Do you, or someone you know personally, have a ZERO credit score like Dave Ramsey talks about? - Page 5 - Mothering Forums
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#121 of 172 Old 03-25-2011, 03:52 PM
 
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Originally Posted by happysmileylady View Post

Since my 15 year old does not have a credit card and will not have a credit card, nor does she or will she have a debit card, she will be taking travellers checks when she travels abroad this summer.


And she will be hit with transaction fees, handling fees and will find many places that just don't accept them anymore.  Good luck to her, for sure.

 

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#122 of 172 Old 03-25-2011, 03:53 PM
 
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Here, let me do the math for you if it will help your understanding of the benefits of 0%.

 

$20,000 is left in your brokerage account rather than using it to buy a car outright.  You gain a modest 5% over the 5 years you have a loan.  Your gains are $5,525.  That money grows you $18,709 over the next 25 years.

 

10 years later, you buy another car for $20,000 at 0% interest.  You leave $20,000 in your brokerage account.  You gain a modest 5% over the 5 years that you have the loan.  Your gains are $5,525.  That money grows you $11,486 over the next 15 years (not 25 because it's 10 years later).

 

10 years later, you buy another car for $20,000 at 0% interest.  You leave $20,000 in your brokerage account.  You gain a modest 5% over the 5 years that you have the loan.  Your gains are $5,525.  (You're at the end of the 5 years, so no more growth.)

 

In my original calculations, I didn't include this last $5,525, but lets do that and see what we have at the end:

 

 5535

18709

 5525

11486

 5525


46,860

 

That's what you make over 25 years if you use 0% interest.  For 3 cars over the course of that 25 years, you would have to have saved $46,000 in rebates to beat using 0%.  That averages to over $15,000 per car in rebates.  Saving $2,000 per car doesn't even COMPARE to these returns.  Even if your return rate is 3%, your gains are $21,185.  Still WAY above the $6,000 you'd save with rebates.

 

That is how I calculated those numbers. 


Wait, what are the assumptions here? A 0% loan still requires monthly payments. You say you leave $20k in the brokerage account - so where are the payments on the loan coming from? Is that from your regular budget, totally separate from the $20k? If it is, you're going to have to take into account what would happen to that budgeted money in the paying up front scenario in order to make a fair comparison.

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#123 of 172 Old 03-25-2011, 03:58 PM
 
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Here, let me do the math for you if it will help your understanding of the benefits of 0%.

 

$20,000 is left in your brokerage account rather than using it to buy a car outright.  You gain a modest 5% over the 5 years you have a loan.  Your gains are $5,525.  That money grows you $18,709 over the next 25 years.

 

10 years later, you buy another car for $20,000 at 0% interest.  You leave $20,000 in your brokerage account.  You gain a modest 5% over the 5 years that you have the loan.  Your gains are $5,525.  That money grows you $11,486 over the next 15 years (not 25 because it's 10 years later).

 

10 years later, you buy another car for $20,000 at 0% interest.  You leave $20,000 in your brokerage account.  You gain a modest 5% over the 5 years that you have the loan.  Your gains are $5,525.  (You're at the end of the 5 years, so no more growth.)

 

In my original calculations, I didn't include this last $5,525, but lets do that and see what we have at the end:

 

 5535

18709

 5525

11486

 5525

 


46,860

 

That's what you make over 25 years if you use 0% interest.  For 3 cars over the course of that 25 years, you would have to have saved $46,000 in rebates to beat using 0%.  That averages to over $15,000 per car in rebates.  Saving $2,000 per car doesn't even COMPARE to these returns.  Even if your return rate is 3%, your gains are $21,185.  Still WAY above the $6,000 you'd save with rebates.

 

That is how I calculated those numbers. 




Wait, what are the assumptions here? A 0% loan still requires monthly payments. You say you leave $20k in the brokerage account - so where are the payments on the loan coming from? Is that from your regular budget, totally separate from the $20k? If it is, you're going to have to take into account what would happen to that budgeted money in the paying up front scenario in order to make a fair comparison.


It's a wash because I didn't calculate the returns that the $20,000 would be earning you either.  If you're replacing the 20K with the amounts you would pay toward a car, it still gives you smaller gains than the lump sum of 20K from the beginning of each 10-year cycle, but I'm assuming that they would be relatively close... just noise.  I'm just calculating the compound interest on the gains made during the loan period.

 

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#124 of 172 Old 03-25-2011, 06:48 PM
 
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It's a wash because I didn't calculate the returns that the $20,000 would be earning you either.  If you're replacing the 20K with the amounts you would pay toward a car, it still gives you smaller gains than the lump sum of 20K from the beginning of each 10-year cycle, but I'm assuming that they would be relatively close... just noise.  I'm just calculating the compound interest on the gains made during the loan period.

