Welcome to Credit Withdrawal, if you like what you see, you may want to subscribe to my RSS feed. Thanks for visiting!

There’s a guest post over at Moolanomy "Putting Credit Cards to Work for You" that truly deserves a response from the peanut gallery.

Benefits of Credit Card Usage and Good Credit Score

Your credit score does matter quite a bit WHEN YOU GET MORE DEBT because it’s an indicator to the lender whether you ‘might’ pay your bills. But too many people believe that having a good credit score makes them a good person. It really just makes them good little consumers, nothing else.

• Interest rates on home and auto loans ARE affected by it, so wouldn’t it be better to either pay all in cash (the auto) or pay a substantial down-payment (home, 30-50% down) instead? I’m sure that you can even get a much better selling price by letting them know that you’re ready to do either an all-cash deal, or a MUCH larger down payment. Using this leverage, shop around until you find lower interest rates.

• Insurance agencies use credit scores more than ever before in qualifying new customers, but that only affects you if you’re changing insurances. If you have a history with a company, they already know your payment and track record, and want to keep you as a client. They won’t base any increases on your credit score, only your past claims history with them. If they do, get on the phone with a live person and let them know they’re risking losing your business.

• Consumers saving on utilities - This one baffles me, I’ve never had any of my utility companies offer me a discount because of my good credit. The only thing I can figure out is that you might be required to supply a deposit when you first activate the service. Again, your history with a past company can come to the rescue to alleviate this (sometimes). If not, pay the deposit, and get it back a few months later. Not paying a deposit when you move, even if you move frequently, doesn’t justify actively working at improving your credit score by using credit to get this benefit.

• Getting a Job - This one continually infuriates me. Employers seem to think that a person’s credit rating reflects on the quality of work a person performs or the qualifications for a position. If there’s any doubt or necessity for above-and-beyond trustworthiness, getting bonded and insured should more than suffice. People’s credit history can suffer for many things beyond their control; divorce, death or serious illness, other major life events. None of these should preclude a qualified person from getting a job!

The Perks

First they came up with the different ‘types’ of cards to try differentiate you from others; The Gold Card, the Platinum Card, the Titanium Card, the Uranium PU-36 Card (with the Earth-shattering Kaboom). Next were colors, Amex Blue, Black, Transparent with the little blue square (still called Blue for some reason.) Some perks.

Now they’re giving away points for everything under the sun; Airline miles, Music points, green stamps, etc. Short of the cash-back, there’s nothing that’s worth all the extra money these gimmicks get you to spend to get them.

I’ve yet to meet or hear of any millionaire that has ever gotten rich by using their credit cards (Thanks Dave Ramsey.) So why would I believe that all of these perks are in MY best interest? I don’t. Credit card companies are in the business of MAKING MONEY, and they do it quite well.

Total US consumer debt (which includes installment debt, but not mortgage debt) reached $2.46 Trillion in June 2007, up from $2.398 Trillion at the end of 2006 (Source: Federal Reserve)

Another interesting fact to counterbalance this

The majority of U.S. households have no credit card debt.  About a quarter have no credit cards, and an additional 30 percent of households pay off their balances every month. (Source: Federal Reserve)

That means that the $2.4 Trillion in debt is spread over only 45% of the United States population. That’s an INCREDIBLE amount of debt, carried by less than half of all the people in the U.S. Is it any wonder that bankruptcy rates are high and mortgage loan defaults are skyrocketing? It’s unreasonable to think that this kind of debt can be supported as-is, even without adding ADDITIONAL debt to the mix. If you have a bad credit rating, maybe it’s deserved?!?? Sometimes you have to say ENOUGH IS ENOUGH and get things back under control.

Getting even deeper in debt doesn’t help.