The Church's Anti Credit Card Culture

[Fether]

We have all heard from General Authorities that we should stay out if dept. I'm sure many of us agree on that. But when I got home from my mission, my mom was apprehensive in me getting a credit card, and I meet YSA members of the church that regularly feel accomplished or superior because they don't have a credit card.

does anyone else see this? If so, why does it exist? 

In my opinion, life is almost impossible, even for a fresh college student. I feel one of the first steps in being financially independent is theough getting a credit card. Until then you need cosigners, can't apply for apartments, and you can't make large, necessary, purchases.

[Guest LiterateParakeet]

The only value I see in credit cards is for traveling.  Some rental car agencies and hotels expect credit cards.

You can have good credit (and therefore not need cosigners) without credit cards.  You shouldn't make large purchases on credit cards!  Yikes.  Credit cards have really high interest rates, that is not the way to make a large purchase.  

People used to tell me "you need a credit card for emergencies".  No, you don't.  In my opinion, the worst thing you can do is start putting gas, groceries, diapers, bills etc on your credit card.  If you can't afford these things in the moment you need them, how are you going to find the money to pay for them with interest later.  I've "been there done that" and it lead me to bankruptcy.  The church doesn't say if you have financial trouble turn to credit.  They say rely on yourself, your family and then the church.  If you need help with groceries, and your family can't help then humble yourself and go to the Bishop.  If you want new furniture, either save until you can afford it, or get thee to the thrift store or garage sale.

 

[NeedleinA]

I 100% understand where @LiterateParakeet is coming from, don't use credit cards to accumulate debt.  

I have 2 credit cards and I use them as much as possible. I rarely use cash. I never use checks. Lastly I would never ever use a debit card. 

So...why?

I use my credit cards as much as possible BUT only on items I was:
1. Going to buy anyways
2. Already have funds to pay for 
3. That won't put me into debt

There is a huge difference in using a: Credit card simply as a payment method vs. a Credit Card to to accumulate goods/services without sufficient funds to pay for them.
Our credit cards give us: airline miles, buyer/fraud protections, itemized statements, tracking for our spending habits, better credit, etc. Airline miles alone allow us to take several trips a year. 
We pay our credit card balance to zero $0 each month and never carry debt on it or pay interest. Credit card companies probably hate me because they don't make any money on me. 

A young husband in our ward and I spoke the other day regarding business ideas he could learn from me. I told him you need to get a business credit card. You would have thought I told him to run over his dog with the car. He mentally was trapped in what you described above @Fether. Credit cards are dangerous tools for people who are foolish with money OR they are wonderful assets for people who follow the council to stay out of debt. 

[Guest LiterateParakeet]

@NeedleinA I agree with you.  I think people who are good with money can use credit cards the way you describe.  That would be an excellent use of them.   As long as you pay it off at the end of the month...and that is where I think many people fail.  

Edited April 15, 2017 by LiterateParakeet

[eddified]

I feel like a credit card is a tool. As such it has bad and good uses. If you have a hard time managing money or have gotten into trouble with credit cards in the past, then stay away. But I never, EVER pay any high rate credit card interest, yet use credit as often as I can. I've never had an issue of going into credit card debt. I've not once carried a balance* in my entire life. (For the uninitiated, "carry a balance" means not paying the debt off before the grace period is up. The way credit typically works is when you charge something to your card, you have a 30 day (or so) "grace period" to pay it back with 0% interest. So as long as you pay your bill in full every month, you will never pay interest. "Carry a balance" means you did NOT pay in full and will therefore start paying interest. ) 

The two main reasons I use it: safer than debit, and I earn cash rewards on all purchases. In other words I get paid to use credit.

A credit card can be dangerous in the wrong hands. If can also be very useful when used carefully.

I never charge something to my card that I don't KNOW I will be able to pay back within the grace period. So credit is not a way to get things now that you can't afford. I still have to save up cash for large purchases. Then when I have the cash, I charge the large purchase on the card so I can get the benefits of using credit.

 

*Except one time when I merely forgot to pay the bill on time -- I paid about $4 of interest that month. Nothing to worry about. 