 


Forgive me if I'm missing something here, but it still doesn't seem like a fair comparison to me, because that $5525 of gains assumes that you pay nothing for 5 years, then $20k at the end. I think there's also an issue with matching the number of years. The first amount of money has 20 years to grow, not 25, because 5 already passed during the life of the loan. We're looking at the total 25 years after the initial purchase, right?

Why wouldn't the calculation go like this?

Scenario 1: Pay $20k up front. Earn no interest on this money.
10 years later, pay $20k, earn no interest.
10 years later (year 20), pay $20k, earn no interest.

Scenario 2: Take 0% loan, invest $20k, the amount invested will diminish as you pay your installments, but you earn interest in the meantime. If you invest $20k at 5% and withdraw $333.33 per month during that time, at the end of 5 years you have $2829.19 remaining, not $5525. This is your gain over 5 years by taking the loan instead of paying up front ($2829.19). This money will earn $4677 interest at 5% in the remaining 20 years from year 5 to year 25.

2nd loan in year 10, same deal, $2829.19 in interest. This time the money earns an additional $1779 in interest from year 15 to year 25.

3rd loan in year 20, same deal, $2829.19 in interest, no further growth since we are at year 25 at the end of the loan.

The amounts are now:
$2829.19
$4677
$2829.19
$1779
$2829.19

Total: 14.943.57

Another thing skipped was the interest that can be earned on the rebates. Assume the $2000 rebate.

Change Scenario 1 to pay $18000 for each car and invest $2000.
They have $6772.7+$4157.86+$2552.56 at the end of 25 years. ($2000 invested at year 0, year 10, and year 20 respectively.)
This is a total of 13.483.12. This is less than the loan scenario, but not a LOT less.

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#125 of 172 Old 03-25-2011, 06:56 PM
 
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You have saved over time $20,000 in your account that earns 5% annually. You have the choice to purchase a car for cash or to finance at 0% for 5 years. You can either pay $333.33 a month in a car payment, or put that back into your account to rebuild your savings over that time.

 

Option 1. You pay Cash.

Now you have $0 in your account.

Each month you deposit $333.33

After 60 months, you will have $22,668.47

 

Option 2. You Finance

You have $20,000 in your account.

Each month you deposit $0, and pay that to your finance company instead.

After 60 months, you will have $25,560.67

 

Paying cash costs you $2,892.20

 

If you keep saving for 5 more years while you drive this car:

Option 1 - You have $51,760.24

Option 2 - You have $55,471.98

Paying cash now has cost you $3,711.73

 

Time to buy another car with the same options as before.

Option 1. You pay Cash.

Now you have $31,760.24 in your account.

Each month you deposit $333.33

After 60 months, you will have $62,833.12

 

Option 2. You Finance

You have $55,471.98 in your account.

Each month you deposit $0, and pay that to your finance company instead.

After 60 months, you will have $71,190.44

 

Paying cash for these 2 cars has now cost you $8,357.33

 

 

If you keep saving for 5 more years while you drive this car:

Option 1 - You have $103,305.90

Option 2 - You have $114,031.34

Paying cash now has cost you $10,725.45

 

So just based on paying cash for these 2 cars, you have cost yourself the equivalent of a European vacation for the whole family.

And so on.

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#126 of 172 Old 03-25-2011, 07:38 PM
 
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See, you're kind of proving my point.  Up until my first post (I haven't read the recent pages, so can't comment on those) I did not see a single person who was offended by your lifestyle.  People questioned it, because I assume they felt the extreme might be unrealistic.  That does not equal offended.  

 

Back to my first post, I said "reacting to an attitude," meaning the tone of some posts here, but you wanted to read "offended by your lifestyle."  What makes you assume that?  What makes you so special that anyone would care what you do?  I sure don't care.

 

I am not offended by a no-credit lifestyle.  In order for me to be offended, some part of me would have to agree with it, while not living up to it.  I don't agree with it for my life and I am very secure in that point of view for my life, so, no, I am not offended by your lifestyle.  Sorry to disappoint you.

 

 

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I've never had anyone be so offended by my personal financial situation as I have on this thread lol

 

What is so "holier than thou" about sharing my experience? It's been suggested I can't so much as buy a loaf of bread without credit, and that simply hasn't been our family's experience at all. I suppose by Velochic's definition, we've used credit in the loosest sense (as in, renting an apartment without paying the entire lease upfront in cash) but I was under the impression that we were all discussing financing things, having credit cards, lines of credit, carrying debt or even being debt free but having "good credit" etc.

 

My husband (according to the mortgage lender and car dealership) has no credit score. No number. I don't know if that was their way of saying no debt, but no number could be calculated. It's as if "he didn't exist". I don't know much about Dave Ramsey or what he considers a 0 credit score, though. We still qualified for the mortgage and car (though chose not to buy at that time). We've never had a problem with utilities, or renting an apartment, or getting airline tickets, rental cars, any of that. What is so offensive or holier than thou about that? It's just our experience.

