Credit Card Debt

[bssc]

bssc, I own a coop apartment in NYC. My annual insurance is $289.00 / yr. Doing a major dance to save $15.00 or so - not cost-efficient for me.

ta,
mew

Not bad, makes perfect sense.

 

[RonBoyd]

When Cash Is Scarce, There’s Comfort in Miles

"First, the returns on loyalty are always positive, as long as you don’t spend needlessly just to earn rewards or carry a balance on your credit cards. After all, earning card rewards worth 2 percent still leaves you far behind financially if you’re paying 20 percent in interest."

"Also, making an investment in patronizing particular companies in exchange for rewards of some sort gives you some measure of control. As long as the airlines or retailers don’t eliminate or eviscerate their programs and the card company is willing to extend you credit, you control how much you spend with whom and your ultimate return. Stocks and bonds don’t work that way, alas."

"And even if you’re not a big spender at this moment, that doesn’t mean you can’t play the loyalty game. Cashing in every reward you earned in 2008 or before, when you might have been spending or traveling more, will allow you to spend less now. Or give yourself a treat you could not otherwise afford."

"Meanwhile, earning a penny or two every time you spend a dollar in 2009, say by putting more of your expenses on a card that earns money back, is another way to make every cent count when times are tough."

 

[MovingtotheCove]

We pay everything we can on cc but pay them off in full each month. Easier record keeping as many have discussed. Easier to keep to a budget than simply having cash out of pocket with no real tracking. Also the rewards...in 2008 racked up in cash rewards right at $3K. This is tax free money and able to be considered as a discount on purchases as we see it.

 

[Alan]

We pay everything we can on cc but pay them off in full each month. Easier record keeping as many have discussed. Easier to keep to a budget than simply having cash out of pocket with no real tracking. Also the rewards...in 2008 racked up in cash rewards right at $3K. This is tax free money and able to be considered as a discount on purchases as we see it.

At 3% cash back your CC spending must be in the order of $100K last year. I expect that is a touch over the average for the members on this forum

 

[Amethyst]

$100K in federal, state, local and property taxes isn't uncommon for 2 child-free earners these days. At 3 per cent cash back [what card offers that?] perhaps MTTC is finding it worthwhile to pay taxes with the CC?

Amethyst

 

[Alan]

$100K in federal, state, local and property taxes isn't uncommon for 2 child-free earners these days. At 3 per cent cash back [what card offers that?] perhaps MTTC is finding it worthwhile to pay taxes with the CC?

Amethyst

If I could pay my taxes by CC with no additional fees then I would but I'm not aware you could do that.

 

[ziggy29]

If I could pay my taxes by CC with no additional fees then I would but I'm not aware you could do that.

Correct. In many jurisdictions there is an option to pay property taxes with a credit card, but there's usually a 2.5% to 3% fee for doing it, which means it's generally not worth doing for rewards or cash back at all.

 

[JustCurious]

Although I am generally debt averse, I think credit cards are useful tools that have many advantages over other forms of payment, including cash and debit cards:

1) By charging almost everything to my credit card, I don't have to worry about carrying around large amounts of cash. I spend several thousand per month, and I would not feel comfortable taking thousands of dollars out of the credit union at the beginning of every month. For one thing, I would be concerned about the risk of losing the money, and the risk of being the victim of a robbery or theft. The alternative is to make regular visits to an ATM machine, but I would prefer not to do that either because every time I visit an ATM machine, I run the risk (albeit small) of being a crime victim. Besides, every visit to the ATM/credit union/bank takes time which can be inconvenient. The time/gas/inconvenience/risk of crime that I avoid by not running to an ATM every other day is worth using a credit card. And what if I run out of money and there is no ATM nearby? What if the ATM charges me a fee? Also, I have heard of some stand alone ATMs stealing your bank information and cleaning out your account.

2) By charging almost everything to my credit card, I get an itemized and dated record of my spending. That has come in handy for me many times.

