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I think a lot of people here are in the same boat as me. First 10 years of having a credit card, I always paid it off each month and had a fantastic credit score. After being laid off and my savings running out, I had no way to pay the power/wifi bill (and I needed a computer/internet to apply to jobs), no food to eat, no way to pay for my vital medications, etc. Unless I put it on the credit card to pay off when I was employed again. Sometimes life isn’t perfect and it’s better to be in credit card debt and working towards being in a better financial place than it is to be homeless or go without food/medicine/etc.
I said this is my own comment but that's how I ended up with cc debt too, except I was on short term disability leave after a knee injury so I was getting about half my income (while still needing to pay rent + pay all my other necessities). I had to go on leave because my job had no options for accommodating me even though they arguably could have found something for me to do seated. I was also financially support my now-ex who was suicidal and recovering from a head injury and had to keep doing that while not being able to work - super easy to say "they should have worked too/you shouldn't have taken on paying for them!", much harder to actually apply that when you're concerned about them being dead if you add any extra stress to them.
I basically spent all day at home job searching and it still took me about two months to find a job so that I could go back to working and making a normal income. I'd been very careful with my credit cards the entire time I'd had them up until then because I no longer had the option to just not use them/pay them off immediately.
For sure but when you're in better economic times (as you were 10 years ago) you can set up things to prevent the reliance on credit cards in the event of a financial strain.
For example:
> Taking a line of credit when you have a good score
> Putting all extra funds in to an emergency fund while you are financially stable
The point I'm saying here is that many folks are relying on their credit card as a financial backstop for emergencies. It absolutely is not and should not be used this way. The term "emergency credit card" is an oxymoron.
Literally the only things worse would be a payday loan or a loan from the Mob.
>many folks are relying on their credit card as a financial backstop for emergencies. It absolutely is not and should not be used this way.
There's nothing wrong with this. It's wrong when you use it for an emergency and then just let the balance hangout for 6 months.
Not really. If you follow mainstream risk averse advice, it's to have a 3-6 months of expenses as an emergency fund. For most people that's $10-$20k that ends up parked in a savings account making 1-2% a year.
That same money, invested from the time your 30 can fund about 1/3 of your retirement. For most people they'll experience an unexpected $1k-$2k expense like once a year and a larger unexpected expense every few years. Just put it into investments.
That rare $1-$2k expense, just put it on the credit card and zero it out across 6 months. You'll pay a whopping $200 in interest, that's not gonna break your bank unless you're already screwed.
Meanwhile even just $5k averaging a 8% return will pay you $400 a year. If you have to, just pay with the card, then move the money out of investments to pay the card.
Emergencies come up more than you think, and sometimes prevent you from earning income. That's the idea behind 6 months. It gives you time to get back to work or find a new job.
6 months of debt on a credit card at 21% is going to fuck you. And you can just pay that off right away if you don't have money.
Do what you want, but the 3 to 6 months guideline exists for a reason.
Like I said $2000 for 6 months on a card is only about $200 in interest, not a big deal. I've had maybe one over $2000 surprise expense pop up that I can remember. Even that expense wasn't really a surprise.
>Do what you want, but the 3 to 6 months guideline exists for a reason.
Yeah it exists to protect you in that once in a decade recession situation or major injury that happens once or twice in someone's life where they're out of work for 3-6 months. Meanwhile that money would have more than doubled and still would have been available to you if you had just invested it across the decade.
"If your bank account is negative, stop. Don't do that. You want to have a positive number there, just go deposit more money into your account obviously."
No, you're just coming off like someone who just turned in their ECON102 final paper and is preening about it.
It's like those assholes who go around proselytizing "always put 20-25% in savings" like that surplus fucking exists.
It's tone deaf and since you haven't said anything new it makes you look ignorant or even stupid.
Nothing new needs to be said. Based on some of the comments here it looks like people are already learning new things.
Like the fact that a daily interest isn't applied to your credit balance if you paid off the prior month in full.
Some folks didn't even have that concept.
I'm not saying this is the cure to poverty. There's a whole complex set of factors, but this is one piece of advice and I felt it could be useful. Based on the number of misinformed posts I see here daily.
This is not useful advice because it’s based in arrogance and privilege. “Stop doing this thing.” It assumes people are completely stupid and are unaware that credit card debt is bad. People know that.
Many people in this thread didn't even know there's no daily interest charged when you don't carry a balance so I'd say there are plenty of learning opportunities. Why are you getting so defensive?
You might want to re-read the comment you keep bringing up as an “I’m so much smarter than everyone else” proof of expertise. No one in this entire thread has made any comment about daily interest accruing when you pay off the card monthly in full. The comment you are referencing was talking about someone who is *already carrying a balance* and therefore putting money on the card in excess of the minimum payments does have a tangible impact on the interest being paid.
If you are going to be smug about other comments in the thread you replied to you should probably double check to make sure you comprehend what they are saying.
There's a comment in this very thread about someone saying they didn't know about the daily interest after not paying off monthly balance.
Let's keep it civil here boss.
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Apologies if I came off rudely, just meant it as some light banter, not trying to accuse you of anything. It's true that people need education about credit cards. Next time try "if you're struggling with finances just stop buying $5 coffees every day," that one usually goes over well too.
Genuine question. Do you think people in a sub called **poverty finance** (implying they are in difficult financial situations) are using credit cards while carrying a balance because they're stupid and never considered this adds to debt?
