Does anyone else eschew credit?

@Foxfyre,

Is it reasonable to assume that houses appreciate enough to cover interest and maintenance costs? I think many are currently finding out that this is not the case whatsoever.

I dislike the idea of paying interest to someone else. I'd rather save money for as long as I can, accruing interest the whole time.

Cycloptichorn

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

Technically this piggy-backs on the credit system, but I can't get away from that fact unfortunately.

Only if you mean "technically" in a strictly literal sense, as in ATMs, transaction software, and the like. Otherwise, paying with a debit card is identical to cash -- except that one system is made of metal and paper, whereas the other is made of plastic and electrons.

1 Reply

@Thomas,

Thomas wrote:

Cycloptichorn wrote:
Technically this piggy-backs on the credit system, but I can't get away from that fact unfortunately.

Only if you mean "technically" in a strictly literal sense, as in ATMs, transaction software, and the like. Otherwise, paying with a debit card is identical to cash -- except that one system is made of metal and paper, whereas the other is made of plastic and electrons.

Yes, it's the physical matrix that I take advantage of.

Cycloptichorn

0 Replies

@Thomas,

Thomas wrote:

I do have a credit card. I don't use it much, but I'm keeping it around, for one of the reasons you name: American society uses your credit score to measure your trustworthiness as a person. I am not going to change American society. Therefore I keep a credit card around just to have a credit score. But as I said, I don't use it much. I use my two debit cards instead.

I have no problems saving and paying for things with cash.

Was German society any different in this respect? I have never known or even been curious about my credit score.

Why not use a credit card and pay the balance in full each month. The effect on your indebitness is the same, but that way you, and not the bank, would benefit from the float?

1 Reply

@Cycloptichorn,

Quote:

Technically this piggy-backs on the credit system, but I can't get away from that fact unfortunately.

OK . . . maybe i'm being dense, but this makes no sense to me. A debit card only works if you have the cash in your account. How does that have anything to do with the credit system?

1 Reply

@Setanta,

Setanta wrote:

Quote:
Technically this piggy-backs on the credit system, but I can't get away from that fact unfortunately.

OK . . . maybe i'm being dense, but this makes no sense to me. A debit card only works if you have the cash in your account. How does that have anything to do with the credit system?

Debit cards are in most cases now 'check' cards; that is, they use the credit system to access your account, like a CC transaction, but with no credit line.

My debit card has a Visa logo on it, but it's not a visa card or account - just the agreement my bank has to let me use the card on their processing system. The CC company gets to charge the same transaction fees, but that's it.

Cycloptichorn

1 Reply

@Cycloptichorn,

OK, i see what you're saying.

0 Replies

@georgeob1,

georgeob1 wrote:

Was German society any different in this respect?

Yes it was. The use of credit scores is much more narrowly restricted in Germany. For example, none of my employers ever checked my credit scores before hiring me, and none of my landlords ever checked it before renting out their apartments to me. If they had tried, it would have been considered very odd in Germany. On the other hand, my American employer and landlord both checked my American credit reports. (Not that there was much to check at the time.)

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

Is it reasonable to assume that houses appreciate enough to cover interest and maintenance costs?

Historically, yes. And provided you stay put in the property long enough.

Certainly there are those individuals who over-extend, or who are caught by market forces, or who try to "flip" houses, but private home ownership is the greatest wealth-builder in the US.

1 Reply

@DrewDad,

DrewDad wrote:

Cycloptichorn wrote:
Is it reasonable to assume that houses appreciate enough to cover interest and maintenance costs?

Historically, yes. And provided you stay put in the property long enough.

.... and considering the rent that you're not paying to a landlord.

3 Replies

@Thomas,

Exactly.

Cyclops IS paying the interest and maintenance costs VIA his rent, and he's not going to have anything to show for it, and he's losing out on some monsterous tax breaks (which I think should be eliminated, but that's another topic).

1 Reply

@Thomas,

Thomas wrote:

DrewDad wrote:
Cycloptichorn wrote:
Is it reasonable to assume that houses appreciate enough to cover interest and maintenance costs?

Historically, yes. And provided you stay put in the property long enough.

.... and considering the rent that you're not paying to a landlord.

The flip side of that is upkeep, insurance, and property taxes. And the upkeep can be a real killer.

Cycloptichorn

1 Reply

@maporsche,

maporsche wrote:

Exactly.

