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Will that be Cash or Credit?
Old 11-03-2014, 08:13 PM   #1
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Will that be Cash or Credit?

Some of the responses I saw in the thread about “credit scores”’ got me wondering about using cash or credit.

Part of my pre-retirement strategy was to have zero debt when I retired. (House, cars, etc, - basically everything paid off) And while I do use credit cards, I pay those off in full each month. Credit cards are more of a convenience and I like getting 1.5% cash back so I don’t consider that debt. Technically yes, but practically no.

Today, as a retiree, I still pay cash for everything and I do not plan on taking out loans for anything for the rest of my life, (Houses, cars, hobbies, etc) For those who have reached FI, and have the option, do you still buy on credit/borrow/loans or pay cash? (Excluding credit cards that are paid off in full each month)
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Old 11-03-2014, 08:22 PM   #2
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We've been retired two years now. No loans or debts. I've been tempted a couple of times to utilize the no interest financing offered for furniture purchases but decided to just pay cash.
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Old 11-03-2014, 08:24 PM   #3
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Yup. I use credit cards as more of a convenience, rebate generator, and cash flow management tool, and pay the silly things off every month.

I haven't carried a balance in decades. DW and I got in deep once, and swore it off. Never again.


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Old 11-03-2014, 08:30 PM   #4
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I pay cash or credit card that I pay off every month. But I did slip up by getting a new credit card for my generator for one year same as cash and $100 off. But I was nervous filling out the credit app using "retired" for occupation.


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Old 11-03-2014, 08:31 PM   #5
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I charge almost everything I can - but pay it off in full each month.
No mortgage, no car loans, no revolving credit outside of my paid-in-full-each-month credit cards.

I did open a HELOC recently- but that's just so I have another cash-flow tool... I have no plans of every using it.... (So it's free if I never use it.)

I'm not worried about the HELOC negatively impacting my credit score... I had my credit score go down 20 points when I paid off the mortgage, so perhaps this will raise my score.
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Old 11-03-2014, 08:35 PM   #6
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I have not taken on any new debt since ER and have no plans to take on any more, unless I need to tap my HELOC for an emergency. My only consumer debt is my car loan at 0.99%. The car is 2+ years old and will be fully paid for next July; hopefully it will be quite a few years before I need to replace it. I do have two mortgages on rental properties but I am in no rush to pay them off as the interest rate is modest, the interest is tax deductible, and my investment property portfolio is self sustaining at present. I have no desire to remortgage for a higher amount to liberate some tax free cash. I do not have a rigid rule about debt; as Brewer says, it is a tool, and if my analysis shows a financial benefit, I am willing to use it.
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Old 11-03-2014, 09:53 PM   #7
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I live comfortably on a pension. I use credit cards to smooth out my cash flow when making large purchases such as a roof or car. I got a used car this summer and put it on a 2% advance fee, 0% interest for 18 months. Will have it paid off then. While I do not have a huge asset base, I grow it each month and will never use it for spending purposes. I prefer to "punish myself" when purchasing something and putting the squeeze to my monthly cash flow rather than buying cash and paying myself back. I also use a separate CC for cash back money and pay back in full each month.I bought a dishwasher last year from proceeds and am zeroing in on having enough to buy a new washing machine next.


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Old 11-03-2014, 09:57 PM   #8
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No debt. Zero balance HELOC. Credit cards for everything. Paid off each month in full.
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Old 11-03-2014, 10:04 PM   #9
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No debt. Credit cards paid off each month in full.
Bought future retirement house in 2013 for cash.
No plans to ever have debt again.
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Old 11-03-2014, 10:10 PM   #10
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I have expanded my use of credit cards in the last few years. One reason is I got a cash-back CC last year from my bank which I have my checking account in. A few years ago I added online banking from my local bank, so together with the home bank cashback CC I can pay the CC bill from home instantly and without having to have anyone mail a check. I pay it off in full every month, of course.


Earlier this year, I began using my CC to pay my monthly HI premium. This, along with using my online banking to pay my one other monthly bill (co-op maintenance check) I had previously mailed out a paper check (the managing agent only accepts paper checks), meant that I finally achieved my goal of not having to write out and mail any personal checks to pay monthly bills.


By using my CC instead of cash to pay my grocery bill at the local store (when it exceeds about $35), I withdraw cash from the ATM only once a month now.


So.......combining all of these new procedures, I (a) get some cash back, (b) don't have to write any personal checks to pay monthly bills (I still use them to pay the less frequent semi-annual or annual bills), and (c) visit an ATM half as often, and (d) pay my CC easily with a few point-and-clicks. All have made my life more convenient and at no cost.
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Old 11-03-2014, 10:16 PM   #11
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IMO, debt is simply a tool. You can use a hammer to stove in someone's head, or to build a house. Same deal with debt.

I am not planning on paying off my primary residence mortgage. It is callable 27.X year debt at a fixed 3.5% and tax deductible. It provides a valuable hedge against inflation. I have another 2 years to go on a car loan at 1.79% which I am pretty much ambivalent about paying off, as my lowest yielding safe money investment (a CD) earns a bit more than that after taxes.
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Old 11-03-2014, 10:20 PM   #12
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I am retired, no mortgage, no other debt. I use my CC as much as possible though and pay it off every month. It helps me to track my spending and reconcile my budget every month. I currently use the BarclayCard Arrival MasterCard to earn the 2.2% cash back and avoid foreign transaction fees.


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Old 11-03-2014, 10:26 PM   #13
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No debt except mortgage (3.375% so no hurry to pay off). Use credit cards wherever possible then pay in full every month.
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Old 11-03-2014, 11:56 PM   #14
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Credit cards are paid off each month. I collect some type of cash benefit on each one. I do have an auto loan. I could have paid cash but they offered me a sub 1% loan. The money to pay it off is currently collecting 3% in a CD.
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Old 11-04-2014, 12:11 AM   #15
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Quote:
Originally Posted by Car-Guy View Post
For those who have reached FI, and have the option, do you still buy on credit/borrow/loans or pay cash? (Excluding credit cards that are paid off in full each month)
I pay cash.
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Old 11-04-2014, 01:58 AM   #16
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Credit card paid in full each month.

Mortgage at 3.49%. Originally I had thought not to have a mortgage at this time, but that was just too good a rate. We could always pay it off if we wanted, but I don't see a good reason to do it.

We currently have no other debt. I might potentially have a car loan in the future (or might not). A couple of years ago we took a loan when withdrawing money from the IRA to pay cash for a car was going to cost us more in taxes (we were in a high bracket that year) than it would cost us to pay interest for a couple of years and then pay off when in a lower tax bracket. It made economic sense to do it that way, so we did. I could see doing something like that in future if it made sense.
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Old 11-04-2014, 02:38 AM   #17
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No debt. Zero balance HELOC. Credit cards for everything. Paid off each month in full.
Ditto.
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Old 11-04-2014, 04:46 AM   #18
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IMO, debt is simply a tool. You can use a hammer to stove in someone's head, or to build a house. Same deal with debt.
Yeah, in which does your money give you the greater return... interest coming in or interest going out? That is always the question with large purchases.
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Old 11-04-2014, 06:37 AM   #19
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I pay by cash, check or credit card for all my purchases. Credit cards paid in full each month. I have no debt....house is mortgage-free. I bought a new car this year and wrote a check for the balance after the trade-in value of two vehicles was deducted.
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Old 11-04-2014, 07:01 AM   #20
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Credit all the way. I have 6 cars to maximize the cashback I get on my purchases. Its free money, just takes a little bit of effort.
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