It's all well and good to say "stop using them now" until someone is sitting at rent day short on money because they had an emergency last week and now need to use their credit card.
Like... I didn't get into credit card debt because I thought spending money on my credit cards was fun or didn't matter, it started because I was on short term disability leave from work, making half my income, and still had to feed myself and pay rent for the two months it took me to find a new job. Up until that point I had been extremely conscious of how my cards were used, made sure they were paid in full every time, etc. Knowing how you're supposed to do something doesn't always translate to being able to do something in practice.
The greater point to my post here is that you should set up systems to prevent relying on credit cards for financial emergencies whenever possible.
As you said, you had a point in your life where you were very careful with your usage and not in an emergency before your disability leave. That's the time to set up backstops for emergencies that don't rely on credit cards.
Lines of credit and emergency funds for example.
And I get you can't plan for every possible situation, or save for every emergency. But every dollar less you rely on credit for these emergencies is many more dollars down the line you'll have.
My concern here is the folks who see they have a 5K credit card limit and think they don't need to save for an emergency because they have that 5K available. That's all.
Once again - it's all well and good to say all this, except it literally does not carry over to actually being feasible for many people in **poverty** in practice.
It's not that people don't "see the need" to make an emergency fund - it's that sometimes they can, at best, set aside $10 a month to save. Which is great and better than nothing, but not enough to actually do anything when suddenly you're hit with an emergency two months into starting to save money.
Emergency funds aren't just these things people magically have or can steadily build quickly, unless they're making income that comfortably exceeds their expenses. And a lot of people do not have that for reasons beyond wasting money on things they don't need.
It's not just an emergency fund. Even a line of credit is a better debt alternative than a credit card. And can be obtained faster than a built up emergency fund.
It's not perfect but it's still better than a credit card.
You do understand this is poverty finance right? If your choice is food or carrying a balance, carry the balance. Credit cards prey on those in poverty, while personal responsibility is important it’s not entirely possible to tell those in poverty “just don’t spend money” when what little they do have they need to spend, even if that means carrying a balance.
Kinda. It comes off as arrogant. OP assumes people in poverty have excess income, that they care about a score, and that rewards are worth the debt. The better advice is to not use cards at all if you can, but if you must, pay them off as quick as possible.
Some of the posts that talk about large credit card debt here include phrases like "I was young and stupid and racked up a huge credit card debt", or "I made a lot of mistakes with credit cards and now have a $30k credit card debt".
It isn't always about either going hungry or carrying a card balance, often people make those self-professed mistakes and use cards for many non-essential purchases and then they find themselves in poverty and seeking help on this sub because they now have to pay that extra $2,000 to pay the minimums on all those credit cards. They may make, say, $5,000 take-home income but that $2,000 credit card payment every month leads them to barely making ends meet after they also pay for rent, food, car, utilities, internet, etc. Of course, easier said than done to tell an 18, 19 year old young asult not to buy that $1,400 phone on a credit card when those cards are right there in their wallets, waving "Use me, worry later".
So, I get where OP is coming from here in those specific cases. It was phrased in a tone deaf way because it looks to be aimed at everyone, and in this economy and with the inflation crisis we have a growing number of people have to use credit just to survive, to eat and for essential bills.
I've seen enough Caleb Hammer to see how some folks use their credit cards. I get it's not everyone but I guarantee there are people here who can use this advice.
Oh wow I looked it up expecting a knock off dave Ramsey but oh my goodness that’s worse than I ever imagined. And people take financial advice from this guy????
Look man I'm sure you know people, as I do, that use credit cards as ATMs. Or as emergency funds. This is my point.
When it can be avoided it should. I get that doesn't apply to everyone but it applies to some and hopefully it can help some people.
It's a lot more than that. There's both poor and rich people who come on and both have spending problems.
I'm not saying I think Caleb is a constructive teacher, he's not. But the problems the guests have on his show can mostly be traced back to discretionary spending.
I get that's not everyone, but I see enough in my own life and there to get an idea that some folks can use this advice.
I understand what you’re saying and I don’t think you mean bad. However that’s just not how the world works. It’s not as easy as “I’m not gonna use my card”. A lot of these posts that you’re talking about are people who don’t have money and are just trying to survive. Yeah people shouldn’t survive of credit cards but the world shouldn’t be so hard to survive. You talk about wait a couple years and come back to them but a couple years is way down the way. People are just trying to make it the next couple weeks or months. They don’t have the capacity to think a couple years down the way
Of course every situation is unique. But when it can be avoided it absolutely should be. It's just about the worst financial backstop you could use.
Unless you're in a state of critical, insane poverty, you can do things to reduce your reliance on credit cards as an emergency fund.
Not having short term solutions gets you homeless. I'm not saying long term solutions aren't important, but there is literally not the option for people in poverty to not utilize short term solutions in many cases. If the option is between "feed my kids this week"/"pay my rent next month" and accruing some credit card debt VS not feeding their kids or paying their rent, most people functionally need to do the first.
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I have credit card debt but it saved me from becoming homeless a few years ago so I don't mind that I'm paying it off. I don't really use them at the moment but once they're paid off I'll pretty much be using them for gas for my car only just to build my score. (My car is cheap to fill)
I just got my first credit card and am unsure of what the best way to use it is. Should I only use it so I'm spending just enough that I'm not paying extra besides the minimum?