[Fether]

40 minutes ago, NeedleinA said:

I 100% understand where @LiterateParakeet is coming from, don't use credit cards to accumulate debt.  

I have 2 credit cards and I use them as much as possible. I rarely use cash. I never use checks. Lastly I would never ever use a debit card. 

So...why?

I use my credit cards as much as possible BUT only on items I was:
1. Going to buy anyways
2. Already have funds to pay for 
3. That won't put me into debt

There is a huge difference in using a: Credit card simply as a payment method vs. a Credit Card to to accumulate goods/services without sufficient funds to pay for them.
Our credit cards give us: airline miles, buyer/fraud protections, itemized statements, tracking for our spending habits, better credit, etc. Airline miles alone allow us to take several trips a year. 
We pay our credit card balance to zero $0 each month and never carry debt on it or pay interest. Credit card companies probably hate me because they don't make any money on me. 

A young husband in our ward and I spoke the other day regarding business ideas he could learn from me. I told him you need to get a business credit card. You would have thought I told him to run over his dog with the car. He mentally was trapped in what you described above @Fether. Credit cards are dangerous tools for people who are foolish with money OR they are wonderful assets for people who follow the council to stay out of debt. 

And this is how I use my card too. I use it as my primary tool for purchases. If I don't have the money in the bank, I don't use the card.

As far as large purchases @LiterateParakeet I am recently home from a mission and getting married. I bought a $500 ring and put a down payment on our honeymoon and a bunch of other wedding exoenses. A lot of it was paid with cash I had already, but I would not have been able to get the ring if I didn't have a credit card. and $500 is pretty stinky cheap for a ring, we are not living nor will we be living luxuriously. We are also cutting all sorts of corners in our wedding to save money. The credit card is the only reason it is all working out. 2 weeks after being $700 in dept, I was out of it. Still have to put $900 down on an apartment (deposit and first month rent), rent a suit, pay the last half for our honeymoon, and eventually buy a wedding band.

Also, for college student like me... not having credit is VERY difficult. Most, if not all, appartments around where I live require a strong credit score. Also, buying a car is difficult without both deep credit score and a strong credit score. My score is currently over 700, but because I waited to get one so long, it isnt very deep so unless your parents are willing to consign, you won't get a car, which I would argue is rather essential.

I feel as long as you aren't being reckless... you are fine . The longest I have held on to a dept is 2 weeks

Edited April 15, 2017 by Fether

[eddified]

To the original question : I do believe the church advises against consumer debt. This could be credit, or it could be financing a new car you don't really need. Or it could be something on layaway. The point is these types of things are not in your financial best interest. I don't believe I've ever heard the church speak out against credit cards as a tool, but they have spoken out against the debt that can come with using a credit card unwisely. 

[Guest]

I believe that a lot of Christians in general have either heard or heard of Dave Ramsey's philosophy on credit cards.  Let me tell you, it has a LOT of merit to it.

But, no, the Brethren have not explicitly laid out a plan like his, nor have they explicitly stated that credit cards are evil.

I believe one reason parents are reticent to get a credit card for their youth or young adults is that they are concerned about their ability to budget and take the responsibility seriously.  I don't know if that was the motivation in the example given in the OP.

What we've done is placed the children on our credit cards.  Since we are responsible with that card, their credit rating goes up.

At the same time, I think things would be a lot better if we didn't have credit cards or loans.  Financially speaking, if we as a society weaned ourselves off of debt so that in 20 years, we had no debt of any kind, we'd be a lot better off.

[Guest MormonGator]

You actually should get a credit card because it'll help you establish a credit history and teach you the basics of self control when it comes to money.

Like everyone else here, I think the worst thing you can do is rack up significant debt on a credit card at a young age. But if you have the self control to now act like a fool, you'll be fine. 

[Fether]

8 minutes ago, Carborendum said:

At the same time, I think things would be a lot better if we didn't have credit cards or loans.  Financially speaking, if we as a society weaned ourselves off of debt so that in 20 years, we had no debt of any kind, we'd be a lot better off.