3) Debit cards are risky because they are linked directly to your checking account. Every time you use them, the merchant (or a dishonest employee of the merchant) has your checking account number and can access your account. Also, if you lose your debit card, someone can take it to Walmart and buy stuff before you are aware that the card is lost, and before you report it as lost, and the money is taken directly out of your account. (This actually happened to someone I know) You then have to fill out forms and ask your bank to credit your account, and this process can take several weeks, assuming they agree to credit your account at all. What if they don't? Think about it. This is different than losing your credit card. If you lose your credit card, you simply dispute any unauthorize charges and don't pay them. Take a look at this article which explains the differences between credit and debit cards, and how much more risky debit cards are:

Debit card fraud grows

4) Some credit cards pay you to use them, in the form of cash back or points. This comes from the 1-3% that all merchants pay for the privilege of taking the credit cards. All of us pay more for goods and services because of these fees, whether we pay by cash or not. So if you make a conscious decision not to use credit, you are choosing not to play the game and get your share of the available money. That's your choice, but I choose to play, and I get several hundred dollars per year in cash back as free money.

5) When I travel, I don't have to worry about taking thousands of dollars of currency and planning ahead for every dollar that I spend, and running the risk of theft or loss of that currency.

6) If I have a dispute with a merchant, American Express will step in and use their clout on my behalf, and they will not force me to pay until the dispute is revolved. I have only done this a few times in my life, and in each case, American Express removed the charge from my account. Try doing that with cash or a debit card.

7) American Express gives me additional warrantly protection and insurance protection on certain purchases or services. E.g. they provide insurance protection for rental cars in some cases.

 

[RonBoyd]

Also, if you lose your debit card, someone can take it to Walmart and buy stuff and the money is taken directly out of your account. (This actually happened to someone I know) You then have to fill out forms and ask your bank to credit your account, and this process can take several weeks, assuming they agree to credit your account at all. What if they don't? Think about it.

Even worse, if you keep a minimum amount in the account (as you should) and have written checks to be drawn on the account. If the check or (most likely) checks hit the bank after the "someone" empties the account but before you can react, you really have a "can of worms" to contend with in the form of "insufficient funds" returns.

 

[calmloki]

We pay everything we can on cc but pay them off in full each month. Easier record keeping as many have discussed. Easier to keep to a budget than simply having cash out of pocket with no real tracking. Also the rewards...in 2008 racked up in cash rewards right at $3K. This is tax free money and able to be considered as a discount on purchases as we see it.

For some reason i find this funny - aren't you free-of-clothing folk? If so surely a card is easier to deal with than change and multiple paper bills - American Express: What's on your lanyard?

 

[mickeyd]

I like playing the game. I charge every purchase I can, I get to wait about a month to pay for those things, and then... they give me money!

I'm with you and what actually makes this so fun is that it is financed by others who choose to NOT pay off their balance each month, thinking that a CC is some kind of budget-controlling asset.

 

[W2R]

Correct. In many jurisdictions there is an option to pay property taxes with a credit card, but there's usually a 2.5% to 3% fee for doing it, which means it's generally not worth doing for rewards or cash back at all.

In my parish, there is a charge of 2.67% for paying property taxes with a credit card. So, for my $864 property tax bill, I would have had to pay an extra $23. (The same would have been true had I paid it with my debit card, though). I mailed it in. I would guess that the cost of the check, stamp, and envelope came to $1 or less.

 

[RonBoyd]

In my parish, there is a charge of 2.67% for paying property taxes with a credit card. So, for my $864 property tax bill, I would have had to pay an extra $23. (The same would have been true had I paid it with my debit card, though). I mailed it in. I would guess that the cost of the check, stamp, and envelope came to $1 or less.

And, I wonder, what the cost to the Parish is to physically handle all that paperwork -- opening envelope, endorsing the check, posting the entry, etc. Can that be done for less than 2.67%?

On the other hand, it does keep unemployment down.

 

[mickeyd]

In my parish, there is a charge of 2.67% for paying property taxes with a credit card.

Same here.

Also our water and power comes from companies that are linked to the city and actually produce income for the local g'ment and they also do not allow free CC payment.

As a tax paying citizen , I'm ok with this, and pay by check or ACH rather than increasting their expenses and probably/possibly holding down local taxes.

 

[Alan]

Same here.

Also our water and power comes from companies that are linked to the city and actually produce income for the local g'ment and they also do not allow free CC payment.

As a tax paying citizen , I'm ok with this, and pay by check or ACH rather than increasting their expenses and probably/possibly holding down local taxes.

Same here - that is why I was surprised at MTTC racking up so much on the CC as I don't pay by CC if there is a fee.

 

[Lakedog]

In my parish, there is a charge of 2.67% for paying property taxes with a credit card. So, for my $864 property tax bill, I would have had to pay an extra $23. (The same would have been true had I paid it with my debit card, though). I mailed it in. I would guess that the cost of the check, stamp, and envelope came to $1 or less.