Cyclops IS paying the interest and maintenance costs VIA his rent, and he's not going to have anything to show for it, and he's losing out on some monsterous tax breaks (which I think should be eliminated, but that's another topic).

Hmm, this isn't exactly true.

My rent is rent-controlled, so it doesn't really rise based on maintenance costs. For example, my landlord re-roofed our building last year to the cost of more than 50 grand. My rent did not and will not increase due to this.

Cycloptichorn

3 Replies

@Cycloptichorn,

Right, but your landlord charges you and his other tenats MORE than his mortgage and maintenence costs total up to.

YOU are paying for maintenence each and every month.

AND you're paying your landlords profit margin.

If my mortgage = $500 / month, and the average maintenece costs are $100 / month, I'll probably charge you $700 per month in rent to make a little profit too.

0 Replies

@Cycloptichorn,

Cycloptichorn wrote:

My rent did not and will not increase due to this.

Generally, it shouldn't. Rent is determined by supply and demand, not whether your landlord has re-roofed in the past 12 months. The cost of that re-roofing was already built into your (and your neighbors') rent.

0 Replies

@Thomas,

Thomas wrote:

DrewDad wrote:
Cycloptichorn wrote:
Is it reasonable to assume that houses appreciate enough to cover interest and maintenance costs?

Historically, yes. And provided you stay put in the property long enough.

.... and considering the rent that you're not paying to a landlord.

And considering that many, maybe most, homeowners also get a tax break from deductible mortgage interest and real estate taxes, increase their credit scores allowing them to borrow more economically when needed, and, if they buy wisely and within their means, at the end of five years or then years or twenty years they have an equity value that has increased in most or all of those years. No matter how many years one pays rent, nobody has anything to show for rent paid. Evenso, rent is certainly preferable to having no home at all, and is a viable option for those who cannot scrape together a down payment for a house or qualify for a mortgage.

2 Replies

@Cycloptichorn,

Cycloptichorn wrote:

The flip side of that is upkeep, insurance, and property taxes. And the upkeep can be a real killer.

Insurance and property taxes are built into my monthy house payment. (Mortgage + escrow to pay for things like insurance and taxes)

Upkeep can be a pain, sometimes, and can really pinch if too much hits at once.

But over the course of a year, or five years, the investment is paying off. Even with the housing downturn, we're still ahead. (This is in Texas, though, where the housing hit hasn't been as hard as, say, California.)

And every month, the financial benefit gets a little better, as less of my payment goes to interest and more of it goes to principle.

0 Replies

@Cycloptichorn,

Cycloptichorn wrote:

My rent is rent-controlled, so it doesn't really rise based on maintenance costs. For example, my landlord re-roofed our building last year to the cost of more than 50 grand. My rent did not and will not increase due to this.

Cycloptichorn

But, when you eventually leave, even if it's when you die, you'll leave the next renter with a huge increase in rent to cover the enormous expenditures of new roof, and other additions and upkeep you've taken advantage of over the years. A future generation will be paying for the roof you got to enjoy for "free" They are going to be paying not only for their own rent, but for things they never got to enjoy.

Do you feel it's morally right to pay a lower rent when someone else is going to have to end up paying for all the benefits you've gotten like a new roof and other improvements?

Landlords are evil, they make people pay money to live on their property, and do as little as they need to, to keep the property in livable fashion. Someone who lives in a rent controlled property is in playing with them, and the landlord is hoping you'll make a mistake and leave, or somehow break your contract with him. The day will come when you'll slip up and break part of your agreement, and then the money you will have to pay will more than make up for all the savings you've accrued by living rent controlled somewhere. Don't you realize you're making things worse for other people?

You're playing a risky game Cycloptichorn. You're gambling that you will be able to stay in this apartment as long as you like, and won't ever break any part of your contract.

2 Replies

@Foxfyre,

Foxfyre wrote:

And considering that many, maybe most, homeowners also get a tax break from deductible mortgage interest and real estate taxes,

This is true, but it is not a reason to buy a house. I've had people tell me they bought a bigger house, so that they'd pay more interest, so that they'd get a bigger tax break.

That's not the way it works. If you pay a $1.00 in interest, and you get $.20 back on your taxes, you've still spent $.80.

1 Reply

@chai2,

WTF?

0 Replies

Does anyone else eschew credit?

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