Is it better to save or pay debt down?

[NICKG]

Originally Posted by JV911SYDNEY

given that the debit is on credit cards, i'd say pay em off

if the debt was deductible (i.e an investment loan) then i'd keep the debt, service the interest only, claim the deductions and use your savings to make other investments

actually in the US, a debit card is another form of a check (although it is actually a visa) it comes out of your account instantly...not a credit card at all.

[onewhippedpuppy]

Originally Posted by NICKG

these are not all m/c or visa..I have those and a few others(lowes and HD fior the house) that we use. There are some things that I cannot just pay off every month..the lowes for example has 0% interest for a year..so we use them for our home repairs (which have been substantial).
Realistically I asked more about what a better management would be, and it seems that i am going about it the right way. The problem with "cuting up the cards" is that as you do this and cancel off the accounts, your debt to cfredit ratio goes up...therefore as a result your credit goes down. For example, I have cancelled some cards with 0 balance that had 10k credit limits..when i pulled my next credit report (i do it every 2 months) my credit took a good hit as the balance to available credit went up.. so it is not just that easy. I am looking for a balance and to control these to my best benefit. I do make habit of dropping any card that has the highest intrest and did away with all Capital one cards when i read the horror stories involving them upping interest without warning to good standing customers(we had 7 total cap one cards...) I have also tried to cut down the ones with low limits to get rid of them.

The one card that I have absolutely refused to get is a gas card...no way am i putting gas on a credit card..that is just dumb

Sorry Nick, but this is BS. Justifying CC usage with your credit score is like justifying an expensive house for the tax write-off. It just doesn't add up. I did not have a credit card until I got married at 22, when my wife added me to hers. We've had one mortgage that we paid off when we sold the house, the loan was in both of our names. When we purchased a new house last year, I had excellent credit. Don't kid yourself, you can cut up those cards and it won't impact your credit rating. There is NO good reason to have more than one or two credit cards. I have my Visa debit card and a Discover credit card, no problems.

If you want to get out of this trouble and stay out, you have to change your mentality. "There are some things I cannot just pay off every month" means that you can't afford them. If you can't pay for them today, or pay for them in one month when your bill comes due, you shouldn't buy them. Period, end of story, no exceptions. By definition, you can't afford something if you don't have the money for it. If you don't change your mindset, you'll never get out of CC debt.

[vash]

the first step is to ditch the "i gotta have it now" attitude. the rest will follow. i am still perfecting it.


to answer you original que. i think you should pay them all off, close a few. oh, i charge all my fuel to my Amex card. i pay the balance off every month. i get a few bucks kicked back to me in costco money....fun. and it helps me keep track of my annual fuel expenses.

[Porsche-O-Phile]

Again, I agree to a point, but not entirely.

The reality is we DO live in a world (fair or not) that only cares about one thing - your FICO score. The amount of financial leverage you can control, the types of financial credit lines and options available to you and ultimately your perceived value all boil down to that one number. It sucks, it's B.S., but that's how it is. As such, ANYTHING you can do to bolster your FICO number is worth doing - unless you're so independently well-off as to really not care or not need it (this applies to probably <1% of people out there).

I'll use myself as an example - I'm currently trying to position myself to take advantage of a real estate price crash, which I think will bottom out in about 2 years' time (and stay flat thereafter for a few years). As such, I see taking on a few extra credit lines right now as a positive thing. It might be a short-term FICO reduction since I'm opening credit lines and having inquiries done, but longer-term, when those cards have been open a couple of years and have very low utilization %ages, it will result in a net gain. This works to my benefit. FICO is everything - on a purchase like that, a few FICO points one way or the other means literally paying or saving THOUSANDS of dollars. So a few bucks here or there on a credit card is pretty much inconsequential.

Properly used and managed, credit can be a very powerful leverage tool. It's nothing to avoid completely "on principle". You can live a lot better and do a lot more for yourself if you tap it - but are careful to do so properly. If you're stupid and mismanage it (as a lot of people do) or are undisciplined, you can get burned. No risk, no reward. Credit is just one more example of this...

