94 It's great you can still check in. On this Mother's Day I feel incredibly blessed that I have three offspring under 30, that have successfully graduated college and found great jobs. No more college debt only cars and homes which is the only thing a person should be in debt for. Doesn't matter what the cards interest rate is--since one never pays it if one uses it as one should.

I had my credit card scare early on. I wasn't earning much, racked up about $5000, couldn't keep up with much more than interest. My father had taken out a small whole life policy for me as a baby, and when I realized I could take a loan from that I did it and paid off my card. I never did pay back the loan (or the premiums) so the policy lapsed and I felt very guilty about that.

A while later I bought a truck on credit, and a year after that started to look at houses. I wanted the truck loan off my record so I asked my dad to pay it off and told him I'd pay him back at $3000 a month. He seemed surprised I wanted to commit to so much, but I told him if I couldn't do that then I couldn't afford mortgage payments so might as well find out now. I did finance one more car at close to 0% but paid it off early because I'm so adverse to having debt. Mortgage, that's it. I'm so tempted to pay off my current mortgage, but at a tax deductible 2.5% there are smarter things to do with my money. It's nice not having debt, but it's nicer not having to have debt. I'm appreciative of good fortune and recognize that not everyone is dealt the same hand.

Lots of great points and advice. I too am debt averse to the point of not even wanting the 0% car loan promotion. Yes, we did it but paid it off withing a few months because it just doesn't feel right. Debt free is how we live, and prefer to live.

Ole joyful-joyful guy HU number number-- you are an inspiration and I will hope that at 94 I have the clarity to post as well as you do, and that I am even still posting then, I might know of one other 94 yr old who is active on forums.

I'll repeat- you are an inspiration.

>>>Ole joyful -- <<<<HUGS >>>> and xoxoxoxox!

Best wishes for a return to better health.

The intended message/advice isn't clear to me. Credit card debt and income taxes aren't related. Spending money or not spending money doesn't provide a rate of return, and almost nothing does so at the percentage rates quoted.

Thank you to many of you for your kind and generous comments.

I've wanted to do this for a while, under a title of something like, "Millions never use an opportunity to earn about 28% to around 42% on some of their money - why?" but couldn't shoehorn it into a title for a thread.

Son called and one of the internet wise women said that only 44% of "credit" DEBT card users pay their accounts in full every billing period.

If I offered you a return of about 28% to 42% on some of your money - GUARANTEED ... would you refuse??

How does one spell "stupid"?

ole joyful

Inspiring indeed! Glad to see you're doing better joyful, and hope for continued progress.

I recall hearing reporting that those who pay their balance in full every month are known in the industry as 'deadbeats' 😄

I am continually being offered 0% interest rates on balance transfers - probably because my credit rating is so high - and I have taken advantage of them. There is a transfer fee, but it's only around 3%-5%, which is considerably less that what the regular interest rates amount to, and then you can get your balance paid off without accruing any interest.

And credit cards sure come in handy when a major appliance breaks down unexpectedly - or you have to evacuate to a hotel because of a hurricane, among other things...

Ole joyful, you are an inspiration--hoping to be doing as well as you at 94. And at 78 I have never carried credit card debt. I have heard that credit card companies refer to people who pay off their cards every month as "deadbeats." Ha!

I am glad that I finally got to where I am a "deadbeat". Thank you, Ole Joyful, hope you have many more years to post on the Garden Web.

My 2 cents...

Certainly I am happy to see Ole Joyful post again, but I am not sure I agree with the post.

Spend money wisely and save/invest as much as you can are both great pieces of advice, but credit cards are a useful tool for many people and can be beneficial when used wisely.

E.g. - My garage door broke recently and it was more economical to replace it, fortunately I had the money to replace it and that was fine, but what if I didn't... Suppose I went to Lowes and found out a new garage door would be $1,200 installed. I could charge it on the Lowes consumer credit card at 26.99% interest or save up until I had the money. Suppose I have $200 per month to save or pay on the credit card (so save for 6 months or buy now and pay $200 per month). If I choose to charge it, then I will actually have to pay $104.12 of interest (which works out to 8.7%). So while that 27% seems daunting...as long as you are making significant progress on the balance, the effective rate is much lower. Personally, I would charge it because I pay $105 more to have my garage door now instead of six months from now.

Taxes are not a relevant cost as they don't differ between the alternatives.

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My personal advice to young people is, when you have to use a charge card plan to make regular payments sufficient to pay the charge off in less than a year. Sooner is better, but if you can't pay it off in a year look for a suitable installment loan instead.

When I got my first credit card, my dad told me to "never owe money unless you are making money with the money that you owe."

I think a good approach is to avoid being over leveraged. When one's assets are substantially greater than one's debt, I think debt's OK.

Obviously, not everyone is that fortunate.

" When one's assets are substantially greater than one's debt, I think debt's OK. "

In most cases a lender would not willingly grant a loan if the situation were otherwise. But more relevent is a look at monthly debt payments as a percentage of disposable income. Individuals can have no assets to speak of (before considering what's purchased with borrowed money) and still be granted loans. But even with assets, loans won't be granted if the periodic payments exceed apparent cash flow available for timely periodic payments.

Only as the doomsday scenario, should the debt go into default, would lenders look for an excess of assets over liabilities.

This thread began with and seems to have attracted some unusual views that don't necessarily make sense.

