Posted: 10/17/2010 6:52:58 AM EDT
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In a day or two, I'll be debt free except for my mortgage. I've carried a shameful balance on the credit card for years, but I'm paying it off with a 401k loan.
I want to keep the credit card for emergencies, but is there any other value in having one? I'm not sure what benefits there might be, but does my Visa check/debit card (through a credit union) afford the same benefits as a regular credit card? Won't I have to make occassional or regular purchases on the credit card (that I'll promptly pay off when the statement arrives) in order to keep it? Won't the credit card company cancel it if I don't use it? |
| A portion of your credit score is based on your length of credit history, so you should keep open your oldest account. However, if you're a self-diagnosed credit abuser ( I am too), you should call and have your limit set to something low enough to keep out of serious trouble, but high enough to keep out of a jam should you need it. Use your card to make one purchase a month, even if it's $25, and pay off immediately. |
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There are some weird things about using a debit card to rent a car or get a hotel room. I think the deal is that even if the rate is x and you only said you're going to have the car / room for one day, they reserve an extra amount in case of additional charges like mini-bar, fuel, etc. This sometimes overdraws people's checking accounts.
If you're traveling, etc. for work, you might put stuff on the card that you couldn't personally afford to pay off immediately, but your employer will reimburse you for anyway. |
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Paying off your credit is a GREAT IDEA !!!
Doing so with a 401 loan ... not so much . Bad things can and do result from this . Is it too late to reconsider the loan ?? You pay a pretty penny usually and heaven you loose your job or are laid off . then your loan becomes INCOME and you get a Huge tax burden . You can't borrow your way out of debt . Good that you are trying to do something though . Check out dave ramsey He is Great on money matters . |
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I have never carried a balance and pay mine off every month......one benefit to me is it's tied to Airline mileage and I fly for free on vacations here and there.
Secondary to having one are cases where large purchases are necessary and you are out of town etc.....car repairs, towing bills....travel, vacations etc. |
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Quoted:
I have never carried a balance and pay mine off every month......one benefit to me is it's tied to Airline mileage and I fly for free on vacations here and there. Secondary to having one are cases where large purchases are necessary and you are out of town etc.....car repairs, towing bills....travel, vacations etc. Same here..... I put everything on the card I can. The mileage is a big plus and has taken care of numerous trips. |
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Quoted:
Paying off your credit is a GREAT IDEA !!! Doing so with a 401 loan ... not so much . Bad things can and do result from this . Is it too late to reconsider the loan ?? You pay a pretty penny usually and heaven you loose your job or are laid off . then your loan becomes INCOME and you get a Huge tax burden . You can't borrow your way out of debt . Good that you are trying to do something though . Check out dave ramsey He is Great on money matters . Is borrowing from yourself really borrowing? How is paying 7% interest to yourself not better then paying 22% interest to someone else? Help me out here , cause I am really having trouble getting my head around your statements. |
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Quoted:
Quoted:
Paying off your credit is a GREAT IDEA !!! Doing so with a 401 loan ... not so much . Bad things can and do result from this . Is it too late to reconsider the loan ?? You pay a pretty penny usually and heaven you loose your job or are laid off . then your loan becomes INCOME and you get a Huge tax burden . You can't borrow your way out of debt . Good that you are trying to do something though . Check out dave ramsey He is Great on money matters . Is borrowing from yourself really borrowing? How is paying 7% interest to yourself not better then paying 22% interest to someone else? Help me out here , cause I am really having trouble getting my head around your statements. ^^^^^^ |
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Quoted:
Is it too late to reconsider the loan ?? You pay a pretty penny usually and heaven you loose your job or are laid off . then your loan becomes INCOME and you get a Huge tax burden . There is plenty left in the 401k to pay taxes in the event of a layoff. Quoted:
You can't borrow your way out of debt . Good that you are trying to do something though . I've accessed my own money to pay off the cards (and my truck.) All of my 401k has been in cash or S&P 500. I did fairly well with timing the movement from one fund to the other. I made a little bit of money in the crash and comeback; I waited for the stock market to come back somewhat before taking the 'loan'. I'm all-in the S&P 500 right now. If the market takes another significant plunge in the near future, using the money to pay off the card will have been wise as a significant chunk of my 401k is sheltered by the loan withdrawl. But while waiting for the market to come back I paid a lot of card interest. Apart from the stupidity of carrying credit card debt....I'm not sure I played the situtation as well as I could, but I feel good about how it's turned out so far. Quoted:
Check out dave ramsey He is Great on money matters . Sincerely, thanks, but I don't need anyone to tell me that carrying debt is a bad idea. Getting out of debt ain't rocket surgery; I'm just finally assuming the financial decipline to do it. Getting the wife on board was a big part in the decision. Her guilt is not in blowing money but being nice and supportive of me while I did it. Me getting her something nice so as to balance me getting something nice was classic economic codependency. Those days are behind us. |
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Back when I was young,and had money,I did take out 401K loans.
I would put the max.in before taxes,and the max in after taxes. By takeing a loan,from the small portion that was in a fixed acct,I was able to stash an additional 2%.(loan was prime +2%). I feel that as long as your not hitting your long term investments,your GTG. |
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If you are smart: Get a card that gives rewards and use it for all your purchases. Treat it like cash... don't spend what you don't have. Have all your utilities and bills get autopayed from it. Pay it all off every month automatically with auto pay from your bank account.
If you are generally level headed but sometimes make rash purchases: Get a card that gives rewards and have all your bills and utilities get auto payed from it. Pay it all off every month automatically with auto pay from your bank account. Keep it around for emergencies. If you have the self control of a 2 year old who still can't stop finger fucking a hot stove: Credit cards aren't for you. |