Investor · Columbus, MT · Member since 2013 · 1k+ posts · 1k+ votes
How many of you out there use a Credit card for your investing BIZ or personal life?
My wife and I don't use them because of the Dave Ramsey movement, but now that we are doing well with money I might consider it? what are your thoughts?
Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
11y
If you don't spend money you don't have then I will almost say it is stupid NOT to use credit cards.
Much more convenient than carrying around a ton of cash, gives you a nice log every month of all your purchases, is a 30 day interest free loan if you don't carry a balance and every card these days has some kind of reward program where you can get stuff just by making purchases you would anyway.
Some people do very well with miles and some will work great deals on other rewards that they use a lot. I like Discover where you can get discounted gift cards. They have a lot of $25 cards for $20 in points. Don't need a math degree to see that you get an automatic 20% return cashing in the money they gave me for no obvious reason to start.
Even if you don't do anything amazing if you have a card that pays back 1% and all you do is take a dollar for dollar statement credit if you spend $1,000 then you only need to pay $990 to pay off your balance.
With some store cards like Home Depot and Lowes if you make a purchase above $299 you automatically get at least 6 months of interest free financing as long as you payoff the balance when the promo period is over. So say you make a $400 Home Depot purchase and instead of paying cash you used their credit card and put the $400 in a "high yield" savings account getting like 0.7%, well at the end of 6 months you made $14 and can pay the balance off in full.
These examples are about the lamest possible way to use the rewards programs or utilizing the free financing but even if you only did this level there is no reason to NOT take the free stuff and/or money these companies want to give you.
Also of course having, using and then paying off cards every month will build your credit up much more than someone without any cards that pays cash for everything. In fact the 2nd person will probably have pretty mediocre credit.
Finally of course the life line they can provide if something bad does happen. While you don't want to just spend money you don't have if you did have 1 person lose a job and income is really tight for a few months you have more options. Maybe you do tighten things up but you still have like a family of 4 and layout like a $100 a week for groceries. For a couple of months when income is low while that person gets a new job it might look nice to only paying $10 at the end of the month than $400 throughout the month.
Credit cards are really only a problem if you use them to buy crap you don't need and can't afford if you did need to use cash. If you are just a little disciplined then there are a ton of benefits with no particular drawbacks.
Investor · Columbus, MT · Member since 2013 · 1k+ posts · 1k+ votes
11y
Thanks Rolanda! Glad you use them. We like Dave too but I also disagree with his real-estate views. Thinking about changing this view on CC as well. thanks for your input.
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
11y
love them if used wisely! I used credit hilton points to get a suite at the nicest hilton in Singapore :) it has paid for many great vacation rooms just for every day spending! Highly recommended!
Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
11y
If you don't spend money you don't have then I will almost say it is stupid NOT to use credit cards.
Much more convenient than carrying around a ton of cash, gives you a nice log every month of all your purchases, is a 30 day interest free loan if you don't carry a balance and every card these days has some kind of reward program where you can get stuff just by making purchases you would anyway.
Some people do very well with miles and some will work great deals on other rewards that they use a lot. I like Discover where you can get discounted gift cards. They have a lot of $25 cards for $20 in points. Don't need a math degree to see that you get an automatic 20% return cashing in the money they gave me for no obvious reason to start.
Even if you don't do anything amazing if you have a card that pays back 1% and all you do is take a dollar for dollar statement credit if you spend $1,000 then you only need to pay $990 to pay off your balance.
With some store cards like Home Depot and Lowes if you make a purchase above $299 you automatically get at least 6 months of interest free financing as long as you payoff the balance when the promo period is over. So say you make a $400 Home Depot purchase and instead of paying cash you used their credit card and put the $400 in a "high yield" savings account getting like 0.7%, well at the end of 6 months you made $14 and can pay the balance off in full.
These examples are about the lamest possible way to use the rewards programs or utilizing the free financing but even if you only did this level there is no reason to NOT take the free stuff and/or money these companies want to give you.
Also of course having, using and then paying off cards every month will build your credit up much more than someone without any cards that pays cash for everything. In fact the 2nd person will probably have pretty mediocre credit.