In my second message here I said that if I offered you 21% or 28% or 31% or 42% on some of your money - you'd be rather stupid not to accept it, wouldn't you? But multiplied millions, over half of "credit" (really "DEBT") card users, carrying ongoing balances owing, don't take advantage of that opportunity.

If you asked me to lend/ rent to you $100. and I said that I'd charge you 21% annual rate, calculated monthly, thus at the end of first month you owe me 21%/12 = 1.75%, so $101.75, and at end of second month $101.75 + 1.75% = $103.53 ... you'd tell me pretty quickly where I could stuff that proposal - and seek a better deal elsewhere!

In the original message I thought that I justified the reference to our levels of earnings by saying that most of the stuff that we buy using "credit" cards isn't deductible, so using them isn't going to increase our amount of after-tax cash on hand, which will have an impact on our pre-tax income, as well.

Granted, not many of us will run up such large debt that we'll be asking for more earning hours, overtime, etc. Or go looking for a part-time job! To increase our income, under this financial presssure that we've incurred.

If we're troubled by paying 21% rental on borrowed money, when we consider that it's after-tax money, that we had to earn much more, maybe pre-tax 28, wouldn't it trouble us somewhat more?

ole joyful

Mother's day has come and gone... so should this thread!

I am struggling with some of the statements. I justified the reference to our levels of earnings by saying that most of the stuff that we buy using "credit" cards isn't deductible, so using them isn't going to increase our amount of after-tax cash on hand, which will have an impact on our pre-tax income, as well. Almost none of the things we buy are tax deductible, so this is simply not relevant... because it doesn't change between the alternatives. The only way this becomes relevant is if you are taking money out of your traditional IRA to use for interest payments... So the entire before tax / after tax logic pretzel only works for one specific thing that is not mentioned in the original post.

Next, a 28% credit card rate is not equal to a 28% savings rate. This is the difference between compounding interest and effective interest. Even though the two are calculated the exact same way, and compounding is a type of effective, compounding grows but effective interest can shrink. Credit cards are basically rolling installment loans with an 8 year and 4 month payback and no early payment penalty. So the total interest you pay on a $5,000 purchase would be $5,892 over 8.33 years.

People will often struggle to convert avoidable interest to investment returns, and most people shouldn't need to do this. The easiest way to do so is by using a version of the Modigliani-Miller theorem. If you want to equate a loan into an investment, then just hypothetically use the loan to purchase the investment and find the interest rate where the total payments on the loan = the total return of the investment. The equivalent investment rate of a 28% credit card, is 9.38%. However, if you are not working with the capital structure of a business, that is pretty useless information. Unless you are borrowing to invest, you should just avoid equating loans to investments. It isn't going to provide useful information.

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Math questions are best solved with math and not an application of some vague wisdom. Interest is not that hard to calculate, so learn to calculate it. There are times when using your credit card is wise and there are times when it is not. Generally speaking though, balances on high interest credit cards are a symptom of another problem. Typically, either frivolous spending or insufficient income. So, if you can, work on that problem first and the credit card problem tends to fix itself.

I just need more money. I am up 103%ISH in eight months. Nice when I invested $200, and it is worth $404ISH (all numbers are rounded from my memory yesterday, so don't correct me). Sigh. I just kept thinking, I still really understand the one stock so much! This has been an experiment in "putting my money where my mouth is". Imagine if had put some zeroes on it

$200,000 invested

$404,000 return

ISH. Today is down a little bit, which I expected with the debt talks, so my portfolio is only up 95%. I'll still take it.

From the start there has been no lack of nonsensical gibberish in this thread, including the pseudo-intellectual ones that impress no one.

Learning how money works - an interesting hobby: that pays well!

(Taxes, too)

Most of the time when we consider the money that we have available, we think of what's on hand. But most of that is the residue after our income tax is paid.

Maybe my dealing with the amount that we must earn in order to have that after-tax money available was a different issue, but I have found that most people tend to think of available money when considering whether they can afford something, rather than how long they need to work in order to earn the before-tax money needed to justify the purchase of goods where no tax deductability is available, as is the situation with much of the goods and services bought using the credit card. The 21% or so annual rate charged on most bank-issued cards, calculated monthly, don't forget, so will be adding to more after 12 unpaid months, will require that one earn 28% before-tax income if one is in 25% tax bracket.

When one thinks that a purchase using the card will cost 21% annual rate, if one considers that its actual rate requires 28% EARNED - it may cause one to look at the situation in a different light.

I have a couple of suggestions for replacing your garage door, bry911:

- if you have a bank-issued card usually charging 20 - 21% annual rate, maybe use that instead of Lowes' card at 26.99%?

- if your credit is good, maybe the bank will give you a loan at 6 - 9% or so? That'll be paid off even sooner.

For those of you carrying levels of credit card unpaid balances higher than you can pay in full each month, if your credit is good, maybe such a bank loan would help you ease the load greatly?

Learn how money works folks: it helps!

ole joyful

I will respond in a year or two…

It's always joyful to see your posts!

I have not thus far paid any interest on my credit cards, not even one cent, for the entire 30+ years I've had cards.

" I will respond in a year or two… "

Why rush it?

Do you think the essentials of what was said will make any more sense then? I doubt it.

I think your previous responses and mine pretty much cover the essentials.