Are credit cards good for you?

[RockBottom]

Hello Everyone,

Until now I haven't had a credit card, been using debit till now. I am still midway reading the fastlane millionaire book. In some chapters, MJ refers to cancelling credit cards as a slow lane thing.

Now I am confused, should I understand that using/maxing out a credit card is bad?
Been thinking of applying for a credit card, now just wondering if it's a good idea.

Please advice !!

 

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[Rickson9]

A credit card is good if you happen to be a gifted entrepreneur.

With other individuals, a credit card can be used to commit financial suicide.

Also MasterCard is one of the most profitable businesses around. At a market cap of $36B, they generate 23% returns on assets and 43% returns on equity on profit margins of 34% using no debt. These numbers are godly.

That should tell us something.

Best regards.

 

[jeandearme]

First thing to ask yourself is: do You really need it?

Credit cards are good only in one situation - when You earn using them. And by earning with CC I mean You buy something You know it will be sold quickly or even better - it's already sold (and paid). For fast, little deals - it may be good. But generally - cash is always better. You can see how much You have.

To be honest: I'm using debit card (with no loan feature), but everyday all I buy is written down - some type of financial statement. And with this in mind I'm doing shopping knowing precisely how much money I have and how much I can use.

My suggestion: if You know what You're doing - You can keep it (if it don't have fee for having one). Otherwise - burn it. Keep in mind that idea of CC is made for banks to earn on You. If You want to be better and earn on them - You must think sharply.

 

[Deeyennay]

In my opinion, credit cards can be a great danger if you're not good with your finances. Like MJ says, it doesn't matter how much money you have if you can't manage it properly.

I have a credit card and I have no regrets whatsoever for taking one. If you travel internationally and you need to book hotels for example, things will be so much easier with a credit card. Transfer time for transactions is also very small. Very useful if you need a product overnight.

 

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[Kak]

I dont have credit cards but I am getting an AMEX business simply cash because you get some pretty good cash back stuff.

Ive got the application right here it came in the mail.

5% back on office supplies and wireless services

3% back on gas

And they have 10 or 5 percent off allot of companies that I use with my businesses like fedex, hertz, espon...

To answer your question, credit cards for credit suck. If you pay off the ones with good business rewards as you spend It looks like it can save you some money. so if you can control yourself go for it.

 

[GlobalWealth]

Also MasterCard is one of the most profitable businesses around.

Thanks for the tip. (not that I follow tips), but I just did a quick scan of MA's financials and on the surface looks great.

Plus the options premiums are pretty good too.

I have been invested in V for awhile now as it is the perfect inflation play. The more money floating around the more money that flows through V's system. Considering they just make their fees on volume of transactions, it made perfect sense.

With 56B market cap, they are larger than MA, but MA's ROA and ROE are much better. Both are trading at fairly low P/E's too.

Back on topic,
Credit cards are what you make them. Misused, they can destroy you and cause years of pain.

I love wine, but drinking 3 bottles per day could be considered overuse. Drink wisely.

 

[458]

If you cant be trusted with 1000 dollars, then who is going to give you 1,000,000? Ive just about passed the 790 mark and it wasnt THAT hard, if you cant trust yourself no one else will.

 

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[CEBenz]

Thanks for the tip. (not that I follow tips), but I just did a quick scan of MA's financials and on the surface looks great.

Plus the options premiums are pretty good too.

I have been invested in V for awhile now as it is the perfect inflation play. The more money floating around the more money that flows through V's system. Considering they just make their fees on volume of transactions, it made perfect sense.

With 56B market cap, they are larger than MA, but MA's ROA and ROE are much better. Both are trading at fairly low P/E's too.

Back on topic,
Credit cards are what you make them. Misused, they can destroy you and cause years of pain.

I love wine, but drinking 3 bottles per day could be considered overuse. Drink wisely.

I was thinking exactly the same thing on pretty much all counts.

Mastercard is interesting as many business owners I know use them. Reasons are the rewards as well as the simplicity of filing a buyer claim. Mastercard is one of the easiest to use to get your money back that I've ever seen.