Finally of course the life line they can provide if something bad does happen. While you don't want to just spend money you don't have if you did have 1 person lose a job and income is really tight for a few months you have more options. Maybe you do tighten things up but you still have like a family of 4 and layout like a $100 a week for groceries. For a couple of months when income is low while that person gets a new job it might look nice to only paying $10 at the end of the month than $400 throughout the month.
Credit cards are really only a problem if you use them to buy crap you don't need and can't afford if you did need to use cash. If you are just a little disciplined then there are a ton of benefits with no particular drawbacks.
Investor · Howey in the Hills, FL · Member since 2013 · 376 posts · 114 votes
11y
I use credit cards for everything. There's no point in paying cash when I can get at least 1% cash back or earn airline miles for free travel. The rewards can really start to add up when you start using credit cards for you real estate business. Put a couple of new A/C units on your credit card and you've earned enough airline miles for a free roundtrip ticket. This only works if you pay the cards off at the end of the month. If you start carrying a balance it will completely undermine any rewards you earned.
Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
11y
I use credit cards for rehab expenses, utilities, insurance premiums, etc. They are paid off every month, and the cash back adds up nicely. If only I could convince the title companies to accept credit cards . . .
We were able to use credit cards years ago to pay for closing cost for our rental properties and buy appliances and get 12 months no pay no interest from Homedepo, Lowes etc...
How ever, Credit Cards are also used as "hooks" by banks to get the regular consumer in a bad habit of start carrying balances. Just look at the way they want you to build credit.
Now days we are only carrying balance on a business transaction if it is worth the return. And for our personal expenses we pay off all of it each month. Good Luck to you and be careful!
Peoria, IL · Member since 2013 · 967 posts · 383 votes
11y
i am torn. credit card companies make shedloads of money. they have the statistics/data. they can and do change interest rate and credit limits when people need credit the most. the small incentives of 1% and they get 17% annually. one late fee kiss $35 gone. cc cos know people spend more using their plastic. not me i wont be one of them. oh wait i already was.
when i use cash i know when there isnt any more in my wallet. i think longer about purchases. i look for used items on craigslist.
i do need to buy some windows. new chase freedom has $100 back on new account $500 spend first 3 month. think i will buy $500 in gift cards for hd on line at 10% off using my 1% back ($5) and then 10% hd in store coupon. although i typically find menards is much less xpensive even with hd 20% off.
Real Estate Investor · Englishtown, NJ · Member since 2014 · 4 posts · 0 votes
11y
Having credit cards and using them wisely will improve your credit rating. This will come in handy when you acquire your first few investment properties as the bank will require you to personally guarantee them.
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
11y
FANTASTIC! if use wisely! I recently visited my husband in signapore and we stayed at the conrad (one of the fanciest hilton chains). Not only did we get a fantastic upgrade, free breakfast ($50 each) and snacks it was FREE thank you every day expenses :)
Personally I love them but like everything in life it must be used wisely.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
11y
Ours run $5,000-$8,000 a month & we bill every business item we can to them. But they are paid off in full each month, (we have the cash back option). The only time we don't use them is @ contractor auctions etc because of the CC premium.
How many of you out there use a Credit card for your investing BIZ or personal life?
My wife and I don't use them because of the Dave Ramsey movement, but now that we are doing well with money I might consider it? what are your thoughts?
Bad idea IMO, unless your income can carry the water.
Just know, that loading CCs up at high balances regardless of when you pay them off effects your ability to obtain RE loans. Lenders look at high balances as a contingent liability if the CC has been paid down or paid off. They may also tag your DTI ratio based on the high balance, not your current balances. That means you must close the account to get rid of that ratio destroyer. Then, you need to start applying again, it can get tougher later on being qualified as the CC company isn't in the short term lending business.
Loading a couple grand may not be an issue, getting tens of thousands isn't prudent use of a CC, you can get caught in a bad deal and get your card stretched (get in trouble).