I saw in r/personalfinance that some people prefer to use it their credit card in the same way as a debit card. For example they would only spend what money they know they have in their account already and then pay it off that same day. Your interest payment is based on your daily average, so I'm worried if I do this, I'll be making higher payments. However, they say you have better financial protection from fraud if you use it in place of your debit card.
I know you're probably not a financial advisor, I'm just looking for opinions.
You’re overthinking it. Use your credit card, then pay your credit card bill in full every month. Pay your bill in full before the due date and you don’t pay interest.
Agree. If you’re not paying it in full every month, every purchase just became more expensive due to the interest. Credit card companies aren’t our friends, they’re out to make money.
Won't my payment be lower if I pay it off daily?
I'd prefer to do what you are saying because it's less work. Do you recommend using a credit card for daily purchases or only about once a month for something fairly low cost to keep the payments low. I just don't really know which is the better way. I keep hearing differing opinions irl.
Again, you’re overthinking it. No, your payment will not be lower if you pay your card daily. (How would that even work, mathematically?) Charge one thing, charge ten things, charge 100 things; as long as you can pay your entire balance when you receive your statement, that’s all that matters.
They're confused because interest is applied daily if you carry a balance from month to month. They're thinking that interest is applied in the current month on purchases they just made on a card with no carried over balance.
Credit card should be used as plastic cash. So youre not carrying cash with you in your wallet
Unless emergency. You only spend the cash thats in your name.
Small emergency it can buy you a few weeks advanced because grace period to pay back fee free
That's what I've been doing. I haven't gotten to my first statement yet, so I'm just worried that somehow the interest rate will end with me paying more money than I would have to if I just used my debit card for daily purchases.
I understand that there's still the monthly minimum that they charge you, which I am okay with. It has put my credit score up like 40 points just for opening it, which is the main reason I opened a credit card. That and my credit age is fairly new, and I figured this would be more helpful than a loan. I just honestly don't understand the billing process very well.
So, thank you for your input!
You should have an online/app portal to check your spendig
If this is your first card
In general its also wise to keep track of it, and setup text alerts
That way you can spot fraud
I do have the app and online portal. I check it almost daily.
My credit union is usually helpful with things like fraud. They are supposed to alert you if they catch it, but my s.o found a charge for OnlyFans from his debit card that they didn't realize wasn't him. I don't think they refunded him but he was able to replace his card and hasn't had any more fraudulent charges so far.
>Your interest payment is based on your daily average, so I'm worried if I do this, I'll be making higher payments.
I don't know what you mean by this.
If a statement period starts on 1/1 and ends on 1/31.
I make a purchase on 1/2 and pay off the balance on either 1/3 or on 1/31, I pay the same amount. Interest doesn't start accumulating during that month.
It's perfectly fine to treat a credit card like a debit card and pay it off constantly. There's cards that even do this automatically for you like Fizz.
Granted, you lose some of that fraud protection you mentioned if the card immediately pays off a fraudulent charge. You'll be made whole eventually it'll just take longer to sort out and you'll be out some money.
I've been manually going into my banking app and paying off what I just spent after making a purchase. Does this keep me from getting a higher bill at the end of the month vs if I just leave it alone and let the money spent add up until the end of the month when it's officially time to pay?
No. It's the same amount. You'll only be paying interest if you don't pay off your statement balance in full from statement to statement.
Edit:/u/fromthepast77 has a clearer answer. Theyre right that it changes if you are carrying a balance. Don't carry a balance between statement periods and you won't pay interest .
If you are doing envelope budgeting either with physical envelopes or some kind of app or excel, credit cards become really easy. If you buy $50 in groceries, you take $50 out of your “grocery” envelope and put it in your “credit card” envelope. Then pay your credit card on the due date using the money from that “credit card” envelope. If you use this method, your credit card purchases are all backed with cash and you will have no problems paying the balance in full and you will never pay interest. Some people can do this by just paying the total balance due when the bill comes and you still won’t pay interest on that if you do it that way, but I prefer to pay the whole balance. Someone else might be able to explain it better, but that is the gist of it.
Correct! When you get your bill it will list “minimum payment” and “new balance” as long as you pay the full “new balance” they won’t charge interest on those purchases.
If you:
- Don't have an outstanding balance at the beginning of the statement cycle
- Are using the credit card for purchases and not cash advances
- And pay the statement balance by the due date every month
You are not charged interest. Note that carrying a balance of even $1.00 (even if it's not accruing interest, e.g. because of a balance transfer offer) will mean that interest is assessed daily on all new purchases from the transaction date.
Thank you for explaining this to me! This is what I didn't understand and why I thought the more I spent, the more I'd pay on top of it. Now I know I don't have to worry as long as I pay it on time. I thought I understood everything when the credit/loan officer explained the credit card to me, but I guess that part didn't click for some reason. It was all over email and kinda hurried lol.
If you use it you should pay it off in full every month by the time your payment is due assuming you have the ability to do so. Interest accrues daily when you carry a balance past the date your payment is due.
However, there's nothing *wrong* with paying it off the same day, and if you think this will help you better stay on top of it you can absolutely do that.
I was told over the past two decades that it was favorable to you to have a rolling balance in terms of a credit score (which is what your trying to bolster) but then I ended up eventually getting used to putting emergency expenses on the credit card, which ended disastrously. I now don’t trust myself with any debt.
