Will that be Cash or Credit?

[Car-Guy]

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)

 

[jfn111]

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.

 

[M Paquette]

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.


Sent from my iPad using Early Retirement Forum

 

[Ronstar]

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.


Sent from my iPad using Early Retirement Forum

 

[rodi]

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.

 

[Meadbh]

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.

 

[Mulligan]

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.


Sent from my iPad using Tapatalk

 

[6miths]

No debt. Zero balance HELOC. Credit cards for everything. Paid off each month in full.

 

[Lucantes]

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.

 

[scrabbler1]

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.

 

[brewer12345]

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.

 

[truenorth418]

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.


Sent from my iPhone using Early Retirement Forum

 

[RetireAge50]

No debt except mortgage (3.375% so no hurry to pay off). Use credit cards wherever possible then pay in full every month.

 

[Chuckanut]

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.

 

[W2R]

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.

 

[Katsmeow]

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.

 

[Nemo2]

No debt. Zero balance HELOC. Credit cards for everything. Paid off each month in full.

Ditto.

 

[RonBoyd]

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.

 

[WhoDaresWins]

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.

 

[Greencheese]

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.

 

[RonBoyd]

I bought a new car this year and wrote a check for the balance after the trade-in value of two vehicles was deducted.

In other words, you determined that investing in a new car would produce a greater return than investing those funds somewhere else (after deducting the borrowing costs, of course). Good for you.

 

[athena53]

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.

 

[pb4uski]

....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)

We carry a mortgage (~7% of my net worth and 44% of home value) because it is only 3.375% and I think we can easily earn more over time (and have earned much more since we took it out just before I retired).

No other debt. We charge most everything so we can get our 2% reward, double manufacturer's warranty, protections of credit cards, etc. but it is autopaid when due each month so we don't count that as debt.

When buying a car, the lending companies often offer cash back for financing and we take advantage of that, make one or two payments and then payoff the loan. Saved $500 on our last car doing that.

 

[WhoDaresWins]

In other words, you determined that investing in a new car would produce a greater return than investing those funds somewhere else (after deducting the borrowing costs, of course). Good for you.

I don't think I put too much thought process into this transaction. I wanted to unload two aging vehicles as easily as possible and get a new reliable vehicle for some retirement road trips. I didn't even think much about other savings but they materialized: lower insurance costs, vehicle registration/inspection, upkeep. I also did not want to think about a car payment. I keep a lot of money on hand in a checking account (amount would horrify people on this forum) that is earning practically nil.

 

[pb4uski]

.... I bought a new car this year and wrote a check for the balance after the trade-in value of two vehicles was deducted.

+1 Unless there is a financing rebate to take advantage of, I pay for vehicles by check. If we reach an impasse in the price of a used car, I usually write out a check to the dealer for my final offer (including tax, transfer,etc.) and don't sign it - I hand it to them and tell them I will sign it if we have a deal for the car for that amount. I'm 2 of 3 so far using that approach.

When I was buying one car I told them I wanted to pay for it by check (no financing) and they seemed to not know what to do to process a non-financed transaction.