Will that be Cash or Credit?

[Dreamer]

I keep a lot of money on hand in a checking account (amount would horrify people on this forum) that is earning practically nil.

Glad to hear that I am not the only one with too much in a checking account. It always makes me feel bad that it is earning practically nil, but I knew that we had a big remodeling project around the corner. It just took longer than expected to get it started. However, it is definitely going on now and money is flying out of the checking account. Contractor does not accept credit cards.

We normally put everything on credit card and pay off each month or pay cash. I do not like debt of any kind.

 

[Senator]

Credit cards all the way. No debit cards, they are too much risk.

Pay them off every month. I have literally received 1000's of dollars in a single year from cash-back rebates.

It helps track spending for you (and others...). And is easier and safer than carrying cash. Soon, it will all be on your phone. Pay with your phone, but it gets charged to your CC.

 

[Meadbh]

Glad to hear that I am not the only one with too much in a checking account.

How much is " too much" in a chequing account? It depends on the circumstances. During your renovation, with a rapid stream of large cash debits, you need a large cash buffer, regular surveillance and top ups to ensure that the account balance always remains positive. At a calmer time, there might be just a few predictable transactions per month, and it is easier to minimize the balance.

I have accounts with two major banks, one of which has recently announced changes to chequing account fees. From January 1, the minimum balance required to avoid a monthly fee will be $1500, compared with $1000 today. The incremental cost to me is tiny, but this annoyance might cause me to move my business to the other bank, where I have a no-fee account. The problem is that I have other business at the first bank, so there is a hassle factor.

My practice is to match the chequing account with a HISA. When I withdraw a chunk of cash from my portfolio (which might be every 6 months) it goes into the HISA, which in turn feeds the chequing account, only to the extent necessary to pay bills and avoid fees.

 

[Amethyst]

We've spent over $50K this year so far on fixing up rental and residence, and the only contractor who took a Cc was the plumber. Killed me to have to give up all those rewards points, but the alternative was always to pay an extra 3-4 percent.

Amethyst

Pretty consistent theme here- this group does not like to carry credit card balances, except for one person who uses them to smooth out cash flow!

We're similar: we have a mortgage and HELOC (the latter used to pay off larger expenditures over time at 2.75%), pay our credit cards off in full every month and et the rewards.

We're having minor things done around the house so it's in good shape to put on the market next year and I'm surprised at the number of tradespeople who prefer to be paid by check. I know they save the percent they pay to the credit card company but I'd think the occasional bounced check would wipe out that savings. For big jobs we make sure they take credit cards or we negotiate a discount for paying cash.

 

[Car-Guy]

I keep a lot of money on hand in a checking account (amount would horrify people on this forum) that is earning practically nil.

You are not alone $$$,$$$ - some hobbies (e.g. regularly buying and selling some collectables) can take a good bit of ready cash.

 

[RetiredAndFree]

We haven't carried debt, even 'strategically' for over 20 years, save our credit card charges that are done simply to leverage reward points. One card, paid off in full each month, so like OP, we don't consider that debt.

At this point in FIRE, we are able to pay cash for all of our needs, including replacement vehicles, and don't need to generate the extra $100, or whatever incentive companies use to excite people into opening new lines of credit. Too much effort to track and manage for too little payback, IMO. Instead, I find the peace of mind in having virtually no bills arrive in our mailbox (other than the usual - insurance, property tax, utilities) to be enormous.

We travel almost 50% of the year. Keeping things simple means we can more readily relax when away.

 

[Beldar]

For those who have reached FI, and have the option, do you still buy on credit/borrow/loans or pay cash?

We pay CASH only for very small purchases, or in venues that only accept CASH, such as flea markets, yard sales, and so forth. The CCs are paid off each billing cycle. I just don't care to carry much CASH, or keep it around the house.

We have no debt, and have no intention of taking any debt in the future. I do suspect, however, I could violate that principle if it came with a substantial discount/rebate, then immediately pay the loan off to avoid any interest charge.

_B

 

[outdoorgirl02]

I think we will always use our airline miles credit cards. We alternate between 3 different airline cards, depending on where want to travel in the next few years. We charge everything possible and pay off each month.

 

[RetiredAndFree]

We have no debt, and have no intention of taking any debt in the future. I do suspect, however, I could violate that principle if it came with a substantial discount/rebate, then immediately pay the loan off to avoid any interest charge.

_B

The problem I bumped into the last time I attempted this at a major retail store, for the exact incentive you've described, was a bizarre billing rule that required we allow the retailer to access our checking account for payment. Since we have an iron clad rule of allowing NO ONE access to our savings or checking accounts, that was an absolute deal breaker, and the point I started rejecting all efforts by retailers to incentive us to open new credit cards at POP.

E-billing, where we schedule and push payments at our discretion? Absolutely yes. Allowing a business access to our checking or savings account for payment at their discretion? Absolutely not.

 

[Payin-the-Toll]

Pretty consistent theme here- this group does not like to carry credit card balances, except for one person who uses them to smooth out cash flow!

We're similar: we have a mortgage and HELOC (the latter used to pay off larger expenditures over time at 2.75%), pay our credit cards off in full every month and et the rewards.

We're having minor things done around the house so it's in good shape to put on the market next year and I'm surprised at the number of tradespeople who prefer to be paid by check. I know they save the percent they pay to the credit card company but I'd think the occasional bounced check would wipe out that savings. For big jobs we make sure they take credit cards or we negotiate a discount for paying cash.

