Keep your house or the credit cards?

[saluki9]

People are actually choosing to keeping their credit cards current instead of making their house payments.

Further signs that this isn't going to end well for a lot of people.

Debt-Laden Homeowners Save Plastic First: Financial News - Yahoo! Finance

 

[twaddle]

Probably not a bad strategy. Foreclosure can take a while, and you might be able to pull off a last-minute work-out, especially in this new world order.

 

[Nords]

People are actually choosing to keeping their credit cards current instead of making their house payments.
Further signs that this isn't going to end well for a lot of people.

Maybe the credit card companies have already told the White House that they won't put up with a five-year rate freeze.

But then the credit-card companies might actually be earning money, too...

 

[twaddle]

I forget where I heard it, but somebody told the story of giving credit card execs a presentation on risk management. After all of the academic charts, she summed it up with "So you see, all of your risk is concentrated in this small pool. All you need to do is filter out this group."

The execs were quiet, and then one of them spoke up and said "but that's where all our profit comes from." Credit card companies don't make their money from do-gooders like us. It all comes from the high rates and penalties from "them."

Edit: Heh. I just remembered where I heard that story. It was a video somebody posted here at ERF!

Maxed Out

 

[al_bundy]

you need a credit card to travel and do a lot of other things. it can be very hard to get a good card after foreclosure.

if you foreclose on a house you can get another mortgage in a year or two usually with no problems

 

[W2R]

you need a credit card to travel and do a lot of other things. it can be very hard to get a good card after foreclosure.

if you foreclose on a house you can get another mortgage in a year or two usually with no problems

The need for a credit card for travel may have changed recently. I was so ticked off when I accidently handed the Thrifty rent-a-car girl in Houston my personal debit card (instead of my federal government credit card) when on travel for work last month. She charged the car to it, so I had to go back and get her to reverse it and put it on the right card. What a PITA. They are the same color and I just plain goofed.

I asked her about that, since although I have used my debit card for hotels and motels countless times in person and by phone (and never had it questioned), I thought you couldn't use debit cards for rental cars and had never tried to do it. My new debit Mastercard says "DEBIT CARD" in huge letters on the front of it, too. She said that Thrifty charges to debit cards all the time, and so do other major rental agencies now. I thought that was interesting.

I don't have any personal credit cards since I don't want one. But, I had planned to get a credit card for the sole reason of paying for the rental truck for my ER move north in two years. Now, I think I probably don't need it.

 

[ChemEng]

How close are we to invalidating the rational consumer assumption that many economical model make?

 

[W2R]

How close are we to invalidating the rational consumer assumption that many economical model make?

If they make that assumption then I think there's a disconnect between economists and Madison Avenue. I think that most ads assume that consumers are pretty stupid, and they are probably right.

 

[Retire Soon]

It makes a whole lot of sense to me, these people are going to need their credit card to pay the moving company.

 

[Martha]

Generally, I would say that when people are in a deep financial hole, that they:

--Pay their taxes because they probably are not going away if they file bankruptcy.
--Pay their student loans, for the same reason as the taxes.
--Pay their house payment(s) unless they intend to walk away from the house. If they intend to walk away, don't pay because the foreclosure process takes awhile.
--If at all possible, ditch the car if they are upside down on the loan. Otherwise, make the payments. If they file bankruptcy they can reaffirm the loan.
--If they are in a hole that they can't work out of, don't pay the credit cards. File bankruptcy instead. If they absolutely need a credit card (which most people really don't), then keep current on one with a small balance and odds are the lender would be glad to keep them even if a bankruptcy is filed. In fact, I have seen many credit card companies try to convince their customers to keep the cards and even give them time to pay off the old credit card debt after bankruptcy. Or, get rid of them all and they probably will receive a credit card solicitation after they are done with the bankruptcy. Easy for people to get back in the same hole with credit cards, so I used to recommend people go cold turkey and not have any cards for a while.

 

[tryan]

interesting article ... if you purchased "no money down" AND you're upside down on the mortgage (no equity), paying everything else makes sense. NOBODY , not even the banks wants the property... until values come back to reality.

 

[ScooterGuy]

Credit card to travel ...

Actually, you don't need a credit card. DW & I are planning a trip to Latin America (Uruguay & Buenos Aires, Argentina), and have cohose to take advantage of a deal offered by AAA. We've bought what is essentially a pre-paid Visa card, to which we can make up to three deposits (3 large deposits). We'll each carry one of these pieces of useful plastic (plus, of course, dollars & pre-changed Pesos), so that we don't have to carry our regular debit cards, which, if lost, could drain our accounts.

Since the pre-paid cards act exactly like credit cards, why not.

 

[W2R]

We'll each carry one of these pieces of useful plastic (plus, of course, dollars & pre-changed Pesos), so that we don't have to carry our regular debit cards, which, if lost, could drain our accounts.

Really? WOW - - I'm glad I don't have YOUR bank. My bank replaces all of any fraudulent usage (that is reported within a reasonable time), instantly and fully, without the $50 charge that credit card users are charged. It's in the debit card agreement that they will do this.