[vash]

i agree with POP. you have to creat the illusion of responsiblity..borrow...pay off. having a bunch of open CC, does nothing.

my wife has a near perfect FICO, it is a sport for her. i am a few, maybe 10 points behind her and she loves it. the car dealer said her score was the highest he has ever seen. we both felt that by borrowing $7k to buy the car would help in the long run. just trying to look even more responsible.

[onewhippedpuppy]

Sorry Jeff, but I think that's a waste of time. I had never borrowed until my wife and I bought our first home, her only credit was from a credit card she's paid off every month since she was 16. We had ZERO problems getting a loan with a great interest rate. Since then we had one car we bought on credit and paid off early, and a paid off mortgage from selling our first house. I think my credit was 750-ish, hers closer to 800. So we basically have borrowed very little across our entire lives and pay off ONE credit card every month, great credit and no issues getting a loan.

Personally, I think the "I want to boost my FICO score" is more an excuse to borrow money for stuff you don't need.

[Porsche-O-Phile]

It's a means to an end. By the time I go for a mortgage, I'll be showing a zero balance (or damn close to it) on my various lines and a historic utilization % that's pretty low. Not to mention the accounts will have been open for a while (2-3 years, all with good solid on-time payment histories). I've done some research on this and doing all these little tricks (including this, doing monthly payoffs of cash advances in full between multiple cards each month, etc.) are all things that can add up pretty significantly in terms of raising one's score. Research it - these kinds of things are worth literally up to a couple hundred points on one's FICO. That's bigtime real money, especially on a mortgage and most especially in a tight/restrictive credit market.

Of course, once you have the mortgage approval at a rate that's acceptable to you, you can go and do whatever you want, close the accounts, whatever. Yes, it's taking advantage of the system but I don't see anything wrong with it. It's simply knowing how to play the game and being smarter and more motivated than the average schlub out there in order to save lotsa lotsa money long term.

[therotman]

Originally Posted by Porsche-O-Phile

It's a means to an end. By the time I go for a mortgage, I'll be showing a zero balance (or damn close to it) on my various lines and a historic utilization % that's pretty low. Not to mention the accounts will have been open for a while (2-3 years, all with good solid on-time payment histories). I've done some research on this and doing all these little tricks (including this, doing monthly payoffs of cash advances in full between multiple cards each month, etc.) are all things that can add up pretty significantly in terms of raising one's score. Research it - these kinds of things are worth literally up to a couple hundred points on one's FICO. That's bigtime real money, especially on a mortgage and most especially in a tight/restrictive credit market.

Of course, once you have the mortgage approval at a rate that's acceptable to you, you can go and do whatever you want, close the accounts, whatever. Yes, it's taking advantage of the system but I don't see anything wrong with it. It's simply knowing how to play the game and being smarter and more motivated than the average schlub out there in order to save lotsa lotsa money long term.

Having more than a few cards hurts your credit score. You want only a few cards with high limits and small balances.



When you go to buy a house you don't benefit from each number you can raise your fico score- over 650 to 700 is all you need to get the best rates.

[onewhippedpuppy]

Jeff, my point is that you don't NEED to do all this stuff. Unless you have bad credit that you are trying to rehab, you can have good credit without playing all these games with credit cards.

[Hetmann]

Originally Posted by Porsche-O-Phile

I agree with this in principle but it's actually not 100% true. If you're careful and pay attention to your card offers, you can effectively ensure that any balance you carry is 0.0% apr by taking advantage of balance transfer offers. If you're paying a dime in interest, it's too much.

But you have to be disciplined enough to keep on top of it and actually put time into researching/applying/transferring/tracking all this stuff. If you do, you can save a ton.

As with a lot of things, the price of doing nothing can get pretty steep. Lazy people pay interest.

I going to call BS on this. Every offer I receive has a transfer fee. You are paying the interest up front. It's been a very long time since I've seen a balance transfer offer without a 3% fee.