There is no charge in my county for paying with a credit card (property taxes, tags, boat registration, drivers license, etc) so I take full advantage. Electric and cable are my only expenses that I can't pay by CC, and I have those set up for auto pay from checking.

 

[MovingtotheCove]

Clarification....

Let me clarify...the cards we are earning with are used for all expenses we possibly can without paying a fee, as some have suggested. This includes utility bills, cell phone bills, property insurance, as well as groceries, etc. Yes, we also can pay some taxes with the card as well as maintenance fees on some timehare weeks we own. Our card earns 5% vs. 3%. Also we did put a portion of a car on in the past year that the dealer allowed a % of the total due to be charged for our convenience. In addition to this we have some college fees and very significant donations to charities on the card. Also I believe we did have a carry over $$$'s earned balance at year end that came from part of 2007. Just to estimate I'm guessing we had about $45K to $50K in calendar year 2008 and the rest came from the last quarter of calendar year 2007. In the end we find use for as much as possible (without fees) and consider this free money to be a bonus coming to us vs. us paying interest to the card issuer as many do each month. Hope this fills in some blanks....oh, by the way.....a lanyard is a great idea!

 

[REWahoo]

There is no charge in my county for paying with a credit card (property taxes, tags, boat registration, drivers license, etc) so I take full advantage. Electric and cable are my only expenses that I can't pay by CC, and I have those set up for auto pay from checking.

My situation is 180 degrees from yours. My electric, satellite TV and phone bills are set up to auto charge my CC. The county charges a 3% fee to use a CC for property tax payments so I pay that bill by check.

 

[REWahoo]

.oh, by the way.....a lanyard is a great idea!

Be sure to hang it around your neck...

 

[ERD50]

Although I am generally debt averse, I think credit cards are useful tools that have many advantages over other forms of payment, including cash and debit cards:

3) Debit cards are risky because they are linked directly to your checking account. ... if you lose your debit card, someone can take it to Walmart and buy stuff before you are aware that the card is lost, and before you report it as lost, and the money is taken directly out of your account.

.... Think about it. This is different than losing your credit card. If you lose your credit card, you simply dispute any unauthorize charges and don't pay them. Take a look at this article which explains the differences between credit and debit cards, and how much more risky debit cards are:

Debit card fraud grows

JC, thanks for this - it got me thinking...

My ATM card is also a debit card. I never give it much thought, as I never use it as a debit card, just to access the ATM once every couple months for a bit of cash ( as I said, I charge almost everything), or to make a deposit. But, I carry that debit card in my wallet, so if it did get lost, I could be at this higher risk. Not good.

However, reading the article, it's not soooo bad...

With credit cards, liability for unauthorized transactions is limited to $50. But since most card issuers have zero liability policies, customers typically aren't on the hook for anything.


With debit cards, liability is limited to $50 only if customers notify their financial institution within two business days after realizing their card has been lost or stolen. After that, liability is capped at $500 if suspicious activity is reported within 60 days of receiving a statement. Beyond 60 days, the sky's the limit.

So most likely, I would notice and report it within 2 days of 'realizing' my card was lost or stolen (OK, I'm an honest person, but who is going to say "I lost it two months ago, just calling now!"?). So a $50 max hit. And $500 max if I was near brain dead.

Further, it sounds like the companies are actually being less restrictive:

The good news is financial institutions generally are more lenient than the regulations require, ...



Most financial institutions cover their customers' entire loss, "unless they are really concerned that the consumer is not acting in good faith," he said.


In addition, Visa and MasterCard have zero liability policies on debit card purchases processed through their networks. Those types of transactions, using cards with the Visa or MasterCard logo, require authorization with a signature instead of a personal identification number.

I should take another look at my CU fine print though, but they have always been 'good guys', so I they are probably in line with this.


-ERD50

 

[MovingtotheCove]

Thanks to all for pointing out the risk differences on debit vs. credit cards....yes, a cc seems to have insurance if lost and if a debit card were lost I guess a PIN could be somehow cracked.... In the end if I can get some "float" on the money by using a cc...sometimes as much as 50 days if the billing cycle is hit just right and earn my 5% reward level seems like a better choice than to have the debit card charge the bank account same or next day. Oh well, in the end the message we share is that we DO NOT ever pay interest and we DO NOT spend money we don't have and thus by not having debt we are hoping for ER with less worries than if we had debt. Just hope the rest of the economic mess doesn't mess with this too much.