 

[livitup]

We are spiraling off the topic here, but AMEX is even better at protecting consumers than MC is. AMEX does instant chargebacks and puts the pressure on the merchant to prove that a charge is valid. And the merchant has a very high standard to meet. As a consumer I've only ever had one chargeback denied by AMEX, and I really was trying to abuse the system with that one...

Back on topic...

Debt in general can be a good thing in one case only - if you can earn a better return on the money than you are paying in interest. For example, home loans are at about 4.5% right now for a 30 year fixed. If I can earn better than 4.5%, then it would make sense to refinance my home, pull out all the equity, and invest it in whatever will earn me 4.5%.

But good luck finding a credit card that will charge an APR than you can beat with investments. It isn't going to happen. So credit card debt is a bad thing. As others have said, credit cards can be useful tools, if you have the self control to only charge what you can afford to pay off right away. Paying interest sucks.

I think MJ was mocking the typical financial guru advice, not suggesting you go out and apply for and max out credit cards. If you're smart enough to be reading and posting here, you should be smart enough to realize the trap that financing consumer goods usually is.

 

[CEBenz]

We are spiraling off the topic here, but AMEX is even better at protecting consumers than MC is. AMEX does instant chargebacks and puts the pressure on the merchant to prove that a charge is valid. And the merchant has a very high standard to meet. As a consumer I've only ever had one chargeback denied by AMEX, and I really was trying to abuse the system with that one...

Back on topic...

Debt in general can be a good thing in one case only - if you can earn a better return on the money than you are paying in interest. For example, home loans are at about 4.5% right now for a 30 year fixed. If I can earn better than 4.5%, then it would make sense to refinance my home, pull out all the equity, and invest it in whatever will earn me 4.5%.

But good luck finding a credit card that will charge an APR than you can beat with investments. It isn't going to happen. So credit card debt is a bad thing. As others have said, credit cards can be useful tools, if you have the self control to only charge what you can afford to pay off right away. Paying interest sucks.

I think MJ was mocking the typical financial guru advice, not suggesting you go out and apply for and max out credit cards. If you're smart enough to be reading and posting here, you should be smart enough to realize the trap that financing consumer goods usually is.

Well put! Speed ++

 

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[FiveStar]

Credit Card's are a wonderful thing when used wisely. I have to spend money on daily items anyways, why not protect myself with the excellent purchase protection these cards offer while taking advantage of their cash back rewards (2% cashback).

If you pay your balances in full before they are due you can actually get paid a little bit of bonus money to use a credit card. Everything I pay for is on a credit card (that I need and would buy anyways) and last year I received $650 back from Visa rewards. (After about 3 calls, they didn't make it easy to get my free money and I don't think they like me much as a customer )

 

[livitup]

If you pay your balances in full before they are due you can actually get paid a little bit of bonus money to use a credit card. Everything I pay for is on a credit card (that I need and would buy anyways) and last year I received $650 back from Visa rewards.

I agree with this too, but like the rest of my previous advice, it's really only valid if you have the self discipline to pay off the card each month. And 99.999% of us just don't. If you read my intro thread, you'll see I'm currenty digging myself out of a credit card hole dug by several years of living beyond my means.

I swear I'm not shilling for AMEX, but I'm a huge fan of their Membership Rewards program. They have some decent point-to-$-ratio items in their catalog from time to time, and worst case you can always trade points for gift cards to like a jillion different stores at a 1% cash back ratio. Many of the items in their merchandise catalog approach 5%.

Plus, I like the added "incentive" of knowing I have to pay it all off at the end of the month.

 

[Runum]

I agree with this too, but like the rest of my previous advice, it's really only valid if you have the self discipline to pay off the card each month. And 99.999% of us just don't. If you read my intro thread, you'll see I'm currenty digging myself out of a credit card hole dug by several years of living beyond my means.

I swear I'm not shilling for AMEX, but I'm a huge fan of their Membership Rewards program. They have some decent point-to-$-ratio items in their catalog from time to time, and worst case you can always trade points for gift cards to like a jillion different stores at a 1% cash back ratio. Many of the items in their merchandise catalog approach 5%.

Plus, I like the added "incentive" of knowing I have to pay it all off at the end of the month.

AMEX will also change the rewards system as soon as the public gets too good at it. They lowered all of my reward percentages and now I use my American Airlines Visa card to put my reward points in other areas.

 

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