I think they are very helpful actually. Mostly in the sense of buying homes or a needed vehicle. It would be nearly impossible to buy either of those early on life (early as in college and the few years after.

Edited April 15, 2017 by Fether

[Guest]

5 hours ago, Fether said:

I think they are very helpful actually. Mostly in the sense of buying homes or a needed vehicle. It would be nearly impossible to buy either of those early on life (early as in college and the few years after.

I certainly understand this sentiment on houses.  But I really don't get it with cars.  When I was a student making next to nothing, I bought a car with cash.  It was an old beater that burned more oil than gas, but it worked.  And it was in the repair shop more often than I'd care to admit.  But it was still cheaper than a monthly loan payment.

I'm sorry if this comes of as "I'm better than you because..."  That's not the way I intend it. But I really don't understand why people tend to include cars in the mix of items "it's ok to go into debt for".  The Brethren, whenever talking about debt, they always include home and education.  I don't believe I've ever heard any of them mentioning cars.

And even with home and education, they caution that homes must be what we can truly afford, and education should be for a job that will make the debt financially worth it.

Edited April 15, 2017 by Guest

[The Folk Prophet]

Haven't read the thread yet, but what a weird title. Culture?

[Guest MormonGator]

46 minutes ago, Carborendum said:

I certainly understand this sentient on houses.  But I really don't get it with cars.  When I was a student making next to nothing, I bought a car with cash.  It was an old beater that burned more oil than gas, but it worked.  And it was in the repair shop more often than I'd care to admit.  But it was still cheaper than a monthly loan payment.

I'm sorry if this comes of as "I'm better than you because..."  That's not the way I intend it. But I really don't understand why people tend to include cars in the mix of items "it's ok to go into debt for".  The Brethren, whenever talking about debt, they always include home and education.  I don't believe I've ever heard any of them mentioning cars.

And even with home and education, they caution that homes must be what we can truly afford, and education should be for a job that will make the debt financially worth it.

@Carborendum makes some great points. The church is exactly right about this-you don't want to act like an idiot when it comes to debt. Self control when it comes to behavior is important, and that includes making grown up choices when it comes to your money too. 

[Vort]

9 hours ago, Fether said:

We have all heard from General Authorities that we should stay out if dept. I'm sure many of us agree on that. But when I got home from my mission, my mom was apprehensive in me getting a credit card, and I meet YSA members of the church that regularly feel accomplished or superior because they don't have a credit card.

does anyone else see this? If so, why does it exist?

Because credit is a crushing burden for too many people in our society. Consumer credit appeals to immediate gratification and the seeming unreality of the future that many people feel.

Carefully used, credit can be a useful tool. But for every person who learns to use credit correctly, five or ten others will destroy their finances with it. People buy TVs and cars and Disneyland trips on money they do not have. It's a killer; people fail to learn responsible financial planning because they're spending future earnings for toys and nonsense.

If no one ever got drunk or became alcoholic, I am sure that the Lord would not have seen fit to prohibit "strong drinks" in Section 89. Similarly, if no one ever abused credit, there would be no counsel about avoiding credit debt.

[Fether]

3 hours ago, Carborendum said:

I certainly understand this sentient on houses.  But I really don't get it with cars.  When I was a student making next to nothing, I bought a car with cash.  It was an old beater that burned more oil than gas, but it worked.  And it was in the repair shop more often than I'd care to admit.  But it was still cheaper than a monthly loan payment.

I'm sorry if this comes of as "I'm better than you because..."  That's not the way I intend it. But I really don't understand why people tend to include cars in the mix of items "it's ok to go into debt for".  The Brethren, whenever talking about debt, they always include home and education.  I don't believe I've ever heard any of them mentioning cars.

And even with home and education, they caution that homes must be what we can truly afford, and education should be for a job that will make the debt financially worth it.

Thanks for your comment. As far as the car goes, here is a quote 

“Some debt--such as for a modest home, expenses for education, perhaps for a needed first car--may be necessary. But never should we enter into financial bondage through consumer debt without carefully weighing the costs” (“Earthly Debts, Heavenly Debts,” Ensign or Liahona, May 2004, 40–41).

