Comments on: Question of the Day: When is Debt Real Debt? http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Sat, 21 Nov 2009 13:00:57 -0800 http://wordpress.org/?v=abc hourly 1 By: William http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-257340 William Fri, 21 Mar 2008 19:33:53 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-257340 Debt or no debt, NOT THE ISSUE with these types of loans. You really need to ask and find out who is holding the paper for the 0% time frame. Most of the time you will be shocked to find out it is a finance company. Now here is the REAL ISSUE the three credit agencies will deduct points from your credit scores. Because the computer models recognize these lenders as finance companies. Why take away points? Because finance companies are recognized as "lenders of last resort"! This credit action will follow you for some time. With the tightening of credit lending rules this could end up being a problem for you in the long run. You are better off applying for a credit card with a 1 Year 0% purchase feature or a 1% - 3% longer term rate. Find out who the lender is and if they are a finance company before signing. The score hit comes because of who you had to do business with not your pay history. Debt or no debt, NOT THE ISSUE with these types of loans. You really need to ask and find out who is holding the paper for the 0% time frame. Most of the time you will be shocked to find out it is a finance company. Now here is the REAL ISSUE the three credit agencies will deduct points from your credit scores. Because the computer models recognize these lenders as finance companies. Why take away points? Because finance companies are recognized as “lenders of last resort”! This credit action will follow you for some time. With the tightening of credit lending rules this could end up being a problem for you in the long run. You are better off applying for a credit card with a 1 Year 0% purchase feature or a 1% – 3% longer term rate. Find out who the lender is and if they are a finance company before signing. The score hit comes because of who you had to do business with not your pay history.

]]> By: Debt General http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-246974 Debt General Thu, 06 Mar 2008 16:38:47 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-246974 I are doing great job paying off debt like that. Keep doing it and get free. I are doing great job paying off debt like that. Keep doing it and get free.

]]> By: Frugal Momma http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-240302 Frugal Momma Sun, 24 Feb 2008 12:10:04 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-240302 It is still debt in my opinion. Those 0% deals always have catches on them. If you miss one payment, you get hit with interest or if you don't pay it off by the payment date you get hit with interest. I would rather err on the side of caution and not have that hanging over my head. Life happens, people forget and you get dinged. Most people taking these 0% deals already have credit card debt and are probably going to default-otherwise the stores wouldn't offer them. It is still debt in my opinion.

Those 0% deals always have catches on them. If you miss one payment, you get hit with interest or if you don’t pay it off by the payment date you get hit with interest. I would rather err on the side of caution and not have that hanging over my head. Life happens, people forget and you get dinged.

Most people taking these 0% deals already have credit card debt and are probably going to default-otherwise the stores wouldn’t offer them.

]]> By: Kitty http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-239947 Kitty Sun, 24 Feb 2008 03:20:03 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-239947 @"Mo" Money: the example in the original entry above specifically said that a) the person already has "a sizeable savings account" and b) has enough cash to buy a $2000 TV but wants to play a little arbitrage. If you have a sizeable savings account, there is no danger that you'd need this money in an emergency - this is what a "sizeable savings account" is for. To me a "sizeable" savings account means a lot more than what one plans to spend on a TV. I also don't understand your saying that a TV isn't worth the money "because it is now used". The same applies to anything you buy. TV isn't an investment, it's something one buys for entertainment. Not everything one spends has to be on "needs", nothing wrong with a bit of entertainment if one can afford it. If one cannot afford a $2000 TV or would have to spend most of the savings on it, one shouldn't buy it whether with 0% or with cash. Same applies to a $20 worth of entertainment if one cannot afford it. It really depends on what percentage of your savings $2000 represents. Minimum wage, some places do give discounts on paying cash. Others don't. @”Mo” Money: the example in the original entry above specifically said that a) the person already has “a sizeable savings account” and b) has enough cash to buy a $2000 TV but wants to play a little arbitrage. If you have a sizeable savings account, there is no danger that you’d need this money in an emergency – this is what a “sizeable savings account” is for. To me a “sizeable” savings account means a lot more than what one plans to spend on a TV.

I also don’t understand your saying that a TV isn’t worth the money “because it is now used”. The same applies to anything you buy. TV isn’t an investment, it’s something one buys for entertainment. Not everything one spends has to be on “needs”, nothing wrong with a bit of entertainment if one can afford it. If one cannot afford a $2000 TV or would have to spend most of the savings on it, one shouldn’t buy it whether with 0% or with cash. Same applies to a $20 worth of entertainment if one cannot afford it. It really depends on what percentage of your savings $2000 represents.

Minimum wage, some places do give discounts on paying cash. Others don’t.