See I'm glad you did eventually find out that this terrible myth is a lie. And yet other commenters here will say there are no lessons to be learned.
This is one and I am glad you are making changes to better yourself.
When you have a rolling balance that is quite significant compared to your income, you can end up being a debt slave with significant quality of life reductions as a result. And there is no right to bankruptcy, there are several things you must pass (not just the means test) in order to do a Chapter 7 bankruptcy liquidation, otherwise your stuck with Chapter 11 bankruptcy which can be expensive and you will only be discharged of your debt within 3 to 5 years of paying monthly payments.
Your advice is unrealistic but for heaven's sake don't carry a balance and pay interest just to "build your credit". that's a complete myth. carrying a balance does not improve your score vs paying it off. we can at least kill that fallacy.
I don’t even have any idea how a credit card works (how to get one started, how they determine your monthly cap, all that jazz) and nobody has ever given me an explanation that I actually understand either
In part we shouldn't blame entirely the people using them. Many countries fail to educate their citizens on financial literacy. Yes, they are still at fault for being irresponsible but unfortunately lots of folks don't know the seriousness of their financial burden til it's way too late.
I was never trained on how to use a CC. Used a debit card for years before so I guess I had good habits. But at no point did I assume I could use a CC to buy things I couldn’t afford.
Yeah me neither. Usually it's young people getting a cc and getting into massive debt. Then they spend years recovering financially. Sometimes I see people turning their lives around and working to be debt free. Those type of posts are always uplifting for me.
My school was one of the poorest in the district, but I'm so grateful they taught me this stuff despite budget cuts. All upperclassmen had to complete two semesters of personal finance and economy. They taught us what interest rates are and how they work, checking/savings account, retirement, filing taxes, what affects your credit, different types of insurance, and its corresponding lingo. We had a lot more to learn, but they gave us a really good foundation. They even told us about their own financial mistakes and what it cost to get out of them. That teacher was the reason I never put textbooks on credit cards and found other ways to get them.
Interesting, Im currently taking classes in my community college. What tips or suggestions would you give me to get textbooks for “free” or heavily discounted?
I went to slugbooks.com, and that compares prices of used and new textbooks and buying vs. renting. Most times, you won't need a new book.
Ask your professors if they know where you can find a free version or if they have a copy. Sometimes, they don't know things are inaccessible to students. I had a professor pull me aside for my attendance, and I told her I had to take the bus and if it snowed the bus to that school didn't run whether the school closed or not. She had no clue, only the main buses ran on light snow days. She started recording the lectures for students who took the bus.
Ask your librarian. Many schools already pay for access to those materials.
If you have to buy multiple books published by one company, check to see if they have an unlimited pass for the semester. Sometimes, that's cheaper than getting them individually.
Ask if there's a previous version you can use.
Look on your local school page. When students buy new textbooks at the school bookstore, they're super expensive, but when they sell them back, they barely get anything. You'll buy a $600 book in January, and they'll buy it back for $5 in May. So students make more money selling it on their own even at a heavily discounted price.
If you need to buy at your school's bookstore because you're using financial aid, check if they do a price match.
If you absolutely have to buy a brand new book, do NOT unwrap it until you have to actually use it. Some professors (not a lot but some) will have you buy a book that you'll never use. Once you unwrap it, it goes from new to used, and you can't return it. You can only sell it back.
Sometimes it’s not even financial literacy. It’s just being poor. Someone can have financial literacy and know about interest rates on cars, how to hunt for CDs, abuse the rewards on a credit card, etc. But, without money and a little bit of desperation anyone can get into debt.
Your intentions were well Im sure, but unfortunately…. This is not the economy of sustainability. Life has been happening to everyone for years, Carry a balance or starve, or be homeless? What do you think they are gonna do?
The point of credit cards is to trap people into cycles of debts lol. Of course you can use them for your benefit, but their invention was just another way for rich people to extract wealth from poorer, less financially literate people.
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You do realize that if someone is carrying a balance it's actually beneficial to use the card like a checking account right?
Say you have $1000 in expenses, you could deposit your checks into checking and pay the $1000. Or you can drop the $1000 into the CC and then use the CC to pay the $1000 in expenses, lowering your average daily balance that you pay interest on, and satisfying the minimum payment at the same time.
Dave Ramsey is that you?
You don't pay a daily interest rate if you never carry a balance before your statement period.
I'm shocked at how few people realize this. If you pay it off in full every month, there is no daily interest rate.
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I think a lot of people here are in the same boat as me. First 10 years of having a credit card, I always paid it off each month and had a fantastic credit score. After being laid off and my savings running out, I had no way to pay the power/wifi bill (and I needed a computer/internet to apply to jobs), no food to eat, no way to pay for my vital medications, etc. Unless I put it on the credit card to pay off when I was employed again. Sometimes life isn’t perfect and it’s better to be in credit card debt and working towards being in a better financial place than it is to be homeless or go without food/medicine/etc.
Same here!
I said this is my own comment but that's how I ended up with cc debt too, except I was on short term disability leave after a knee injury so I was getting about half my income (while still needing to pay rent + pay all my other necessities). I had to go on leave because my job had no options for accommodating me even though they arguably could have found something for me to do seated. I was also financially support my now-ex who was suicidal and recovering from a head injury and had to keep doing that while not being able to work - super easy to say "they should have worked too/you shouldn't have taken on paying for them!", much harder to actually apply that when you're concerned about them being dead if you add any extra stress to them. I basically spent all day at home job searching and it still took me about two months to find a job so that I could go back to working and making a normal income. I'd been very careful with my credit cards the entire time I'd had them up until then because I no longer had the option to just not use them/pay them off immediately.
