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Old 07-27-2011, 11:33 AM   #21
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The point of the post is they needed to use their credit cards because that is the only way they have to pay the bill.
I understand that point, but I disagree. When I got behind on my credit card accounts, I kept my checking account as close to zero as feasible, since I wanted to use all my cash to minimize interest on my credit card debt. It didn't make sense to me to keep money in cash for an emergency, when (1) that cash was costing me in extra interest on my credit card, and (2) I didn't need the cash for emergencies, because I could use a credit card for that. When you have a CC and good credit, it seems to me to be bad advice to keep an emergency fund in cash.

You've pointed out that a bad thing about CCs is they tempt you to buy too much on credit. I knew that. I'm pointing out to you that a good thing about CCs is that they make it unnecessary to have a cash fund for emergencies.
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Old 07-27-2011, 12:49 PM   #22
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Originally Posted by GregLee View Post
I'm pointing out to you that a good thing about CCs is that they make it unnecessary to have a cash fund for emergencies.
The standard advice is to carry an emergency fund that can see you through 8-12 months of expenses. If you've got a credit limit equivalent to a year of your salary, your income is likely so high as to make an emergency fund largely an option. For most people, however, an emergency fund is very necessary. And last I checked, there are no exorbitant interest charges when paying in cash.
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Old 07-27-2011, 12:57 PM   #23
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Originally Posted by stoutboy

The standard advice is to carry an emergency fund that can see you through 8-12 months of expenses. If you've got a credit limit equivalent to a year of your salary, your income is likely so high as to make an emergency fund largely an option. For most people, however, an emergency fund is very necessary. And last I checked, there are no exorbitant interest charges when paying in cash.
Although I confess to having to do as Greg Lee has in past, I have an emergency fund now. When CC is the emergency fund your terms are subject to their various changes such as limits, interest rates, and fees. They keep raising my limits most of them 25 k , which I don't know why as I don't ask for it and rarely use them. I shudder at some of the things I used to do with CC's in the past as it could have led to a disastrous end.
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Old 07-27-2011, 01:46 PM   #24
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And last I checked, there are no exorbitant interest charges when paying in cash.
Probably I wasn't clear about the interest concern. Suppose you're in the hole on your CC account, and you manage to get $500 ahead of expenses some month. You could keep the $500 in cash to bolster your emergency fund (earning negligible interest on it) or pay down $500 of CC debt that month saving the CC interest charge on $500. As a consequence of your decision to put $500 into a cash fund for emergencies, you have to pay a high rate of interest on the $500 which remains a part of your CC debt.
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