]]> By: "Mo" Money http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-239656 "Mo" Money Sat, 23 Feb 2008 14:56:58 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-239656 I don't think this is a good strategy. It has some pitfalls for a lot of people. And the the TV is not worth the money that you paid, because it is now "used". Your net worth did not cancel each other because of the value of the used TV. This could work for some people, but for most they do not have the discipline to carry this off. So I would not spend a lot of time trying to decide whether or not it is a good deal for me. The company offering this "deal" know that the majority of the time they will benefit from the transaction. You can win if you have the discipline, and if you do not have an emergency during that time frame. Your are taking a risk and that could be costly. Don't do it! I don’t think this is a good strategy. It has some pitfalls for a lot of people. And the the TV is not worth the money that you paid, because it is now “used”. Your net worth did not cancel each other because of the value of the used TV. This could work for some people, but for most they do not have the discipline to carry this off. So I would not spend a lot of time trying to decide whether or not it is a good deal for me. The company offering this “deal” know that the majority of the time they will benefit from the transaction. You can win if you have the discipline, and if you do not have an emergency during that time frame. Your are taking a risk and that could be costly. Don’t do it!

]]> By: Minimum Wage http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-239414 Minimum Wage Sat, 23 Feb 2008 04:01:26 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-239414 Those 0% deals are OAC (On Approved Credit). If someone couldn't get approved, they'd have to pay cash. If they pay cash, they lose the use of their money immediately, unlike the 0% credit buyer. Shouldn't the cash buyer get a discount? Those 0% deals are OAC (On Approved Credit). If someone couldn’t get approved, they’d have to pay cash. If they pay cash, they lose the use of their money immediately, unlike the 0% credit buyer. Shouldn’t the cash buyer get a discount?

]]> By: Kitty http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-239339 Kitty Fri, 22 Feb 2008 23:40:39 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-239339 As most people said- it is a debt, but as long as you have money available at the moment notice, it is a good idea. $91 may not be much, but it is free money. Most people, even those with money, don't consider $91 pocket change. I usually look at an amount of money in terms of what it can buy (even if I don't plan to spend it). I can think of a number of things $91 can buy. I don't see it as very dangerous or time-consuming either. The trick to never being tempted to spend the money you owe is never to think of it as yours no matter who you owe it too - bank, store, credit card, or a friend. It's like something a friend gave you for safekeeping and being an honest person you aren't going to use it until you need to give it back. It is morality as much as discipline. As most people said- it is a debt, but as long as you have money available at the moment notice, it is a good idea. $91 may not be much, but it is free money. Most people, even those with money, don’t consider $91 pocket change. I usually look at an amount of money in terms of what it can buy (even if I don’t plan to spend it). I can think of a number of things $91 can buy.

I don’t see it as very dangerous or time-consuming either. The trick to never being tempted to spend the money you owe is never to think of it as yours no matter who you owe it too – bank, store, credit card, or a friend. It’s like something a friend gave you for safekeeping and being an honest person you aren’t going to use it until you need to give it back. It is morality as much as discipline.

]]> By: Debra http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-238873 Debra Fri, 22 Feb 2008 00:46:31 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-238873 I think that using 0% financing, and earning interest on the money is a very good idea. I would put the money into my savings account, set up a scheduled transfer to my checking when the bill is due, and then schedule the payment through online billing. This would help me to avoid forgetting to pay the bill and incurring the finance charge (which would defeat the whole purpose of using 0% financing). I may have more tolerance for petty things, but $91 eventually grows to be thousands. To me, it is no more time consuming than remembering to bring my re-usable grocery bags before I go shopping. I think that using 0% financing, and earning interest on the money is a very good idea. I would put the money into my savings account, set up a scheduled transfer to my checking when the bill is due, and then schedule the payment through online billing. This would help me to avoid forgetting to pay the bill and incurring the finance charge (which would defeat the whole purpose of using 0% financing). I may have more tolerance for petty things, but $91 eventually grows to be thousands. To me, it is no more time consuming than remembering to bring my re-usable grocery bags before I go shopping.

]]> By: Meg http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-238869 Meg Fri, 22 Feb 2008 00:41:10 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-238869 Of course it's debt, but of course you should do it. Its like why you keep your mortgage even if you have money in the bank to pay it off. Of course it’s debt, but of course you should do it. Its like why you keep your mortgage even if you have money in the bank to pay it off.

]]> By: Cully Perlman http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/comment-page-1/#comment-238837 Cully Perlman Thu, 21 Feb 2008 23:20:57 +0000 http://allfinancialmatters.com/2008/02/20/question-of-the-day-when-is-debt-real-debt/#comment-238837 In business school you learn that some debt is good debt. Personally, I hate debt of any kind. I'm a cold hard cash type of guy--but I do have great credit. I just like know that I don't owe anyone anything, and that the cash in the bank doesn't have someone else's name on it. In business school you learn that some debt is good debt. Personally, I hate debt of any kind. I’m a cold hard cash type of guy–but I do have great credit. I just like know that I don’t owe anyone anything, and that the cash in the bank doesn’t have someone else’s name on it.

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