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Discussion in 'Credit Talk' started by JoshuaHeckathorn, Apr 8, 2009.
Suze Orman Changes Her Mind
I'm interested in what all of you think as well, so please share!
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Its one thing to have cash on hand,everyone should have cash.However if you have a good credit limit at lets say 14.9% and pay the balance down you will have sort of an emergency fund.If you have a high balance you will pay more interest than a savings account will pay you.In order to get a higher interest rate on your money you would have to put it a time account which carries a 20% penalty for early withdrawal.Just a thought!I could be wrong.
I am not a fan of hers, and like her sweeping statements which I have never agreed with she is FINALLY coming around as what happens with high interest rates and charge offs and junk debt buyers . I have seen her basically ignore all of this before and while she is not as savvy as *we here are* ; ) at least now some will take note and listen.
What I mean is for far too long I have seen people pay their credit card when they don't know where their next pay check is coming from.Or using up thie reserve cash to pay a JDB.
If I owed on a current credit card, and money was very tight my first priority is to pay my rent and or mortgage my utilities, taxes and day to day living expenses and then if I had anything left I would pay the credit card...maybe..
We really do have to start thinking differently right now as many things have changed ....
YOU NEED CASH and YOU NEED AT LEAST A FEW THOUSAND JUST IN CASE, and that is the minimum that one would need for day to day food and shelter.
So I guess I agree with Suzy on paying just the minimum and keep the extra money you have for right now as who knows what will happen
I can agree with this reasoning also it makes more sense than Suzie.However i think its a matter of the family coming first.
IF you could make sure that that cc co is NOT going to l ower your limit and or credit line, great, but we have been reading even long time customers who have never been late are getting accounts closed or credit/cash advanced line reduced.
BoA did this to me recently. Had a 15K Credit line, ALWAYS have paid more than the required monthly amount, and never have been late...
I have had it as high as 14K but now just use it when I need it, or when I needed it...
Well the other day all of a sudden I went online and my credit line was CLOSED..
NO notice whatsoever!
Now say I had owed 5K and decided to pay it off figuring I could use the line in case of an emergency in the future...
What a bummer that would be, huh?
They only need our minimum payment after getting the bailout money.They can start weeding out the users who rarely use their cards.Also less risk when they default.
The advice I heard (and, of course, ignored at the time) was to "pay yourself first," which is how I read her advice. I agree that the need for a "cushion" of a month or two's expenses (at least) should be everyone's first priority (after keeping the roof over your head and food in your mouth, of course).
So, If you have No savings and big credit card bills:
a) pay your CC's to 90% utilization first (assuming they're maxed out) That way you'll have some cushion to keep the fees from piling up.
b) build up some savings until you get a month or two's worth of expenses in the bank. If that means min payments for a while, so be it. People have been running too lean for too long.
c) once you get your "cushion" padded, then go back to paying down the cards.
But, as has been said above, you don't want to rely on your cards as a cushion because you can't rely on them (I found this out the hard way, too.) When you need them most is when they are most likely to take them away. Not so with cash in the bank.
I have had this line of credit for over 20 years. Of course it has been thru many bank name changes.
I would have thought the credit line would have been lowered or closed 5 6 7 8 9 years ago, when I owed a lot and now not owing anything and my credit score going up to high 600's when it was down to 500 back then, they closed it with me having higher scores and not owing anyone!!!
Now my score is probably going to go down!
I have a BoA cc as well with a 25K limit so most likely that will be limited or closing soon I guess.
I owe about 3K on that as I used it last month while I went on vacation and was just about to pay it in full as it is due on the 20TH, now I am thinking, I will just send 500 bucks,as I also have to pay my quarterlies
You have all made great points, and I agree that we should not be relying on credit as part of our emergency fund.
However, I still disagree with Suze's sweeping recommendation for everyone that doesn't have a big emergency fund to only pay the minimum balance. It might be good for some who can't pay their bills and sense bankruptcy in the near future, but for most people listening to her this isn't the case. If you have some cashflow, you should still be paying at least more than the minimum...racking up as much high-interest debt as possible is not a smart move.
Josh is right and it is only common sense.
I don't believe you should depend on credit cards and or cash advances to get you thru hard times as this is one of the problems that started this recession.
I DO believe if you owe money on cc and credit lines and do not have much cash flow and things are looking uncertain fro the future, then best to pay as little as possible just in case and when things get better start paying the debt off .
I have one loan out on a vehicle. I WOULD NOT pay it off right now even though I have the money as I want to have a 10K cushion, AND credit money is hard to come by right now.
So for me, if I did owe a lot on credit cards I would be paying hte minumum now and wait and see what happens.
Thankfully I only have one credit card with a balance which usually gets paid off ASAP so I do not incur any interest charges, but this month, it is going to be a few hundred dollars instead of a few thousand.
In the end it all depends what you feel is the best way to go for you.
I would also agree with woofer. Seems unwise to cash out in today's market.
"Suze Orman Changes Her Mind"
Sometimes there is not enough money to pay the bills let alone try to save for an emergency. If it weren't for the three of us sharing expenses there is no way that my mother and sister would have survived in this economy. I have retired and my mother is retired and we don't know when my sister will be going back to work. For my sister to just pay her bills alone is a struggle, with the three of us trying to pay the house payment, and everything else that goes with it is a whole different ballgame. Parttime jobs don't offer health insurance and Cobra is to high for someone who only brings in less than 200.00 every two weeks. So far we have not had to use the credit cards to survive and we won't if we can help it. We don't fall in that category where we can refinance the house to a lower house payment, I doubt that we could anyways because no one is working. I have retirement and disability but that only goes so far. So I'll pay the bills first and then if there is anything then I'll put it in a savings account for an emergency.
she has done a good job of branding herself, but I wouldn't follow a lot of her advice.