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NaturallyMe's avatar

Do you think it's a tad unwise to buy (relatively speaking) unneccesary stuff on credit?

Asked by NaturallyMe (4902 points ) July 17th, 2010

What would you be willing to buy on credit?

In my opinion, i think it’s a waste of money for the average person to buy anything other than a house and a car on credit. I’m talking of things here, so for the sake of the question, ignore things like student loans and medical necessities etc.

Of course, everyone is free to waste their money as they deem fit…but not to the point where they get into financial trouble and are not able to afford paying for the things they’ve acquired.

Plus, can one really have peace of mind knowing that all this stuff is bought on credit – it would feel like a heavy weight hanging over me.

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32 Answers

HungryGuy's avatar

Yes. The only things you should buy on credit are things you can’t save up for in a reasonable amount of time, and are essential to live in today’s modern world, like a house and a car. Everything else, if you can’t afford it, do without it until you can save up for it.

josie's avatar

The only thing that I would buy on credit is an appreciating asset, like (hopefully) a house, or other real estate or a business or capital machinery, your education etc. In general, there is truth to the old axiom “interest should be earned and not paid”

sferik's avatar

Do you include paying with a credit card as “buying on credit”?

NaturallyMe's avatar

@sferik – if you’re not paying that credit card off in full within 30 days, then i suppose i do include it. If you can’t pay it off in full every month, that means you’re living on credit.

jerv's avatar

I have yet to even buy a car on credit since I am of the opinion that many things are overpriced anyways so why pay even more. Of course, that also makes me a ghost in the system so my credit rating isn’t good enough to ever get a mortgage big enough to cover the cost of houses these days, or even a car loan for anything less than a decade old unless I am willing to deal with 19% APR, so there is a downside.

tranquilsea's avatar

I learned the credit game very young. My father only brought home a paycheck every 2 to 3 months because he was a terrible businessman. My mom had 6 kids she needed to feed and clothe. She put a LOT of things on credit. Unfortunately, this became a habit that she couldn’t break. She ended up paying thousands of $$ on interest and it did become a weight and a massive stress.

I put thousands of dollars worth of stuff on my credit cards but only because I earn cash back. As soon as something gets charged it gets paid that evening out of our bank account.

We save up money to make big purchases. There has been the odd purchase that we’ve done a 30/60/90 deal with, but we don’t do that very often.

Coloma's avatar

The only debt I currently have on a CC is an overseas vacation I took this past spring.

As long as one pays off the debt in a reasonable amount of time, ( I make triple, at minimum, payments ) and is not out of control in their spending I see no harm.

I say use credit for emergencies and a once in awhile splurge, providing you can sew up the debt in a hasty manner.

NaturallyMe's avatar

@jerv – i know, it crazy that you’re not favoured for a home loan just because you have no loans…sheesh. Also, a car is more of a necessity here in SA than i suspect it may be in some other countries in the world, because our public transport is horrendous and very unreliable and it’s just not how things are done around here. Of course it’s easier buying an old car cash, but unfortunately (haha) i want something better than an old car. :)

aprilsimnel's avatar

I don’t use credit cards now, but I haven’t had to. In the next couple of years, though, I will need credit if I want to buy a home, so I’ll be getting a secured card as soon as I’m employed again.

Coloma's avatar

@NaturallyMe

Yes, same here in my rural Northern Ca. area…a car is a necessity, no public transport.

A reliable and safe vehicle is a must for my demanding mountain roads and long distance commutes.

I go through tires and brakes like melting ice cream. lol

jerv's avatar

@NaturallyMe My current car is an ‘85 Corolla with ~212K miles that I bought for $300. It’s reliable and I can work on it myself. Why pay $700+ to replace a head gasket when I can do it myself for $50? I did that with my ‘87, and that was also the only car that was in good running order when I got rid of it and the only one that lasted more than 18 months.
I have had newer and nicer, but all of those has severe issues. The most expensive was my wife’s ‘98 Saturn. She got it used from the dealer in ‘00 with 47K miles and within three years it had blown two transmissions. We had a nice ‘98 Mazda 626 but it had the problematic Ford CD4E transmission. Meanwhile, the POS ‘87 Corolla was unstoppable, the $350 ‘89 Golf that replaced it ran like a champ and only died as a result of having to scavenge parts off of it to keep my wife’s Golf running, and the free ‘90 Civic that replaced that was mechanically solid despite having a body made of bondo and scrap metal.
Why pay $200–500 a month for something less reliable and more expensive to repair when you can pay $300–500 for a car outright and keep it on the road for far less repair costs than a car payment?