 

I've said several times live and let live, if credit works for YOU, then go for it. We just choose not to even get involved. I think when people begin feeling "offended" when no offense has been intended or even suggested (I don't believe I've made any judgment toward people who use credit wisely), maybe the examination should be inward rather than outward. How am I hurting YOU by not using credit (in the sense I assumed we were all talking about)?

 

I compared it to minimalism because sometimes at other people's houses, THEY will say to ME, without me saying a word or even thinking anything "you must think my house is a mess..." or "you must think my house is cluttered because you're so decluttered..." or some variation, when I wasn't thinking anything negative. Just by virtue of me being decluttered made me suddenly accused of being "judgmental" or "holier-than-thou" when honestly I don't care what your house looks like. I really, really don't. It's not my space or my life. Same with finances. I don't care who has credit, especially if it's wisely used, but simply by virtue of me choosing a different way, I'm suddenly "holier-than-thou". That's in your head. Sorry.



 

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#127 of 172 Old 03-26-2011, 06:23 AM
 
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For the calculations... First of all, it's assuming the $20,000 up-front, not at the end of the 5 - year cycle.  So that 20K is giving you returns from the beginning (which is how I was calculating).  Now the other question is... if you have the $333.33 to put back every month instead of making the payments on the 0% interest... why are you tying up 20K in a car?  It doesn't cost you anything to keep that 20K for "just in case", as the loan itself is not costing you anything.  A rebate can't beat what that 20K is going to continue to earn for you, even if you put it back (as reiandmoi showed).  The question, though is if a person really would invest exactly the amount of a car payment every.single.month.without.fail.  Probably not.  Even as disciplined as we are (we save to buy our cars and put back $400/month), we have times that things come up and we skip putting money in our car fund.  So, you can't really say that at the end of 5 years you're going to have the full 20K again.    It's really, all around, kind of a foolhardy way to approach car buying when you get into the numbers.  If you can afford to put back 20K over 5 years, then you are in a financial position to leverage that 0% financing.  There are many ways to calculate the spread between paying cash and using 0%, but it's based on your personal finances.  Some people will take out that 20K and never put a dime back in. That's the worse case scenario and most people are somewhere in the middle.  Again, it goes back to the mindset of using a corporation's money to make money for yourself.

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#128 of 172 Old 03-26-2011, 06:40 AM
 
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Exactly.  My niece learned this the hard way last year. Her parents stayed in England while she and friend traveled across France, Switzerland and Italy. The places that did take traveler checks charged a 15-20% service fee however most places she went the younger sales associates didn't even know what they were! If there wasn't an older associate/manager they had no idea how to process them.  This was prevalent in the open markets and grocery stores. None of the smaller hotels would take them. But the ATM's were tricky too since the networks often went down.  Between the 2 of them they were able to get by (friend had a debit card with a credit option). I would not send my child to Europe nor would I go myself with a combo of both.  Travelers checks and debit/credit card.

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And she will be hit with transaction fees, handling fees and will find many places that just don't accept them anymore.  Good luck to her, for sure.

 



 


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#129 of 172 Old 03-26-2011, 08:27 AM
 
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Anyone who doesn't have anything particularly useful or topic appropriate to contribute to a thread but simply comes into comment on the alleged "attitude" of a poster they don't agree with seems to be way more invested in personal attacks to someone's character than the actual topic.

 

(bolding mine) You cared enough to respond...specifically, to me...not once, but twice, without adding anything topic-appropriate to the discussion. It seems you care a lot... love.gif
So, thank you for proving my point lol.gif

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See, you're kind of proving my point.  Up until my first post (I haven't read the recent pages, so can't comment on those) I did not see a single person who was offended by your lifestyle.  People questioned it, because I assume they felt the extreme might be unrealistic.  That does not equal offended.  

 

Back to my first post, I said "reacting to an attitude," meaning the tone of some posts here, but you wanted to read "offended by your lifestyle."  What makes you assume that?  What makes you so special that anyone would care what you do?  I sure don't care.

 

I am not offended by a no-credit lifestyle.  In order for me to be offended, some part of me would have to agree with it, while not living up to it.  I don't agree with it for my life and I am very secure in that point of view for my life, so, no, I am not offended by your lifestyle.  Sorry to disappoint you.
 

 



 


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#130 of 172 Old 03-26-2011, 06:30 PM
 
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Since my 15 year old does not have a credit card and will not have a credit card, nor does she or will she have a debit card, she will be taking travellers checks when she travels abroad this summer.