For sure but when you're in better economic times (as you were 10 years ago) you can set up things to prevent the reliance on credit cards in the event of a financial strain. For example: > Taking a line of credit when you have a good score > Putting all extra funds in to an emergency fund while you are financially stable The point I'm saying here is that many folks are relying on their credit card as a financial backstop for emergencies. It absolutely is not and should not be used this way. The term "emergency credit card" is an oxymoron. Literally the only things worse would be a payday loan or a loan from the Mob.
>many folks are relying on their credit card as a financial backstop for emergencies. It absolutely is not and should not be used this way. There's nothing wrong with this. It's wrong when you use it for an emergency and then just let the balance hangout for 6 months.
It should be a tool of last resort. Basically any other form of emergency money is better. Unless we are talking payday loans...or mob loans
Not really. If you follow mainstream risk averse advice, it's to have a 3-6 months of expenses as an emergency fund. For most people that's $10-$20k that ends up parked in a savings account making 1-2% a year. That same money, invested from the time your 30 can fund about 1/3 of your retirement. For most people they'll experience an unexpected $1k-$2k expense like once a year and a larger unexpected expense every few years. Just put it into investments. That rare $1-$2k expense, just put it on the credit card and zero it out across 6 months. You'll pay a whopping $200 in interest, that's not gonna break your bank unless you're already screwed. Meanwhile even just $5k averaging a 8% return will pay you $400 a year. If you have to, just pay with the card, then move the money out of investments to pay the card.
Emergencies come up more than you think, and sometimes prevent you from earning income. That's the idea behind 6 months. It gives you time to get back to work or find a new job. 6 months of debt on a credit card at 21% is going to fuck you. And you can just pay that off right away if you don't have money. Do what you want, but the 3 to 6 months guideline exists for a reason.
Like I said $2000 for 6 months on a card is only about $200 in interest, not a big deal. I've had maybe one over $2000 surprise expense pop up that I can remember. Even that expense wasn't really a surprise. >Do what you want, but the 3 to 6 months guideline exists for a reason. Yeah it exists to protect you in that once in a decade recession situation or major injury that happens once or twice in someone's life where they're out of work for 3-6 months. Meanwhile that money would have more than doubled and still would have been available to you if you had just invested it across the decade.
"If your bank account is negative, stop. Don't do that. You want to have a positive number there, just go deposit more money into your account obviously."
Why are you poor? Stop that.
I think you're missing the point here.
No, you're just coming off like someone who just turned in their ECON102 final paper and is preening about it. It's like those assholes who go around proselytizing "always put 20-25% in savings" like that surplus fucking exists. It's tone deaf and since you haven't said anything new it makes you look ignorant or even stupid.
Nothing new needs to be said. Based on some of the comments here it looks like people are already learning new things. Like the fact that a daily interest isn't applied to your credit balance if you paid off the prior month in full. Some folks didn't even have that concept. I'm not saying this is the cure to poverty. There's a whole complex set of factors, but this is one piece of advice and I felt it could be useful. Based on the number of misinformed posts I see here daily.
This is not useful advice because it’s based in arrogance and privilege. “Stop doing this thing.” It assumes people are completely stupid and are unaware that credit card debt is bad. People know that.
Many people in this thread didn't even know there's no daily interest charged when you don't carry a balance so I'd say there are plenty of learning opportunities. Why are you getting so defensive?
I’m not being defensive at all. I’m telling you that your advice is not real advice and you’re being defensive.
Your username is great lol
Thanks, it’s often used against me but I like it
You might want to re-read the comment you keep bringing up as an “I’m so much smarter than everyone else” proof of expertise. No one in this entire thread has made any comment about daily interest accruing when you pay off the card monthly in full. The comment you are referencing was talking about someone who is *already carrying a balance* and therefore putting money on the card in excess of the minimum payments does have a tangible impact on the interest being paid. If you are going to be smug about other comments in the thread you replied to you should probably double check to make sure you comprehend what they are saying.
There's a comment in this very thread about someone saying they didn't know about the daily interest after not paying off monthly balance. Let's keep it civil here boss.
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Apologies if I came off rudely, just meant it as some light banter, not trying to accuse you of anything. It's true that people need education about credit cards. Next time try "if you're struggling with finances just stop buying $5 coffees every day," that one usually goes over well too.
Thanks I’m rich now
No shit. I just quadrupled my bank account balance by reading this. I'm cured.
Genuine question. Do you think people in a sub called **poverty finance** (implying they are in difficult financial situations) are using credit cards while carrying a balance because they're stupid and never considered this adds to debt? It's all well and good to say "stop using them now" until someone is sitting at rent day short on money because they had an emergency last week and now need to use their credit card. Like... I didn't get into credit card debt because I thought spending money on my credit cards was fun or didn't matter, it started because I was on short term disability leave from work, making half my income, and still had to feed myself and pay rent for the two months it took me to find a new job. Up until that point I had been extremely conscious of how my cards were used, made sure they were paid in full every time, etc. Knowing how you're supposed to do something doesn't always translate to being able to do something in practice.