[Guest]

Things can happen in a short amount of time that take you from a place of security to living hand-to-mouth. If you already have a bunch of debt on top of your monthly obligations, the problem is exponentially worse. 

 

I see using a card and paying it off immediately for the sake of a good credit score differently from carrying a balance month after month, especially when you're only paying the minimum or a little more.

[Guest MormonGator]

It's virtually impossible to buy things online using cash, so credit cards are handy in that case. If an unexpected expense comes up (like you need to travel to get to a funeral, car breaks down, etc) credit  cards are also handy. Use it, don't abuse it. Simple as that. 

[yjacket]

4 hours ago, Fether said:

I think they are very helpful actually. Mostly in the sense of buying homes or a needed vehicle. It would be nearly impossible to buy either of those early on life (early as in college and the few years after.

I put everything that I can on the credit card and then pay it off each month.  The major reason I do this is for security. All major credit cards have anti-fraud mechanism.  You order something from amazon and it get shipped broken-you can fight with the company or just file a claim with the CC and let the CC fight for you. That is very beneficial; or you rent a car and it gets trashed, most credit cards come with automatic insurance on rentals. Or someone steals you CC number b/c you've put it into a hacked website, CC company protects you . . .good luck on getting the bank to reimburse you 10k b/c your debit card got hacked and they sucked money out of the ATM. Plus the rewards help too.

That said, be very leery of credit and debt; it is one thing that we do not teach our children enough growing up, how to manage finances.  I understand that the way the world is set up that you think you need debt for buying a home or a car.  I bought my 1st home with cold-hard cash . . .and my second home with cold hard cash. The first 6 years we were married, we rented the cheapest dive we could just barely stand to live in.  I saved everything at least 50% of my take-home went to savings.

It was hard, it was rough, I wouldn't want to do it again-but man the pay-off was beautiful!  My first house was the cheapest thing that I could buy with cash that the family could live in (like renting)-I bought the house at an auction.  Then I took the money that was going to rent or a mortgage payment and socked that away for cash.  And boy, now I could really save up money. 3 years later, I bought a better house for twice the price of the first house . . .cash. Now the second house isn't where I ultimately want to be and I'm doing the same exact thing.  

I did it 8 years ago . . .so it's definitely possible, but very, very hard.  The best thing in the world is debt free.  With no mortgage payment, car payments, etc. you can easily live on 2k a month; that's what a ~30k job. So if life gets very rough you all you have to do is worry about putting food on the table rather than wondering where you are going to live. You extract yourself from being a debt-slave.

And that is exactly how our entire monetary system is set up . . .every dollar in existence came to be b/c it was loaned into existence; the financial industry is set up to make money off the backs of debt-slaves.

The problem you might have and trust me the sooner you get this out of your mind the better you will be; is that within a few years after starting out you should be able to afford the nice house, nice cars, nice vacations, etc. Buying a house in your early-mid 20s is not too smart-the biggest asset you've got when you are young is the ability to move. Especially if you finance the purchase.  You don't even scratch the surface of paying down debt in the first 5 years.  Unless you plan on living in a house for 30 years, a 30 year mortgage is absolutely stupid and the only way it works is through the magic of inflation.  The first 5 years is something like 90% of the payments interest payments-so you either pay rent money to a landlord or you pay rent money to the bank; unless you are in a period where housing inflation is very high it is likely that you will actually lose money when you sell. And my guess is that right now we are in an echo-bubble boom in housing and we will see a downturn pretty soon.

Finding out what work is all about, where you want to live for a while, etc. that can take some time; and the worst thing you can do is tie yourself down to a house when you are young and don't have a whole lot of possessions.  Being able to put everything you own in a 14' rental truck is beautiful for mobility.  You don't like the job, find another one, don't like the area, find another place.  When you have a house, you start calculating well now I have to sell it or rent it plus it will take 2 full size tractor trailers to move everything.