 

[Alan]

In addition, Visa and MasterCard have zero liability policies on debit card purchases processed through their networks. Those types of transactions, using cards with the Visa or MasterCard logo, require authorization with a signature instead of a personal identification number.

I wonder if the USA will follow Europe in moving to "chip and PIN" credit cards so that your CC or DC never leaves your possession. No more signatures (who looks at them anyway) instead you insert your card into a reader at the checkout and type in your PIN, or at restaurants the server brings a wireless hand-held reader to your table with the amount to be paid showing on the display. You take the reader, insert the card and type in your PIN.

I was caught several times over the past 3 years trying to pay and the establishment did not accept USA style swipe CC's. If they take Amex then they have a swipe style so no problem. There have been 3 times I had to get someone else to pay (business trips) and once when I had my Dad pay.

Last year, even in a very small shop in a tiny mountain village in N. Spain they had Chip and PIN but we did have our UK Chip and PIN Debit card to use.

 

[JustCurious]

So most likely, I would notice and report it within 2 days of 'realizing' my card was lost or stolen (OK, I'm an honest person, but who is going to say "I lost it two months ago, just calling now!"?). So a $50 max hit. And $500 max if I was near brain dead.

Further, it sounds like the companies are actually being less restrictive:


I should take another look at my CU fine print though, but they have always been 'good guys', so I they are probably in line with this.


-ERD50

I don't think you quite understand. Despite the use of the word "realize" in the article, your financial institution will not care when you realized your debit card was lost or stolen, they will only care when it was ACTUALLY lost or stolen. If it was lost 5 days ago, and you just realized it today, but someone used it 4 days ago, your financial institution will rightly conclude that you did not notify them within 2 days of the loss, therefore, you will be responsible for $500. You may feel comfortable with that, but I am not.

As far as relying on your credit union's good graces, well, let's just say you are more trusting with your money than I am. What if they don't do what you expect them to do?

 

[ERD50]

I don't think you quite understand. Despite the use of the word "realize" in the article, your financial institution will not care when you realized your debit card was lost or stolen, they will only care when it was ACTUALLY lost or stolen. If it was lost 5 days ago, and you just realized it today, but someone used it 4 days ago, your financial institution will rightly conclude that you did not notify them within 2 days of the loss, therefore, you will be responsible for $500. You may feel comfortable with that, but I am not.

As far as relying on your credit union's good graces, well, let's just say you are more trusting with your money than I am. What if they don't do what you expect them to do?

Well, I made those comments assuming that one could take the article at face value. Reality may well be different, I don't put much faith in articles I read, but that was the context of my reply.

Just checked on-line, my CU has a 100% coverage. Further down, it does say that it is my responsibility to report any loss or theft immediately. I'll write them to see what that would mean if it did take me 4 days to realize it was lost, and there were charges in the mean time.

"Trust" is kind of a funny word for me. I don't really "trust" anyone when it comes to financial matters. For me, I don't see it as "relying on their good graces", as much as just having a history of them doing the right thing for their members. When I have a history of working with an organization, and that organization has always treated me fairly and in a businesslike manner, I tend to spend a bit less time worrying about the corner cases of what might happen in unlikely situations. I expect (based on past experience), but maybe not "trust", them to do the right thing. Semantics maybe.

I'll give a counter-example of companies I do *not* "trust" - the kinds of places (cable companies come to mind), that advertise all these starter rates, and make it difficult to even find out what the real on-going rate is. Or the gas station near me that has the big low price on the sign that you can read from the street, with little letters "price with car wash". I don't want to do business with them if I can avoid it.

-ERD50

 

[Sue J]

My situation is 180 degrees from yours. My electric, satellite TV and phone bills are set up to auto charge my CC. The county charges a 3% fee to use a CC for property tax payments so I pay that bill by check.

I do the same thing, have my utilities automatically charged to a credit card. I do this for the 2% cash reward on utilities. It's the only thing I use this card for. It's supposed to be for electric, water, cable TV, etc. but specifically not for internet. But our internet is through our cable company so I get the reward on that one, too.

All these utility bills are fairly small so I've been letting the reward build up and someday I'll cash it in. I wish I could use it for our natural gas bill, which is our highest utility, but they don't take credit card payments without a fee, so that one is deducted from our checking account.