 

 


 

 


I hope, from a safety perspective, that you help your dd get a credit card prior to her travels.  I would not want my young daughter abroad with only traveler's checks.  In an emergency, she really needs to be able to quickly have a way to pay for medical, travel, food, a safe place to stay.  Even a card w/a $1000/limit would provide a safety net.  I would not send my child abroad with only traveler's checks.  My DH has traveled all over Europe, and knows first hand that there were times/places Traveler's Checks didn't work out.  He and his buddies would rough it, sleep on a beach, charm their way into a meal (student living obviously).  It's probably considered very sexist, but we would never want our dd to be in that situation.  The world is a different place today, and the unexpected happens.

 

Anyway-sorry.  OT.

 

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#131 of 172 Old 03-26-2011, 07:02 PM
 
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Besides that, you have to turn travelers checks into money and then you're carrying your money around with you. I traveled when I was younger and did not have a credit card, and basically you could either pay a butt load of exchange fees or have all your money in cash either stashed in your room somewhere (bad idea) or hiding on you (bad idea). I chose to pay the exchange fees multiple times to keep my money as tc stashed in my room with the check numbers written down in 3 places, plus a photo copy of all the checks in my backpack, and as I cashed them I crossed them out.

 

Even having a bank account with an international bank, or a bank with minimum transaction fees for international withdrawals is better than traveling with travelers checks. You just go to the ATM like normal and withdraw small amounts of money like normal, and the rest of your money is safe.

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#132 of 172 Old 03-26-2011, 08:24 PM
 
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My daughter is not travelling alone.  She is with a guided tour group composed of three of her teachers, the tour guides and about 20 other students.  If an emergency happens, there are adults there to handle it.  I absolutely will not be getting a 15 year old a credit card just to travel to Europe for 12 days with a school group. 

 

The reality is that when you travel overseas, any method of cash flow is going to involve some fees.  Currency exchange fees, check cashing fees, ATM fees, taxes etc etc.  And all carry risks.  If someone steals your stuff, it doesn't matter what you have on you, it's a pain in the rear.  While there's no way to get straight cash back, carrying a credit card, particularly in another country, doesn't automatically guarentee access to funds if it's stolen either.  If your card is gone, how are you going to take it to the ATM?

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#133 of 172 Old 03-27-2011, 06:28 AM
 
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Which is why I suggested, as do most travel sites, that you have both- travelers cheque (or the like) and a debit/credit card. Yes there are fees with both but TC fees tend to be much higher. And as I noted with my niece was that the ATM networks were often down so what worked is that they had a combination of both. That is what protected them.

 

Now I also assumed, as many others did, was that your daughter was traveling on her on/with friends not on a supervised school sponsored trip. But I can pretty much guarantee you that those adults will have some kind of credit/debit option just for those kinds of emergencies. 

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My daughter is not traveling alone.  She is with a guided tour group composed of three of her teachers, the tour guides and about 20 other students.  If an emergency happens, there are adults there to handle it.  I absolutely will not be getting a 15 year old a credit card just to travel to Europe for 12 days with a school group. 

 

The reality is that when you travel overseas, any method of cash flow is going to involve some fees.  Currency exchange fees, check cashing fees, ATM fees, taxes etc etc.  And all carry risks.  If someone steals your stuff, it doesn't matter what you have on you, it's a pain in the rear.  While there's no way to get straight cash back, carrying a credit card, particularly in another country, doesn't automatically guarentee access to funds if it's stolen either.  If your card is gone, how are you going to take it to the ATM?



 


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#134 of 172 Old 03-27-2011, 07:56 AM
 
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Which is why I suggested, as do most travel sites, that you have both- travelers cheque (or the like) and a debit/credit card. Yes there are fees with both but TC fees tend to be much higher. And as I noted with my niece was that the ATM networks were often down so what worked is that they had a combination of both. That is what protected them.

 

Now I also assumed, as many others did, was that your daughter was traveling on her on/with friends not on a supervised school sponsored trip. But I can pretty much guarantee you that those adults will have some kind of credit/debit option just for those kinds of emergencies. 



 

I do agree that having variety is good protection, just like diversifing an investment portfolio is the best protection for it.  However, I am still not going to get a 15 year old a credit card for a 12 day trip.  Not going to happen.  She *might* maybe potentially get a checking account with a debit card-she's already got a job and it's getting to be time that she learn how to use a checking account and debit card.  And if we do set that up before her trip, she will likely take the debit card and the travellers checks both.  But at the moment, since she doesn't have that account, the tc are the route. 

 

As far as the teachers/tour guides using credit in case of an emergency...that's their choice, I don't care.  It's not like I have some moral opposition to everyone on the planet using credit cards.  How someone else chooses to handle an emergency is their own choice. 

 

 

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#135 of 172 Old 03-27-2011, 08:48 AM
 
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Quote:
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I do agree that having variety is good protection, just like diversifing an investment portfolio is the best protection for it.  However, I am still not going to get a 15 year old a credit card for a 12 day trip.  Not going to happen.  She *might* maybe potentially get a checking account with a debit card-she's already got a job and it's getting to be time that she learn how to use a checking account and debit card.  And if we do set that up before her trip, she will likely take the debit card and the travellers checks both.  But at the moment, since she doesn't have that account, the tc are the route. 

