone who invests with the mindset that they can easily sell their investments at any time, is stupid!
Never, ever sell low and never, ever put yourself in the position of being forced to do so! | |
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| How much credit card debt is acceptable for you?
Posted: 5/18/2008 7:59:06 PM | Your FICO has a basis in :
Credit ballances/Credit available
Plus payment history factors.
If you have a house loan... the initial loaned amount is used for the credit available and what you still owe is the credit ballance.
If you have a credit card, the average daily ballance is the credit used and the credit limit for the card is the credit available.
Therefore... carrying a ballance on a card HURTS your FICO... it does not help it.
And you can have a pristine credit score ... get a home loan and suddenly your score is in the pooper. (until you have a payment history for that loan) | |
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| How much credit card debt is acceptable for you?
Posted: 5/31/2008 2:02:11 PM | OP,
If you're entering a relationship that may become permanent a full-disclosure of finances is important. Once you mingle income & debts, watch out!
If you are credit car debt-free it would seem apparent that it's important to you..so your guy should be in the same spot, at least paying off the balance monthly. If he has an outstanding balance on his cards I'd have to have him get it paid down or off before comingling. Plus, I'd have the majority of the cards cancelled & cut up, to keep the urge to run up a balance down.
Debts can be so different at different life stages! But, if you're looking to get married, buy a house, have & raise kids together, the debt load that you start with will just increase for a decade or so. It may be best to start off with as little as possible.
It also changes when you get to my life stage. I've gotten all debt except mortgage paid off and I'm not looking to take on someone who loves to live on credit. | |
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| How much credit card debt is acceptable for you?
Posted: 5/31/2008 2:33:12 PM |
How much do you Americans will find appropriate for a person you may be willing to settle down?
As long as the debt isn't mine and doesn't become mine, I don't really care. As long as my partner can pay their own share of the living expenses, (IF it came to the point where we were talking about living together) the rest is his to deal with.
I have never expected a new person in my life to pay off my debts or to help me raise my kids (when I was still raising my kids).
He needs to have enough left to share in some of the dreams we might have tho'. | |
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