@Coloma Been there, done that. When I lived in rural NH, off-roading capability was a must, as was good winter handling. You call it “mud bogging”, I call it “getting from the highway to my driveway”. You call it “a skating ink”, I call it “my morning commute”. And I have had to use my bumper as a snow plow more than once and I got in the habit of downshifting even in an automatic since I got sick of wearing out brake pads.
And my old beaters handled it far better than anything newer than a ‘95 ever did. Ever see an ‘02 Jetta sunk up to the frame rails? Or a ‘98 626 drifting like Tak Fujiwara down Mt. Akina? I’ll take my old Corolla with it’s mountain goat handling over a nice car I can’t drive any day!

LuckyGuy's avatar

I’d like to see a higher, minimum purchase limit for credit cards. For example, you may only use a credit card if the purchase is above $50. Would that affect spending habits?

NaturallyMe's avatar

@worriedguy – maybe!! It’s so much easier just putting the stuff on credit card and even more easy to lose track of exactly how much you’ve spent on it. Seeing cash leave your wallet could make some think twice about buying.

jerv's avatar

@worriedguy Considering the fine line between debit cards and credit cards, that may be trickier to implement than you think. I mean, I can use my debit card at places that only take Visa, so are you proposing that people start carrying more cash?
And are you willing to install more ATMs to allow that? I’m not willing to drive 7 miles round trip to my credit union just so I can withdraw $20 to buy groceries at the supermarket right next door nor am I going to carry more than a couple of dollars (lunch money) on me in these crazy times; I’m going to use my debit card as a credit card.
Of course, if we went the way I think you are proposing then banks would lose a lot of money since people would be carrying it around instead of letting the banks hold it to lend out to home-buyers. Either that or we would need to perform a pretty hefty overhaul of our financial infrastructure, and I don’t think anybody is willing to pay for that.

Spider's avatar

@NaturallyMe I have a friend who is a financial coach and she said that something that helps her (and something she recommends to her clients) get a good sense of how much is being spent is to use cash as much as possible.

Personally, I use my credit card whenever possible because otherwise I would just keep tapping the MAC and spending cash and not realizing how much I was spending, and on what. (I’m not diligent enough to keep all my receipts and tally them regularly, etc.) Using the credit card allows me to see exactly what my expenditures look like, and I just use cash when I can’t use a credit card, and I can keep track of the fewer number of cash purchases. (I pay my cc bill in full every month.)

There’s something that I want that’s around $6,000, but I’m saving up for it instead of getting a loan or trying to use credit (massage school). To the original question though, what would I put on credit? Well, only something I knew I’d be able to pay off without interest. And by “know”, I mean that I basically have the money but will take advantage of 0% interest so that I can continue to earn interest on my own money and have access to it in an emergency. However, given the size of my current savings account and the possibility of being laid off, I probably wouldn’t put any thing on credit right now..

jerv's avatar

@Spider Bank of America gives out little credit-card-sized ledger books not unlike those in a checkbook for use with their debit cards. Even though I don’t bank with them any longer, I have a few around. How do you think I know how much money I have in my account even when there isn’t a scrap of paper currency in my wallet?
In fact, I often have a better sense of what I have in the bank than how much cash I have on me at any given time even without that ledger. Is that weird?

Lightlyseared's avatar

It’s not a tad unwise – it’s bloody stupid.

NaturallyMe's avatar

@Spider – credit cards are very handy, we used them a LOT. In fact, i buy everything on there, except our month food – grocery money we take in cash – this was just something we did to help us budget and not overspend on food, and it’s a way to help us control how much money we spent. Anyway, we also pay off our credit card everymonth from our savings account, so we NEVER spend money we don’t have.
It seems me and you know how to use a credit card wisely. :D Some others see it as easy money – buy now and pay back…..some time in the future that i don’t have to think about right now, type of thing.

NaturallyMe's avatar

@Lightlyseared – lol, well, says i too.

Seaofclouds's avatar

I have two credit cards and they are for emergencies or if I’m in a situation where I need to use a credit card that is not a debit/credit card (I had this happen with renting a car). I could have used my debit card as a credit card, but then Enterprise would have done a credit check on me. By using my credit card to book the reservation, they skip the credit check (because the bank issuing the credit card already did one). I paid the bill at the end with my debit card.

I use my debit card for just about everything. USAA has a system where I can put each purchase into categories and keep track of my spending each month. I can tell you how much I’ve spent on groceris, bills, eating out, mailing stuff to my husband, and entertain with the press of a button. It’s really nice.

NaturallyMe's avatar

@Seaofclouds – hey, that USAA thing sounds cool, i’ve never heard of anyone ever mentioning anything like that over here.

Seaofclouds's avatar

@NaturallyMe It’s really great. I love USAA and use them for just about everything I can. They have been really great for me and I would recommend them to anyone that was eligible to get accounts with them.

Austinlad's avatar

As a former (and thank goodness, now reformed) plastic junkie, I usually use only my debit card to buy stuff, which forces me to spend only what I have paycheck to paycheck. Occasionally I use credit to buy something expensive, but I do that only when I’m sure I can pay it back in 30 days. A former girlfriend once told me she never paid or WOULD pay credit card interest or bank fees, and I’ve followed that rule for many years. I have NO credit card debt, for I find that saving is a whole lot more fun that paying on credit cards.