 

As far as the teachers/tour guides using credit in case of an emergency...that's their choice, I don't care.  It's not like I have some moral opposition to everyone on the planet using credit cards.  How someone else chooses to handle an emergency is their own choice. 

 

 


Then get her a pre-paid visa card.  We travel to Europe once or twice a year and have lived there multiple times over the years.  I guarantee you that your dd is going to have more headaches with traveler's checks than the supervisors are willing to deal with.  They may cover her needs, but I doubt they're going to give her spending money.  Traveler's checks are EXTREMELY inconvenient and expensive to use.  It just doesn't make sense that you would pay 15% or more over the cost (which is already very high in Europe with the exchange rate) just to prove a point (that you can live without credit... yes, you can, but it's obviously not always the smartest thing to do).  You don't pay extra fees usually when using your credit card abroad.  We don't, anyway.  We just pay that day's exchange rate.  No fees involved.  And getting cash with our debit card is super inexpensive, too.  We don't pay fees for that, either.  We have up to 15 foreign withdrawals a month free of charge on our account.

 

No offense here, but YOU aren't the one that is going to be dealing with the problems of just sending traveler's checks... your dd and her teachers are.  It seems kind of selfish to knowingly put them in that position just on principle.  Credit is not so evil as to jeopardize your dd's safety and comfort to avoid it.

 

My dd goes abroad with her school for the first time in 5th grade.  She will absolutely have one of our credit cards when she goes.  We already load a pre-paid visa for her to spend "her" money from her savings when we go on trips abroad.  It's a lot safer than cash, but it's like using cash.  When it's gone, it's gone.  However, we are teaching her good money management skills and can trust her to use her head with making purchases even now at 9 yo.  By 15, I expect she'll be handling her own money without us micromanaging it.

 

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#136 of 172 Old 03-27-2011, 08:51 AM
 
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Yikes no need to get defensive! winky.gif I was not implying that she should have one since I clearly stated that I *assumed* she was traveling alone when I made my initial recommendation.  Since she is on a school supervised/sponsored trip I was making the point that if an emergency came up with any of the students (and it was needed) the school would most likely handle it via credit.

 

I do have to say that *I* would care that the school and the chaperone's were prepared for any/all emergencies. I would want to know how the chaperone's would handle emergency medical needs for my child, missed flights, lost luggage.  I would not be comfortable sending my child oversea without an action plan in place.  

 

Maybe its me though because I have lived overseas and spent a lot of time traveling thru Europe both as a teen and now as grown woman in my late 40's. I have been stuck on train when the train workers went on strike, missed my flight for the same reason. I have shown up at hotels that were closed or overbooked. I like to be prepared.  But that has nothing do with Europe, credit cards, ATM's or travelers cheques, LOL.  If I was sending my 15 year old off with only some travelers cheques in her pocket I would care how the chaperone's would handle an emergency. 

 

And I do have say that by time my child is 15 he will be well versed in money management. Already at age nine his has a saving account.  He has been getting an allowance since he was 5. He saves a third, donates an third and can spend a third. He tracks his interest, projects out how log it will cost to save for a big lego set, etc.  I think it really important that he understand finances long before he gets a paid job.

 

Quote:
Originally Posted by happysmileylady View Post

I do agree that having variety is good protection, just like diversifing an investment portfolio is the best protection for it.  However, I am still not going to get a 15 year old a credit card for a 12 day trip.  Not going to happen.  She *might* maybe potentially get a checking account with a debit card-she's already got a job and it's getting to be time that she learn how to use a checking account and debit card.  And if we do set that up before her trip, she will likely take the debit card and the travelers checks both.  But at the moment, since she doesn't have that account, the tc are the route. 

 

As far as the teachers/tour guides using credit in case of an emergency...that's their choice, I don't care.  It's not like I have some moral opposition to everyone on the planet using credit cards.  How someone else chooses to handle an emergency is their own choice. 

 

 



 


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#137 of 172 Old 03-27-2011, 08:53 AM
 
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I think this is a valid point in theory. However one of the benefits being missed here is that if you buy a car outright with cash and then you or your spouse loses your job it is one less monthly payment that has to come out of your emergency fund and one less thing to worry about.