Once I had a top of the line Dell Inspiron laptop charged to my card and shipped to somebody I never heard of in San Jose - - I think a hacker got the card number off my hard drive. Anyway, I got the money back instantly, the Friday afternoon I reported it to my bank and before I even left the bank, conditional upon their investigations confirming what I said. Within two months I was informed that I could keep it. My bank told me it was against (this, that, and the other) laws that they cited, for anyone to use my debit card without my permission. At other times when I have lost it, my bank has changed the number and replaced it on the spot as I waited, before the old card was ever used. Then they would cancel the old card. No problem.

I remember 20 years ago when debit cards were essentially ATM cards with no guarantees against fraud. But at my bank, times have changed.

 

[al_bundy]

i take half of it back. i remember 10 years ago when i had a 400 FICO and no debit card i would buy DVD's by sending checks to amazon. it was a PITA to buy anything online. lately it seems everyone takes bill me later or paypal.

i still think you need a credit card to travel since a debit will put a hold on a lot of money and you won't be able to use it. a lot of stores also have a lot of sales and if will need a big ticket item like a new TV, you will most likely need a credit card to buy it. and credit cards are great for emergencies. what if you needed a few thousand $$$ really quick for something?

 

[Helena]

How many of those who choose credit cards
over their mortgage NEED the cc to pay for
food !

 

[starter82]

How many of those who choose credit cards
over their mortgage NEED the cc to pay for
food !

Don't have a mortgage (renting is so cheap for me!), but I do nearly always use my credit card for food. The exception is the rare occasion that I buy a drink or soup (something cheap) with spare change that I've collected.

 

[Helena]

Don't have a mortgage (renting is so cheap for me!), but I do nearly always use my credit card for food. The exception is the rare occasion that I buy a drink or soup (something cheap) with spare change that I've collected.

I will use a credit card at the supermarket. I pay the cc off every month.
There is no interest [or annual fee] and I get points to spend on Amazon.com

However, stats show people will spend more when using a cc verses cash.

I will not use my credit card at the kind of restaurant where the waiter
takes my cc out of my sight... I use cash.

However, there are people who don't have that choice... they MUST use
a cc for food and still only pay the minimum balance on the cc.... I just
wonder how many are in that terrible situation.

 

[barbarus]

The term in the industry for those of us who pay off the full balance each month is "deadbeat". This is pejorative and traditionally used by the financial industry in the opposite sense i.e. to refer to someone who refuses to pay a bill.

It shows both how corrupt business is and how far we've degenerated as a society.

 

[al_bundy]

another plus to keeping credit cards is that an old tradeline on your credit report will increase your score. a foreclosure and no active tradelines on your credit report is very bad

 

[starter82]

I will use a credit card at the supermarket. I pay the cc off every month.
There is no interest [or annual fee] and I get points to spend on Amazon.com

However, stats show people will spend more when using a cc verses cash.

I will not use my credit card at the kind of restaurant where the waiter
takes my cc out of my sight... I use cash.

However, there are people who don't have that choice... they MUST use
a cc for food and still only pay the minimum balance on the cc.... I just
wonder how many are in that terrible situation.

Probably more than we know. I also pay mine off every month. I put nearly everything that I purchase on it (everything that can go on a credit card, food, gas). This way I get to have some more interest.

I find that I buy food that is more healthful if I purchase with a credit card. Either way, I buy healthful food, but I find myself walking down the aisles and turning away from stuff when I think about what would happen if my payment isn't received one month. Would I really want to pay interest on that junk? Also, whatever goes on the credit card has a record. Sure, I can't look back at how much was spent on that day and say for sure what it was, but I know that if I pay for something with the little bit of spare cash that I have, there's no paper trail to look back on and feel guilty.

 

[Cattusbabe]

Really? WOW - - I'm glad I don't have YOUR bank. My bank replaces all of any fraudulent usage (that is reported within a reasonable time), instantly and fully, without the $50 charge that credit card users are charged. It's in the debit card agreement that they will do this.

Once I had a top of the line Dell Inspiron laptop charged to my card and shipped to somebody I never heard of in San Jose - - I think a hacker got the card number off my hard drive. Anyway, I got the money back instantly, the Friday afternoon I reported it to my bank and before I even left the bank, conditional upon their investigations confirming what I said. Within two months I was informed that I could keep it. My bank told me it was against (this, that, and the other) laws that they cited, for anyone to use my debit card without my permission. At other times when I have lost it, my bank has changed the number and replaced it on the spot as I waited, before the old card was ever used. Then they would cancel the old card. No problem.

I remember 20 years ago when debit cards were essentially ATM cards with no guarantees against fraud. But at my bank, times have changed.

The pre-paid vacation VISA card is a sensible move when you think of it. Debit cards use is not with out risk. Sure, now a days you can do a lot of the same things with a debit card that you can do with a credit card however they have direct access to a persons bank account which is why they are so convenient. Pay as you go, no carrying a balance. With the risk of identity theft, the last thing I would want is a person getting that close to my finances. For those who do not need or want a Credit card a pre-paid card limits that access to the amount you put on it and closes off the possibility of someone gaining access to your banking information. There is a lot of information contained on those magnetic strips on the back all of that plastic we carry and I have no doubt that there a thieves smart enough and persistent enough to look for ways to unlock that information.