NaturallyMe's avatar

@Austinlad – for sure, i’ve never paid credit card interest either, i just can’t bring myself to waste money like that.

Spider's avatar

@jerv The ledger-book idea is a good one. I would probably use a debit card more often if the one that I had worked. I use a credit union, and the “debit” card they provide doesn’t work the same as debit cards I’ve had from regular banks. This is fine though because my checking account is (low) interest-bearing, and I get 1% back from cc purchases in the form of a visa gift card, whenever I choose to redeem one. This also means that the amount in my checking account doesn’t change unless I visit the ATM or make an online payment or transfer, and I’m aware of my balance when I do those things. Actually, I don’t even have checks; I pay my massage therapist every month by account transfer so I don’t have to worry about having cash on-hand. :)

@NaturallyMe If there was one thing my father would have wanted for me (besides enjoying life in general), it would be to avoid credit card debt, and he stressed time and time again that you can’t spend what you don’t have, even if you can get something without having the money for it. I agree, it’s a huge problem with a lot of people. Unfortunately, I think the problem is pretty deep-seeded in our culture because many people seem to buy stuff they don’t really need. They buy into marketing and think something will gain them status, popularity, happiness, etc., and although that may be true temporarily, the amount that is paid for it is usually more than the actual value it has.

I apologize for a tangent here, but as an example, someone recently made the statement that when people buy clothes, they don’t really need clothes. Taken as a general statement, this is pretty true, but people like the idea of having new clothes, and wearing a certain style. I’m not opposed to personal expression, but it’s my opinion that many people have a skewed perspective of what is really important, and this affects their ability to manage money. (I’m guilty to a degree as well, but I try to be as conscious as possible.)

@Seaofclouds I also have a cc with a pretty big limit that I don’t use but have in case of an emergency. It sounds like the tool at USAA is similar to Yodlee.

Seaofclouds's avatar

@Spider It sounds a bit similar to that, but there’s no need to link accounts since USAA offers it themselves. Also, I can make my own categories or use the pre-existing ones they already have. I like making my own because I can personalize it a lot more.

Spider's avatar

@Seaofclouds But your account(s) would need to be with USAA to use the tool, right? If you do, that’s great. But if you have accounts somewhere else that doesn’t offer that feature, one can still categorize their spending across all their accounts even if they’re not all at the same institution.

If I enlisted in the military after I graduated college like my Dad suggested, perhaps I would be a USAA member. Alas, I decided to stay civilian.

Edit: I actually would be eligible for a checking/savings account because Dad was military. Still, I would have to compare the features against Navy Federal CU which has been pretty good.

Seaofclouds's avatar

@Spider I’m not sure if you can use their tool with other accounts, I’ve never looked. I use USAA for everything I would need to keep track of right now.

Spider's avatar

@Seaofclouds That must be nice. I would like to have all my “stuff” in one place, and I consolidated a little when I went with the CU: my checking, savings, and primary cc are at the same institution. But when I bought a car, I used a different CU because they had a really great auto loan rate that I couldn’t get my own CU to beat. No complaints though! :)

Jeruba's avatar

I’ve been trying to read a book about finances. It’s slow going because I have no interest in the subject. But I do recall one point made early: the older generations believed in saving up for things and not incurring debt or paying interest in credit cards. The younger generation uses credit—and not just for instant gratification. They see see that as long as the value of our money keeps declining, the $1000 you saved isn’t worth $1000 when you’re ready to use it. Rather, the smart thing to do is to borrow the money (typically via credit card) and make the purchase now, and pay it back with dollars that are worth less in the future.

Since money is an emotional subject and not just a matter of cold practicality to many of us, I don’t know that I’m ready to embrace that idea. It took my husband and me a lot of effort to become debt-free, and I don’t ever want to owe money again. But I must grudgingly admit that I can see the logic, as what we thought was an adequate provision for retirement keeps dropping in three ways: returns on investment decline in actual dollars, the value of each dollar also declines, and costs go up.

Aster's avatar

I spend enough on shipping charges to not be buying anything on credit! Proud to be
Debt Free. (pay off cards each month).
If 2011 smells like Huge Solar Storms/Power Grid collapse and Total Market Crash coming up in 2012, I would consider running up my cards to the max just like half the world. lol Then , while I
watch in horror at the goings on, I’ll at least be watching it from the window of
My New Mercedes SUV. Or some lux auto. possibly,who knows

NaturallyMe's avatar

@Spider – buying into marketing is a big problem, it’s almost like people lose the ability to think for themselves sometimes, instead they just HAVE to get that thing. And yes, many for example buy expensive cars by refinancing (?) their home just to keep up with the Jones’s. Sheesh. I’m glad i can see through these things and not fall into that trap.

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