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#139 of 172 Old 03-27-2011, 09:08 AM
 
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Our family is trying to live without debt. It is difficult but we decided on this path after my husbands job was reduced to part time (he is a structural engineer) and I was on maternity leave. If we didn't have as many monthly payments (car payments, student loans, credit cards, mortgage) it would have been much easier. I think that the argument of needing credit in case of emergency makes sense in theory, but in reality the credit really held us back and stressed us out when our emergency came. I also think every family has to pick what is right for their particular situation. For us, it will be purchasing large items with cash up front and living without debt. I have also spoken to our insurance and mortgage company and although they do look at credit scores, they also allow us to work with an actual person. So if our credit score suffers because we use too much cash for everything, the person we work with will be able to make the appropriate adjustments for approval. Also, they always consider the fact that you are putting a large amount of money down and whether you have savings and other emergency funds.

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Originally Posted by AZMel View Post

I think this is a valid point in theory. However one of the benefits being missed here is that if you buy a car outright with cash and then you or your spouse loses your job it is one less monthly payment that has to come out of your emergency fund and one less thing to worry about.


If you take the money out up front, you have less in reserves to begin with.  It's easier to take a little bit of money at a time from the EF with the anticipation that you may find a job before it runs out.  However if you don't have the money to begin with...  I guess you can always sleep in the car that you own outright.  (And to be clear... I am not advocating financing a car.  I'm advocating utilizing 0% financing when it's going to help you increase your net worth.  We personally save for a car and outright buy certified used cars that are just a couple of years old.)

 

This thread is about living without using credit... not living debt-free.  Big difference.

 

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#141 of 172 Old 03-27-2011, 10:16 AM
 
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.  You don't pay extra fees usually when using your credit card abroad.  We don't, anyway.  We just pay that day's exchange rate.  No fees involved.


Are you sure? Our credit card doesn't pop up with a fee separate from the transaction, but any transaction in a foreign currency has a 2% fee built into the exchange rate. Read the fine print about foreign currency transactions, I think this is pretty common. Because of this, we try to use cash as much as possible when we are in the US, even though we use the CC for regular purchases at home. But we certainly bring the CC along just in case.

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Quote:
Originally Posted by velochic View Post

.  You don't pay extra fees usually when using your credit card abroad.  We don't, anyway.  We just pay that day's exchange rate.  No fees involved.




Are you sure? Our credit card doesn't pop up with a fee separate from the transaction, but any transaction in a foreign currency has a 2% fee built into the exchange rate. Read the fine print about foreign currency transactions, I think this is pretty common. Because of this, we try to use cash as much as possible when we are in the US, even though we use the CC for regular purchases at home. But we certainly bring the CC along just in case.


Positive.  Our Capital One doesn't charge a foreign transaction fee.  Neither does our visa through our credit union.  Our AmEx does (or did... we just found out that they are not going to anymore), which is why we didn't use it abroad.

 

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Originally Posted by velochic View Post




Positive.  Our Capital One doesn't charge a foreign transaction fee.  Neither does our visa through our credit union.  Our AmEx does (or did... we just found out that they are not going to anymore), which is why we didn't use it abroad.

 


I can confirm this also. I travel abroad frequently and my Capital One does not charge transaction fees either.

 


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Originally Posted by rhiandmoi View Post

You have saved over time $20,000 in your account that earns 5% annually. You have the choice to purchase a car for cash or to finance at 0% for 5 years. You can either pay $333.33 a month in a car payment, or put that back into your account to rebuild your savings over that time.

 

Option 1. You pay Cash.

Now you have $0 in your account.

Each month you deposit $333.33

After 60 months, you will have $22,668.47

 

Option 2. You Finance

You have $20,000 in your account.

Each month you deposit $0, and pay that to your finance company instead.

After 60 months, you will have $25,560.67

 

Paying cash costs you $2,892.20

 

If you keep saving for 5 more years while you drive this car:

Option 1 - You have $51,760.24

Option 2 - You have $55,471.98

Paying cash now has cost you $3,711.73

 

Time to buy another car with the same options as before.

Option 1. You pay Cash.

Now you have $31,760.24 in your account.

Each month you deposit $333.33

After 60 months, you will have $62,833.12

 

Option 2. You Finance

You have $55,471.98 in your account.

Each month you deposit $0, and pay that to your finance company instead.

After 60 months, you will have $71,190.44

 

Paying cash for these 2 cars has now cost you $8,357.33

 

 

If you keep saving for 5 more years while you drive this car:

Option 1 - You have $103,305.90

Option 2 - You have $114,031.34

Paying cash now has cost you $10,725.45

 

So just based on paying cash for these 2 cars, you have cost yourself the equivalent of a European vacation for the whole family.

And so on.



I generally agree with this this calculation except that option 1 schould have started with a balance of $2000 (the rebate) not $0.  Also the fact none of the senarios take into account income tax (even with only paying at the long term capital gains rate/not state income tax would diminish the ROI for both the option 1 and option 2 situations) closes the gap even further.

 

I'll conceed that it is marginally more expensive to pay cash, but no way it is as expensive as velo's orginal senarios.  Also not paying interest is a sure thing (which I still think you are with the 0% loans due to the upcharge in price/lack of rebate) vs. keeping money in a long term investment has some risk.  I'll take the opportunity risk of not investing long term over the risk of my lost of inital investment.