My parents had beater cars until they were at least in their mid 30s, they lived in small houses until at least their mid 30s. I had crappy beaters cars 10 years after college (still do), I've lived in crappy places. You can't get everything you want in life . . .but you have a lifetime to try and earn it. If you want a big house-awesome, just realize that it takes a lot of hard work to obtain it-and it doesn't come within 1-2 years . . .it takes decades to get it.

I try to live my life by the saying "Live life beneath your means so that one day you can live life above your means".

[Guest]

2 hours ago, Fether said:

Thanks for your comment. As far as the car goes, here is a quote 

“Some debt--such as for a modest home, expenses for education, perhaps for a needed first car--may be necessary. But never should we enter into financial bondage through consumer debt without carefully weighing the costs” (“Earthly Debts, Heavenly Debts,” Ensign or Liahona, May 2004, 40–41).

Very well.  We have one statement that includes a car.  I still have difficulty accepting this as a go ahead.  It seems more like: If you're really in a situation where it is a need and there is no other way...

But my problem with that is that most people just us that as an excuse, when they really could have gotten along without one.

[eddified]

@yjacket, kudos to you for buying your house with cash. I think that's commendable. Good job!

[Fether]

3 hours ago, Carborendum said:

Very well.  We have one statement that includes a car.  I still have difficulty accepting this as a go ahead.  It seems more like: If you're really in a situation where it is a need and there is no other way...

But my problem with that is that most people just us that as an excuse, when they really could have gotten along without one.

I could definitely get by without a car. I would, however, be sacrificing driving myself to the temple, being able to get to my 2 different jobs and back in time to do homework for school, visiting family, doing all my shopping/chores in a short amount of time. Getting my car wasn't super taxing or anything. And the pay off is astronomical

[Guest]

2 minutes ago, Fether said:

I could definitely get by without a car. I would, however, be sacrificing driving myself to the temple, being able to get to my 2 different jobs and back in time to do homework for school, visiting family, doing all my shopping/chores in a short amount of time. Getting my car wasn't super taxing or anything. And the pay off is astronomical

If it's for the sake of work, I'd call it an investment.  If the dollars work out, then it is a good investment.  If the dollars don't work out, then it is a luxury or a convenience.  Don't go into debt for a luxury or a convenience.

Either way, I'd really take a hard look at your finances and see what else you can cut, so you could afford a cheaper car.  If you've got 2 jobs, I like you already.  By the same token, I don't know why you couldn't just buy a cheap car that you didn't need to go into debt for.  

Sorry if that comes off as judgmental.  But you were asking for opinions, so... 

[mrmarklin]

I don't know where you live yjacket but here in the SF Bay Area no one is saving for their first home and paying cash in just a few years. Starter homes here are $500k and appreciation is currently over 5 percent a year. That's a lot of after tax $$$$$$$. 

The average Joe Sixpack is definitely going into debt to buy a first home.  Or any home, for that matter.

[Fether]

54 minutes ago, Carborendum said:

I don't know why you couldn't just buy a cheap car that you didn't need to go into debt for.  

Sorry if that comes off as judgmental.  But you were asking for opinions, so... 

I did buy a cheap car, but again... I just got off my mission so I didn't really have any money saved in the firstborn place. I bought a pretty cheap one and had to replace the timing belt not long after, that was about 1/3 of the original cost to replace... I feel like buying a cheap junker can be one of the worst investments ever  Unless you can't help it, get something that will run well.

I have been over my finances quite often. We are going to be able to avoid a LOT of debt. My fiancé works quite a bit, I do too.   We got a cheap apartment and neither of us really demand anything high maintenance. I'm just really grateful for the credit card. Without it, getting a car, apartment, and buying all the things we needed for the wedding would have been a nightmare and would have remained in debt to my parents rather than leaving their financial care and being on my own financially.

[Guest MormonGator]

3 minutes ago, Fether said:

neither of us really demand anything high maintenance

Look, I'm the most high maintenance male diva you'll ever meet, so do as I say here, not as I do. 

Finding a spouse who is compatible with money is HUGE. In fact, it can make or break a marriage. There are three things that couples don't talk about: Money, sex, kids. If you can openly talk about money and be on the same page, than you are on the right track for sure.