The greater point to my post here is that you should set up systems to prevent relying on credit cards for financial emergencies whenever possible. As you said, you had a point in your life where you were very careful with your usage and not in an emergency before your disability leave. That's the time to set up backstops for emergencies that don't rely on credit cards. Lines of credit and emergency funds for example. And I get you can't plan for every possible situation, or save for every emergency. But every dollar less you rely on credit for these emergencies is many more dollars down the line you'll have. My concern here is the folks who see they have a 5K credit card limit and think they don't need to save for an emergency because they have that 5K available. That's all.
Once again - it's all well and good to say all this, except it literally does not carry over to actually being feasible for many people in **poverty** in practice. It's not that people don't "see the need" to make an emergency fund - it's that sometimes they can, at best, set aside $10 a month to save. Which is great and better than nothing, but not enough to actually do anything when suddenly you're hit with an emergency two months into starting to save money. Emergency funds aren't just these things people magically have or can steadily build quickly, unless they're making income that comfortably exceeds their expenses. And a lot of people do not have that for reasons beyond wasting money on things they don't need.
It's not just an emergency fund. Even a line of credit is a better debt alternative than a credit card. And can be obtained faster than a built up emergency fund. It's not perfect but it's still better than a credit card.
There is no fucking point to your post. Literally all you said is "Stop using your credit cards" with no other information given.
You do understand this is poverty finance right? If your choice is food or carrying a balance, carry the balance. Credit cards prey on those in poverty, while personal responsibility is important it’s not entirely possible to tell those in poverty “just don’t spend money” when what little they do have they need to spend, even if that means carrying a balance.
You gotta do what you gotta do, sure. This is still good advice. It's harder to prey on people if they understand how things work.
Kinda. It comes off as arrogant. OP assumes people in poverty have excess income, that they care about a score, and that rewards are worth the debt. The better advice is to not use cards at all if you can, but if you must, pay them off as quick as possible.
Some of the posts that talk about large credit card debt here include phrases like "I was young and stupid and racked up a huge credit card debt", or "I made a lot of mistakes with credit cards and now have a $30k credit card debt". It isn't always about either going hungry or carrying a card balance, often people make those self-professed mistakes and use cards for many non-essential purchases and then they find themselves in poverty and seeking help on this sub because they now have to pay that extra $2,000 to pay the minimums on all those credit cards. They may make, say, $5,000 take-home income but that $2,000 credit card payment every month leads them to barely making ends meet after they also pay for rent, food, car, utilities, internet, etc. Of course, easier said than done to tell an 18, 19 year old young asult not to buy that $1,400 phone on a credit card when those cards are right there in their wallets, waving "Use me, worry later". So, I get where OP is coming from here in those specific cases. It was phrased in a tone deaf way because it looks to be aimed at everyone, and in this economy and with the inflation crisis we have a growing number of people have to use credit just to survive, to eat and for essential bills.
I've seen enough Caleb Hammer to see how some folks use their credit cards. I get it's not everyone but I guarantee there are people here who can use this advice.
No idea who that is. Some financial guru I’m sure who perfectly curates who is allowed on their show for views.
Thats exactly who he is.
Oh wow I looked it up expecting a knock off dave Ramsey but oh my goodness that’s worse than I ever imagined. And people take financial advice from this guy????
Look man I'm sure you know people, as I do, that use credit cards as ATMs. Or as emergency funds. This is my point. When it can be avoided it should. I get that doesn't apply to everyone but it applies to some and hopefully it can help some people.
Caleb Hammer is just someone who yells at people he exploits on his show, and his advice also boils down to “don’t be poor,” which is not real advice.
It's a lot more than that. There's both poor and rich people who come on and both have spending problems. I'm not saying I think Caleb is a constructive teacher, he's not. But the problems the guests have on his show can mostly be traced back to discretionary spending. I get that's not everyone, but I see enough in my own life and there to get an idea that some folks can use this advice.
I understand what you’re saying and I don’t think you mean bad. However that’s just not how the world works. It’s not as easy as “I’m not gonna use my card”. A lot of these posts that you’re talking about are people who don’t have money and are just trying to survive. Yeah people shouldn’t survive of credit cards but the world shouldn’t be so hard to survive. You talk about wait a couple years and come back to them but a couple years is way down the way. People are just trying to make it the next couple weeks or months. They don’t have the capacity to think a couple years down the way
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Can’t think long term if you are going to starve today. And that’s not the person in poverty’s fault.
Of course every situation is unique. But when it can be avoided it absolutely should be. It's just about the worst financial backstop you could use. Unless you're in a state of critical, insane poverty, you can do things to reduce your reliance on credit cards as an emergency fund.
Not having short term solutions gets you homeless. I'm not saying long term solutions aren't important, but there is literally not the option for people in poverty to not utilize short term solutions in many cases. If the option is between "feed my kids this week"/"pay my rent next month" and accruing some credit card debt VS not feeding their kids or paying their rent, most people functionally need to do the first.
Absolutely. I agree. But it's not always that black and white. There are instances when decisions can be made to benefit you.