 

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#145 of 172 Old 03-28-2011, 06:15 AM
 
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Bolding mine.

 

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Originally Posted by happysmileylady View Post

My daughter is not travelling alone.  She is with a guided tour group composed of three of her teachers, the tour guides and about 20 other students.  If an emergency happens, there are adults there to handle it.  I absolutely will not be getting a 15 year old a credit card just to travel to Europe for 12 days with a school group. 

 

The reality is that when you travel overseas, any method of cash flow is going to involve some fees.  Currency exchange fees, check cashing fees, ATM fees, taxes etc etc.  And all carry risks.  If someone steals your stuff, it doesn't matter what you have on you, it's a pain in the rear.  While there's no way to get straight cash back, carrying a credit card, particularly in another country, doesn't automatically guarentee access to funds if it's stolen either.  If your card is gone, how are you going to take it to the ATM?


 

I was going to step away from this thread becasue clearly, we simply do not view this issue the same.  And that's fine, there's just really no point in debating it any longer.  However, now you are bringing up your 15 year old daughter travelling overseas alone.  Alone = without parents.  Please, at least do a prepaid Visa or Amex to use in addition to travellers checks.   Please.

 

I don't know how much you've travelled but if you are in a bind, travellers checks are not going to be a quick and easy solution.  A credit card is.  It is accepted without question, travellers checks are not.  I still remember travelling when I was 17 without my mom.  I was with *responsible* adults and friends.  Yeah.  Not so much.  I ended up deciding it was best to leave in the middle of the night (very long story) and even though I was under 18 I was able to arrange a car to take me to a hotel, a hotel room, and a flight the next day with a telephone and a credit card.  No way travellers checks would have been as simple.


She will be alone, 15 and in a forgeign country.  Give her the ability to easily get herself home if needed.

 

I also think it is kinda hypocritical to assume the adults will have access to credit should an emergency arrise but that is a separate issue from your daughter's safety and ability to get herself out of a bad situation if it arrises.  Give her that option.
 

 

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Bolding mine.

 


 

I was going to step away from this thread becasue clearly, we simply do not view this issue the same.  And that's fine, there's just really no point in debating it any longer.  However, now you are bringing up your 15 year old daughter travelling overseas alone.  Alone = without parents.  Please, at least do a prepaid Visa or Amex to use in addition to travellers checks.   Please.

 

I don't know how much you've travelled but if you are in a bind, travellers checks are not going to be a quick and easy solution.  A credit card is.  It is accepted without question, travellers checks are not.  I still remember travelling when I was 17 without my mom.  I was with *responsible* adults and friends.  Yeah.  Not so much.  I ended up deciding it was best to leave in the middle of the night (very long story) and even though I was under 18 I was able to arrange a car to take me to a hotel, a hotel room, and a flight the next day with a telephone and a credit card.  No way travellers checks would have been as simple.


She will be alone, 15 and in a forgeign country.  Give her the ability to easily get herself home if needed.

 

I also think it is kinda hypocritical to assume the adults will have access to credit should an emergency arrise but that is a separate issue from your daughter's safety and ability to get herself out of a bad situation if it arrises.  Give her that option.
 

 



Yes, exactly.  Safety trumps all, esp. for a minor child travelling abroad. This just feels like common sense to me.  I don't get the struggle here at all.  It's as though credit is bad, except if someone is going to use it on your (or your child's behalf).  Would she still travel abroad if you were relying on the school to not have any access to credit to take care of students in an emergency? I cannot imagine school administrators authorizing a trip under those circumstances.  That seems foolhardy.

 

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#147 of 172 Old 03-28-2011, 10:56 AM
 
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She will not be alone, she will be with 19 other students, 3 teachers, and a commercial tour company guide.  She's far from alone, she's just away from us.

 

I don't in the least find it hypocritical to be comfortable with the people in charge choosing to use debt.  Because I don't care if other folks use credit, I am not like morally opposed to others using it in their own lives.  That's like saying it's hypocritical for me to be ok with a vegetarian family feeding her a vegetarian meal when she is visiting, even thought we aren't vegetarians. 