Don't borrow beyond your ability to cover the debt if you get hammered :)
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
11y
We use them, pay them in full each month, treat them like cash. I consider them money in my wallet just like a $20 bill. I know how much I can charge without getting into trouble. That being said I know some people can't do this, if you are one of them stick with cash.
Also I gave them to my kids when they started driving and they know what they can use them for (emergencies, our household expenses). Beats looking for change when you send them to the store for something. They haven't used them incorrectly but I know other families who this hasn't work for. For us cash is harder to manage. Also a CC gives me a trail to follow you know what was spent on what. Category reports can be a big help.
You have received some great inputs here and I wanted to add a few thoughts as well. I have taught the Ramsey course at church along with the Crown Ministries course prior to that.
First: I use credit cards so I disagree with Dave on this. However, the rationale behind Dave's argument is that people spend up to 30% more when they are using credit cards than when they pay cash. I am not sure how scientific the 30% number is but I am confident that this is true to a certain extent for everyone and even more so for those without financial discipline.
Second: Dave says to use Debit cards instead. I really do not like the use of debit cards. If your account gets compromised it could create a ripple effect account into your checking account causing checks to bounce, ACH payments to be returned etc. I realize that they will take care of the fraud associated with your account but if you have an active account and now have to replace bad checks, etc, you now have a new full time job.
Keep up the great work on improving your finances!
Investor · Columbus, MT · Member since 2013 · 1k+ posts · 1k+ votes
11y
@Val Csontos@Bill Gulley Thank you all for your awesome input. We did end up getting a Lowe's CC and now participate in the %10 off that it affords. We will not EVER be carrying a balance on it, but we will use it to save money.
Congrats on your decision! It is great way to go! Don't forget to take your Lowes CC statement/ to Home depot (when you have business there) they will give you the 10% too for purchasing there!
As they like to do Price match with the competition. :)
Investor · Binghamton, NY · Member since 2014 · 118 posts · 66 votes
11y
Joshua Daniels - the answer is, "it depends."
Are you buying "doodads" that won't ever return your money to you? TV's clothes etc. keeping a balance on these items is unwise- and you should listen to David Ramsey.
Can you use the credit cards to buy investments that make you money? Absolutely. 10% interest is commonly charged by hard money lenders and can be useful for short term uses
Investor · Binghamton, NY · Member since 2014 · 118 posts · 66 votes
11y
Joshua Daniels - here's an example. Let's say you have a dozen credit cards, and find a good rehab property. -all purchases on a credit card:
Purchase price=80k
Rehab and holding costs= 20k
Credit card interest for a year= 15k
ARV= 150k
150k-115k= 35k profit
Do I care about that credit card interest? In this case- not really. Benefits- it's easier to use than a bank loan. And your credit score goes back to normal when the balances are paid below 50% on each card. Hope this helps.
Contractor · Cleveland, OH · Member since 2014 · 317 posts · 181 votes
11y
Also, if you have good credit, you can probably qualify for chase ink or amex blue for business. I qualified fairly easily for these, which gave me about 12 months of 0% apr of about $12,000. I pay them off in full every month though... as others have advised.
I have always been under the impression that having a low current balance to max balance ratio was beneficial for lending. This shows that you do not excessively use your available revolving credit and that you have a buffer to absorb emergency spending. This would indicate a higher available balance is a good thing to have. Closing accounts supposedly can impact your credit score as well. I am not familiar with lending on a massive scale for REI, this may only apply to personal lending.
Specialist · Kirkland, WA · Member since 2013 · 1k+ posts · 817 votes
11y
The problem with following Dave Ramsey is that by following his plan you will be out of debt, but it's not going to improve your credit rating, in fact his methodology will slowly degrade your credit score.
If you want the best interest rates and the best treatment when purchasing, you need to carry a stellar credit rating. Real Estate without great credit is difficult. After I got out of a couple of 10's of 1000s of dollars of debt (college and living on credit cards) I lived in a cash only Ramsey Mode for the better part of a decade, then I decided to try and use my cash stockpile to purchase real estate investments.
I won't make you guess how hard that was. I had to take on a credit partner, and years later I'm still sub awesome interest rates but am working hard on building that FICO number.