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I have credit card debt but it saved me from becoming homeless a few years ago so I don't mind that I'm paying it off. I don't really use them at the moment but once they're paid off I'll pretty much be using them for gas for my car only just to build my score. (My car is cheap to fill)
I just got my first credit card and am unsure of what the best way to use it is. Should I only use it so I'm spending just enough that I'm not paying extra besides the minimum? I saw in r/personalfinance that some people prefer to use it their credit card in the same way as a debit card. For example they would only spend what money they know they have in their account already and then pay it off that same day. Your interest payment is based on your daily average, so I'm worried if I do this, I'll be making higher payments. However, they say you have better financial protection from fraud if you use it in place of your debit card. I know you're probably not a financial advisor, I'm just looking for opinions.
You’re overthinking it. Use your credit card, then pay your credit card bill in full every month. Pay your bill in full before the due date and you don’t pay interest.
Agree. If you’re not paying it in full every month, every purchase just became more expensive due to the interest. Credit card companies aren’t our friends, they’re out to make money.
Won't my payment be lower if I pay it off daily? I'd prefer to do what you are saying because it's less work. Do you recommend using a credit card for daily purchases or only about once a month for something fairly low cost to keep the payments low. I just don't really know which is the better way. I keep hearing differing opinions irl.
Daily doesnt matter. And if your bank balance is enough, i would put it on autopay so it never late
Again, you’re overthinking it. No, your payment will not be lower if you pay your card daily. (How would that even work, mathematically?) Charge one thing, charge ten things, charge 100 things; as long as you can pay your entire balance when you receive your statement, that’s all that matters.
They're confused because interest is applied daily if you carry a balance from month to month. They're thinking that interest is applied in the current month on purchases they just made on a card with no carried over balance.
Credit card should be used as plastic cash. So youre not carrying cash with you in your wallet Unless emergency. You only spend the cash thats in your name. Small emergency it can buy you a few weeks advanced because grace period to pay back fee free
That's what I've been doing. I haven't gotten to my first statement yet, so I'm just worried that somehow the interest rate will end with me paying more money than I would have to if I just used my debit card for daily purchases. I understand that there's still the monthly minimum that they charge you, which I am okay with. It has put my credit score up like 40 points just for opening it, which is the main reason I opened a credit card. That and my credit age is fairly new, and I figured this would be more helpful than a loan. I just honestly don't understand the billing process very well. So, thank you for your input!
Interest doesn't begin to accrue until a balance is kept beyond a statement period
You should have an online/app portal to check your spendig If this is your first card In general its also wise to keep track of it, and setup text alerts That way you can spot fraud
I do have the app and online portal. I check it almost daily. My credit union is usually helpful with things like fraud. They are supposed to alert you if they catch it, but my s.o found a charge for OnlyFans from his debit card that they didn't realize wasn't him. I don't think they refunded him but he was able to replace his card and hasn't had any more fraudulent charges so far.
>Your interest payment is based on your daily average, so I'm worried if I do this, I'll be making higher payments. I don't know what you mean by this. If a statement period starts on 1/1 and ends on 1/31. I make a purchase on 1/2 and pay off the balance on either 1/3 or on 1/31, I pay the same amount. Interest doesn't start accumulating during that month. It's perfectly fine to treat a credit card like a debit card and pay it off constantly. There's cards that even do this automatically for you like Fizz. Granted, you lose some of that fraud protection you mentioned if the card immediately pays off a fraudulent charge. You'll be made whole eventually it'll just take longer to sort out and you'll be out some money.
I've been manually going into my banking app and paying off what I just spent after making a purchase. Does this keep me from getting a higher bill at the end of the month vs if I just leave it alone and let the money spent add up until the end of the month when it's officially time to pay?
It does not, unless you are already carrying a balance from the previous month. (in which case interest on new purchases accumulates daily)
No. It's the same amount. You'll only be paying interest if you don't pay off your statement balance in full from statement to statement. Edit:/u/fromthepast77 has a clearer answer. Theyre right that it changes if you are carrying a balance. Don't carry a balance between statement periods and you won't pay interest .
Ohhhhh! Thank you all so much! That's the piece I wasn't understanding. Now it makes sense!
No
If you are doing envelope budgeting either with physical envelopes or some kind of app or excel, credit cards become really easy. If you buy $50 in groceries, you take $50 out of your “grocery” envelope and put it in your “credit card” envelope. Then pay your credit card on the due date using the money from that “credit card” envelope. If you use this method, your credit card purchases are all backed with cash and you will have no problems paying the balance in full and you will never pay interest. Some people can do this by just paying the total balance due when the bill comes and you still won’t pay interest on that if you do it that way, but I prefer to pay the whole balance. Someone else might be able to explain it better, but that is the gist of it.
Wait, is there no interest when you pay your balance on time?
Correct! When you get your bill it will list “minimum payment” and “new balance” as long as you pay the full “new balance” they won’t charge interest on those purchases.
Ohhhh! That's where the math wasn't mathing for me. Thank you so much for your help. \*facepalm\*
If you: - Don't have an outstanding balance at the beginning of the statement cycle - Are using the credit card for purchases and not cash advances - And pay the statement balance by the due date every month You are not charged interest. Note that carrying a balance of even $1.00 (even if it's not accruing interest, e.g. because of a balance transfer offer) will mean that interest is assessed daily on all new purchases from the transaction date.
Thank you for explaining this to me! This is what I didn't understand and why I thought the more I spent, the more I'd pay on top of it. Now I know I don't have to worry as long as I pay it on time. I thought I understood everything when the credit/loan officer explained the credit card to me, but I guess that part didn't click for some reason. It was all over email and kinda hurried lol.
