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Comments about ‘Doug Robinson: Going in debt a good thing, so they say’

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Published: Monday, April 1 2013 9:05 p.m. MDT

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CougAbroad
Vienna/Austria, 00

I understand the point of the article, but I think it's important to point out that there is nothing inherently evil about credit cards. Debt is generally ill-advised and should be avoided, but it's important that young people understand the rules of "the game" and learn to play accordingly.

Get a credit card early. Use it like cash, purchasing every day items. Pay off the ENTIRE BALANCE each month (it's not necessary to carry a balance). After some time you'll qualify for CCs with great benefits (like cash back). Then watch how the credit card companies PAY YOU to use their plastic at registers.

People with financial integrity could avoid using credit cards their entire life. This would make things difficult, however, when attepting to rent a car or check in for your flight. If you learn the rules of the game early, then you can win! This is a better option than putting all your cash under your mattress and walking around with a Costanza-style wallet all the time.

The only good debt is the kind that you could get out of at a moment's notice if you had to. :)

  • 2:41 a.m. April 2, 2013
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Econ101
Farmington, UT

Doug,

Simple things must amaze you. This system makes perfect sense.

It's a matter of information asymmetry (who knows what when) -
Let's say you are going to loan $10,000 to one of 2 strangers.
One of them says he is responsible, frugal, and pays for everything with cash.
The other says he is responsible, frugal, and has a credit history which shows he always pays his bills.

Who do you want to bet on paying you back? Now they want $200,000 to buy a house - who do you trust?

This article is ridiculous in it's view of money and responsibility - how are you supposed to know if someone is responsible unless they leave a digital finger print behind with all of their financial transactions - that is the failing of cash.

Perhaps the author's confusion is more telling of his own grasp of the world than one that makes imminent sense!

Liberal Ted
Salt Lake City, UT

If you are frugal and pay cash for everything. Then plan on making a cash offer on a home, car and pay cash for school.

You don't need credit if that is the way you want to go.

Years ago, I was frustrated when I tried to get a used car loan through my credit union. They told me that I needed a co-signer. I had more than triple the cash in my account to pay for the vehicle. Yet, I was told I didn't have the credit history. Even though the credit/checking card was supposed to create the history and I wanted the car loan to increase my credit when I was ready to purchase a home down the road.

I ended up paying cash for the car. Took out 3 credit cards. Buy a tank of gas each month on two of the cards and pay tuition or a pack of gum on the other one. Paid them off each month.

SillyRabbit
Layton, 00

If the dangling carrot of a credit score is what you want, you run the risk of fulfilling the metaphor as the mule.

Positive elements are seen by optimistic people; however, that viewpoint will never preclude the negative.

Conscientious debt, debt with a purpose, calculated risks, these are all things that can be beneficial.

$2,500 debt for the newest iMac for freshman year courses at graphic design university with a major in art theory and no job. Nope.

All in all, I am glad that the data in the article suggests that young people have more perspective than Fluando de Tal from my example.

Redshirt1701
Deep Space 9, Ut

It is a nice idea, but there are other ways to build credit without a credit card. For example, if you buy a car you can build your credit history. Other reports out there show that most college age kids have around $20,000 in student loans. Those all go onto your credit history. If you make those payments you can build a history without the credit card.

Mukkake
Salt Lake City, UT

I really doubt the lack of credit cards among this group has anything to do with not wanting debt, but rather not being able to qualify. Many of my friends and peers are in this boat.

Many are unemployed and underemployed. Many are probably running up credit card debt on their parents credit cards.

I use my credit cards for everything I can, and then just pay them off. I now have a credit line much larger than I did only a couple years ago.

The other day I was caught by one of Salt Lake's many bums. He asked for change and I told him I don't carry cash. He proceeded to tell me how he doesn't trust credit cards. I thought, "Exactly."

Usually the people complaining about credit cards are the same ones obsessed with returning to the "Gold Standard".

one vote
Salt Lake City, UT

Do not go into debt to buy gold, the bubble is bursting! Remember how the advertisers were saying 3000 per ounce by 2013?

rlsintx
Plano, TX

Credit cards (revolving debt) don't really help you that much and the total monthly possible payments required against their limits counts against your % indebtedness when a loan is calculated.

Buy a good used car on a credit union installment loan and stay current on it.
That's all it takes to establish good credit.

I have an 820 score, don't own a home and never carry a balance on the one credit card I have for emergencies.

I haven't owned a home in 9 years. Revolving debt instruments (credit cards) are a trap to avoid, and when you have one keep the max allowed on it very low.

Worry more about if you can sleep at night than if you have good credit. A good name trumps good credit too, conduct your finances with strict attention to solvency.

My2Cents
Taylorsville, UT

All kinds of advice and most of it is bad and completely wrong. Do not use credit card to buy anything, that is causing inflation and daily inflation. Its not smart at all and these low IQ low information spenders who are only fooling themselves with this misconception.

Credit card interest is irrelevant not what you have to worry about. Debt is a daisy chain from manufacture and every middleman to consumer who pays the cost of debt for everyone in the loop. Retail stores don't have cash either so they borrow it to stock their shelves pay their workers. Consumers add 25% inflation every time they swipe their cards. Retailer have to wait days or weeks to get paid from credit card use and no cash flow means more seller debt.

Banks get lucky when a consumer has a snag in the payday to payday poverty and not be able to pay off their card in full with about 30 fees associated with unpaid balance independent of interest fees and minimum payments.

Credit score is a sales pitch to entrap consumers. Cash and carry is free of fees and interest, and banks hate us. We keep all our money.

MyChildrensKeeper
Taylorsville, UT

If anyone worries about their credit score means they can't afford a credit card and its 30+ fees and charges independent and due on every billing cycle. An emergency expense event can jump debt payment to $200 fees plus payment, irrelevant to PIF history.

Its also foolish for anyone to assume they can borrow their way into wealth in the stock market or money markets or precious metals that are all subject to daily fluctuations market pricing. If you want the least amount of investment security it can only be done with tangible cash and in the hand possession of property.

Once you own (poses) tangible assets it becomes long term and solid concrete investment. Value may go up and down but over the long run "value" adjusted by inflation and the economy may be more than cost but never less than cost on a basis value.

Cash in a savings account is tangible investment that everyone should have, pay yourself first is my motto. Make saving a monthly bill to pay. Tax refunds are great for starting assets savings. Taxes are prepaid on cash accounts and no late fees or credit score adjustments apply.

Kings Court
Alpine, UT

Actually, it does make sense that you want to see an individuals payment/debt history before giving them a loan. This article makes the erroneous contention that just because a young person has no debt, he/she must be responsible. That is not exactly true. A young person without debt may be a lazy moocher who lives at home as a 30 year old and mom and dad pay the bills. Banks want to see someone who is able to be "independently" responsible and not having a credit history throws up red flags about the key word here "independent."

Admittedly, there are a lot of gray areas here and no matter the scenario, you will find people who are creditworthy/uncreditworthy regardless of their credit history, but in today's world banks have determined that a known credit history is better than an unknown credit history when making large loans. I can't really blame them.

Ed Meyer
Kanab, UT

It's interesting that at least one comment said debt was a bad thing. That's not necessarily the case. Let's say a business makes 60% on its product and could continue doing this if it expanded its operations. While it would be best to expand through cash in the bank, taking on debt can be a very wise investment. Students take out loans to pay for their education and that's a good investment as long as they borrow only what they need for college, books, etc. I would say that irresponsible debt, just spending to feed ones appetite certain things is the unwise thing.

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