 

The reality is that financial difficulty she's most likely to encounter there is losing her money.  If you lose cash, it's gone, you are SOL.  If you loose a credit card, you aren't liable for charge made on it, woo who, but you still don't have a card or access to that credit.  You do get another card in the mail, eventually, usually takes like 4 to 6 wks, mailed to your house.  Same with a debit card.  I know because I have lost both.  You are still SOL.  However, with American Express Travellers Checks, you can get that money back usually within 24 hours

 

Quote:
 

Lost or Stolen Cheques

American Express® Travelers Cheques are safer than cash. If they are ever lost or stolen, the funds can be replaced virtually anywhere in the world, usually within 24 hours.*

 

What to do if your cheques are lost or stolen

  • 1. Locate serial numbers Have the serial numbers for your lost or stolen Cheques on hand when you call.
  • 2. Call Call an American Express Travelers Cheque Customer Service Center as soon as possible to report the loss and open a claim. Use the search tool to the right to find the customer service number for your current location. Service Centers handle claims 24 hours a day, 7 days a week.
  • 3. Plan delivery During this call, we will help determine the best way for you to obtain a refund. Refunds are available at American Express Travel Services Offices and partner locations around the world.

https://www212.americanexpress.com/dsmlive/dsm/dom/us/en/personal/cardmember/additionalproductsandservices/giftcardsandtravelerscheques/travelerschequesservicecenter.do?vgnextoid=8a79b244dc310210VgnVCM200000d0faad94RCRD&vgnextchannel=95ddb81e8482a110VgnVCM100000defaad94RCRD&appinstancename=default

 

They can also be purchased in Euros, so no exchange fees to worry about (other than obviously the one time fee at the time of purchase).  And when I have used them, I just cashed them at a bank or the hotel and then used the cash at merchants.  So, that morning, take whatever check down to the hotel front desk, cash it, then that cash is what would be used to pay for lunches and such. 

I intend to send her with both cash and travellers checks.  And if we have a checking account set up by then, she will bring her debit card too.  Three forms of financial access will be MORE than enough, and IMO, two is sufficient.  And if something worse than losing her cash happens, she can contact us, we will book whatever plane tickest and hotel rooms she needs if the tour company isn't able to.  And before we discuss what if phones go down, even in the current situation in Japan, people are contacting others around the world through facebook and email and so on.  If things get so bad that there's absolutely no way to communicate at all, funds are not going to be a primary concern anyway. 

 

I am also not quite sure how not having a card to swipe at 15 is considered not financially savvy.  She's 15, not 35.  She's had a job for over a year.  She paid for a third of this trip herself.  The spending money she is bringing is all hers.  She is going to pick up paying for her own cell phone shortly, and has been paying for her own texts since she got it (no I will not pay for unlimited texts.  So, she wants unlimited, she's getting her own bill then.)  I have to say that it's my experience that she's the most financially savvy 15 year old I know.  I think 15 is a perfectly reasonable age to get the first checking account.  I don't know of too many folks who get them earlier than that.  And IMO, part of teaching her to be financially savvy is teaching her to live on less than she makes, and that debt is not a necessary evil of life.  Sending her with a credit card would be hypocritical of that, IMO.

 

If DH or I could get a credit card in the first place.  We don't have one and I am not sure we would get approved for one anyway.

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Well, all I can say, happysmileylady, is that I feel sorry for your dd.  My mother came to visit us a few years ago when we were living in Germany and I had to pay for EVERYTHING.  She brought traveler's checks and could not use them anywhere.  We traveled to France, Austria, and Switzerland while she was there and most of the time, she couldn't even get them cashed.  Finally, back in Munich, she had to go down to the AmEx office and cash them in for cash.  She spent the last week just carrying around cash because most places didn't even accept them.  You might as well just send cash with your dd.

 

She will still pay exchange fees.  There will still be fees when using them.  They are no longer widely accepted and she'll probably have to go to the AmEx office itself to just have them converted to cash, so she'll be right back where you don't want her to be... with a form of currency that can be lost and not recovered.  I guess I just can't wrap my head around what you are saying because it make absolutely NO financial sense to me.  confused.gif

 

You seem to think that the issue is her losing the money.  I'd say that's the least of your worries.  The issue is that where she CAN use the traveler's checks, she's going to pay considerably more with extra fees, and the rest of the places she won't be able to use them at all.  I guess you'll figure this out in time... at your dd's expense.  (Quite literally because if it's her money she's spending, she's going to be paying a lot more for a decision you are making.)

 

Also, just FYI, you can get credit cards replaced immediately when abroad if you are in a major city with a regional office.  It doesn't take 4 - 6 weeks.  Even in a non-emergency situation at home, we get our cards replaced in just a few day.

 

 

 

 

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#149 of 172 Old 03-28-2011, 01:08 PM
 
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Well, all I can say, happysmileylady, is that I feel sorry for your dd. 

 



Huh?

 

I don't think this is called for.


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#150 of 172 Old 03-28-2011, 02:19 PM
 
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Huh?

 

I don't think this is called for.

Why?  She is the one that is going to have to deal with the traveler's checks in Europe.  Not her mother or anyone else.  I feel sorry for her.  She's going to be on a trip of a lifetime and have to deal with a huge headache trying to get things paid for.  I'm not the only one trying to explain the difficulties of using traveler's checks abroad.  What's not to be "called for"?
 

 

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