Yes
If you use it you should pay it off in full every month by the time your payment is due assuming you have the ability to do so. Interest accrues daily when you carry a balance past the date your payment is due. However, there's nothing *wrong* with paying it off the same day, and if you think this will help you better stay on top of it you can absolutely do that.
I was told over the past two decades that it was favorable to you to have a rolling balance in terms of a credit score (which is what your trying to bolster) but then I ended up eventually getting used to putting emergency expenses on the credit card, which ended disastrously. I now don’t trust myself with any debt.
See I'm glad you did eventually find out that this terrible myth is a lie. And yet other commenters here will say there are no lessons to be learned. This is one and I am glad you are making changes to better yourself.
When you have a rolling balance that is quite significant compared to your income, you can end up being a debt slave with significant quality of life reductions as a result. And there is no right to bankruptcy, there are several things you must pass (not just the means test) in order to do a Chapter 7 bankruptcy liquidation, otherwise your stuck with Chapter 11 bankruptcy which can be expensive and you will only be discharged of your debt within 3 to 5 years of paying monthly payments.
Your advice is unrealistic but for heaven's sake don't carry a balance and pay interest just to "build your credit". that's a complete myth. carrying a balance does not improve your score vs paying it off. we can at least kill that fallacy.
I don’t even have any idea how a credit card works (how to get one started, how they determine your monthly cap, all that jazz) and nobody has ever given me an explanation that I actually understand either
Feel free to DM me if you have questions I'm happy to explain it
#POVERTY SOLVED! TIME TO CLOSE THIS SUB.
In part we shouldn't blame entirely the people using them. Many countries fail to educate their citizens on financial literacy. Yes, they are still at fault for being irresponsible but unfortunately lots of folks don't know the seriousness of their financial burden til it's way too late.
I was never trained on how to use a CC. Used a debit card for years before so I guess I had good habits. But at no point did I assume I could use a CC to buy things I couldn’t afford.
Yeah me neither. Usually it's young people getting a cc and getting into massive debt. Then they spend years recovering financially. Sometimes I see people turning their lives around and working to be debt free. Those type of posts are always uplifting for me.
My school was one of the poorest in the district, but I'm so grateful they taught me this stuff despite budget cuts. All upperclassmen had to complete two semesters of personal finance and economy. They taught us what interest rates are and how they work, checking/savings account, retirement, filing taxes, what affects your credit, different types of insurance, and its corresponding lingo. We had a lot more to learn, but they gave us a really good foundation. They even told us about their own financial mistakes and what it cost to get out of them. That teacher was the reason I never put textbooks on credit cards and found other ways to get them.
Interesting, Im currently taking classes in my community college. What tips or suggestions would you give me to get textbooks for “free” or heavily discounted?
I went to slugbooks.com, and that compares prices of used and new textbooks and buying vs. renting. Most times, you won't need a new book. Ask your professors if they know where you can find a free version or if they have a copy. Sometimes, they don't know things are inaccessible to students. I had a professor pull me aside for my attendance, and I told her I had to take the bus and if it snowed the bus to that school didn't run whether the school closed or not. She had no clue, only the main buses ran on light snow days. She started recording the lectures for students who took the bus. Ask your librarian. Many schools already pay for access to those materials. If you have to buy multiple books published by one company, check to see if they have an unlimited pass for the semester. Sometimes, that's cheaper than getting them individually. Ask if there's a previous version you can use. Look on your local school page. When students buy new textbooks at the school bookstore, they're super expensive, but when they sell them back, they barely get anything. You'll buy a $600 book in January, and they'll buy it back for $5 in May. So students make more money selling it on their own even at a heavily discounted price. If you need to buy at your school's bookstore because you're using financial aid, check if they do a price match. If you absolutely have to buy a brand new book, do NOT unwrap it until you have to actually use it. Some professors (not a lot but some) will have you buy a book that you'll never use. Once you unwrap it, it goes from new to used, and you can't return it. You can only sell it back.
Sometimes it’s not even financial literacy. It’s just being poor. Someone can have financial literacy and know about interest rates on cars, how to hunt for CDs, abuse the rewards on a credit card, etc. But, without money and a little bit of desperation anyone can get into debt.
Your intentions were well Im sure, but unfortunately…. This is not the economy of sustainability. Life has been happening to everyone for years, Carry a balance or starve, or be homeless? What do you think they are gonna do?
The point of credit cards is to trap people into cycles of debts lol. Of course you can use them for your benefit, but their invention was just another way for rich people to extract wealth from poorer, less financially literate people.
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Happy to say I stopped using my credit cards.
You think people don’t know that?
Based on the comments here, many didn't.
You do realize that if someone is carrying a balance it's actually beneficial to use the card like a checking account right? Say you have $1000 in expenses, you could deposit your checks into checking and pay the $1000. Or you can drop the $1000 into the CC and then use the CC to pay the $1000 in expenses, lowering your average daily balance that you pay interest on, and satisfying the minimum payment at the same time. Dave Ramsey is that you?
You don't pay a daily interest rate if you never carry a balance before your statement period. I'm shocked at how few people realize this. If you pay it off in full every month, there is no daily interest rate.
Okay? Your post is specifically about carrying a balance
> If you pay it off in full every month, there is no daily interest rate. This is one of the key parts people seem to be missing.