Hmmmm....methinks that being paid by check is real close to being paid in cash, and just maybe taxes aren't being paid or declared on that money.

 

[Sue J]

No mortgage, no other debt. We pay all the bills by ACH or debit card. In person shopping is with cash.

The only credit card we use regularly is the PenFed Cash Reward credit card for gas only for the 5% deducted from the statement and the ease of paying at the pump.

The only other card we've used is a Chase Freedom that's still active from long ago. I had a BIG medical bill to pay and used that one for the 1% points and then applied it to the balance. Paid that off with the first statement.

I used to enjoy playing the reward card points games but in an effort to get DH involved at all in household money matters we switched to cash at his request. He likes the concreteness of paying cash and I was pleased that he was finally participating after all these years.

 

[daylatedollarshort]

We use credit cards as much as possible for the cash back and sign up bonuses. That is an easy 4 figures in extra income each year.

We borrow money whenever it makes strategic sense. We pretty much have zero attachment to the idea of debt or not. We just try to maximize our total net worth and/or income streams.

 

[Mulligan]

We use credit cards as much as possible for the cash back and sign up bonuses. That is an easy 4 figures in extra income each year.

We borrow money whenever it makes strategic sense. We pretty much have zero attachment to the idea of debt or not. We just try to maximize our total net worth and/or income streams.

Any tips to maximize this tax free income? I generally only from synergy just use my chase card... I'm only getting about $500 a year tops so, if practical I would be happy to learn anything that could squeeze me some more free cash or equivalent.


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[daylatedollarshort]

Any tips to maximize this tax free income? I generally only from synergy just use my chase card... I'm only getting about $500 a year tops so, if practical I would be happy to learn anything that could squeeze me some more free cash or equivalent.

I am a relative novice but I find a lot of good ideas on sites like flyertalk, fatwallet and the boarding area blogs. You have to keep in mind that my expenses are for a family with college expenses in a higher COL area, so my cash back is going to be higher just because my every day household expenses are probably much higher than yours.

The basic idea is to use cash back cards for 2 - 6% for every expense, shop online through cash back portals, open and close new credit cards with sign up bonus points every quarter or so, etc. I wouldn't do a lot of the extreme stuff some of those people do, but just the simple, low hanging fruit generates some nice little extra income for us without much effort.

 

[sengsational]

I might try to use a HELOC to delay pulling money from tIRA/401k. This won't be for a while, since I'm still running on after tax funds. But when that runs out, if the PPACA subsidy is still a thing, going into a little debit might be more advantageous than not.

 

[Quantum Sufficit]

for those that carry a mortgage in retirement, Dave Ramsey likes to ask people if they had a paid off mortgage, would you go out and borrow to invest or place your money where ever it is you now have it?

 

[brewer12345]

I'd like to ask Dave Ramsey when he stopped beating his wife.

 

[Quantum Sufficit]

really...was he a beater?

 

[RetireAge50]

Yes I would and have before borrowed to invest. Borrowed from HELOC to max out Roth and 401k and paid it off from higher incomes later. Also borrowed for real estate investments. Worked out well for me.


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[daylatedollarshort]

for those that carry a mortgage in retirement, Dave Ramsey likes to ask people if they had a paid off mortgage, would you go out and borrow to invest or place your money where ever it is you now have it?

I'd ask Dave Ramsey to explain where he received his math training. If someone offered to lend Dave $100M at zero percent interest, would he take it and invest it Treasury bonds or turn it down because he didn't want to be a naughty, naughty debtor?

Or if he needed to borrow $1 at 2% interest in order to keep his AGI below the 400% FPV cliff limit for $10K in ACA tax credits, would it be better to keep from being in debt $1 even if it meant a net financial loss of $9,999.98?

 

[Walt34]

I'd ask Dave Ramsey to explain where he received his math training. If someone offered to lend Dave $100M at zero percent interest, would he take it and invest it or turn it down because he didn't want to be a naughty, naughty debtor?

I think one has to bear in mind that Ramsey's (and Suzie Orman's) target audience are not the people on this forum. So for that reason I'll cut both some slack.

Like the others here we don't pay cc interest and haven't for decades. We use a mixture of cash, checks, and credit cards but the credit cards are of course paid off in full every month.

 

[imoldernu]

This may be off topic, but a comment on interest, and rates. Not posted as an endorsement of the article, but one person's observations on the future.
Interest Rates Cannot Rise and Here’s Why… | First Rebuttal

So you start to understand that interest rates are locked into a very low range forever or at least until total debt gets paid down, which none of us expect to ever happen. So with total debt greater than GDP and rising it’s SOL for future retirees and all other savers. Next stop will be negative interest rates which of course will need to be monetized. In chess they have a term called Zugzwang; a situation in which no matter what move you make you will be worse off than you are currently. I believe we may be in a Zugzwang now.

Zugzwang= new word for me

 

[daylatedollarshort]

As a side note, here is Dave Ramsey's house:

Dave Ramsey’s House: Living Like No One Else

 

[aja8888]

As a side note, here is Dave Ramsey's house:

Dave Ramsey’s House: Living Like No One Else

But it's paid for....(no mortgage)

 

[daylatedollarshort]

But it's paid for....(no mortgage)

It was paid for by his followers, presumably not wealthy people in debt, with all those products and endorsements one finds on his web site.