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**This post has been entered in Frugal Fridays at Life as Mom!**

Now that the holidays are over, how are you doing on debt? If you’re like most Americans, you spent a LOT on your credit cards to pay for the holidays. Of course, if, like us, you did a homemade Christmas, you probably didn’t spend much or anything on credit. But, the average American racks up $935 in credit card debt during the holidays.

But, that’s over now. It’s the new year, and it’s time to get rid of that credit card debt. This time, FOREVER!

Paying Off Your Debt

It’s not easy to pay off credit cards. First, take a look at the previous entries about Ways to Save Money Around the HouseCreating a Budget, and Cutting Spending. If you can cut spending and save money around the house, then you are on your way to getting your money under control.

Make sure you have a place in your budget for paying off debt. Any extra money you set aside should be placed towards paying off your credit cards. Follow these steps:

1) Sit down and look at what credit card debt you have. Pull out ALL your cards, including individual store cards. Write down the balance on each card and then write down the total.

2) Call the companies and cancel ALL the credit cards. They will try to get you to stay by offering you lower interest rates, increased balance limits, etc. They may get very insistent or even nasty. Be firm and say “I want to cancel this card and I am not interested in any other options or services.” Also, request a letter be sent to you confirming that the card has been canceled so that you have proof that the account is closed.

3) Cut up ALL those credit cards immediately so you are not tempted to try to use them. Get rid of them. If (when) new offers come in the mail, shred them and throw them out. Don’t get any new credit cards. Don’t be sucked in by “rewards programs” or the promise of “good credit ratings” or anything else. Just get rid of the cards and don’t get new ones. Don’t get sucked into the idea that you “need” a credit card for emergencies, either. You don’t. That’s why you should have an emergency fund. You never, ever “need” a credit card.

4) Pay off the card with either the highest interest rate or the lowest balance first. Dave Ramsey recommends the lowest balance so that you can pay it off quickly, which gives you the psychological feeling that you’re doing something about your problem. He calls it the Debt Snowball. But we recommend paying off the highest interest rate if it is significantly higher than the others. This will save you money in the long run.

5) DON’T fall for the “debt consolidation” schemes. It will not actually help you, it is borrowing debt from one place to pay off another. Don’t use a home equity loan or another credit card to pay off the debt for the same reason. Shifting debt around is not actually going to help you.

Make It A Priority

It’s very important to make paying off your credit cards a priority. Of all the types of debt you have, credit cards are usually the easiest to obtain and use, and the ones on which you pay the highest interest rates and also the highest fees. It’s not something you want to get caught up in. Or, if you already are, it’s something you want to get away from immediately.

Credit cards should never be used for necessities (well, or at all…). Cut all non-essential spending if you have to, sell an extra car, or get another job. If you HAVE to use your credit cards to buy groceries, something is very wrong with your finances. Redo your budget, take a much closer look at your finances. Where is your money going? Get rid of cable, internet, anything you don’t really need. Hold a garage sale and sell off anything you don’t need to raise money. You must be able to pay for your basic necessities without any form of credit. Even if you have to get a job at Taco Bell making $9 an hour for awhile.

Don’t Let Them Take Advantage of You

Where you might run into trouble with this is if you call the credit card companies (or they call you) and the companies try to tell you that you MUST pay your credit card bills first, before you pay for your necessities (while paying credit cards should come before non-necessities like cable, cell phones, etc. it should never come before groceries, gas, housing, etc.). Tell them NO. You must pay your housing, your food, your basic transportation (gas and insurance…if you owe a lot of money on a car, SELL it and get a $1000 car that you can pay off immediately), health care, etc. Debt payment comes ONLY after you have met your basic necessities. If they harass you, hang up on them. Tell them not to call. Don’t answer the phone. Get nasty back to them. Do not let them bully you.

It’s against the law for the credit card companies to harass you. There is a law called the “Fair Debt Collection Practices Act.” They can only call you 8 AM and 9 PM (your local time), and only a reasonable number of times per day that a normal person wouldn’t feel is harassment. They can’t tell you that they can put you in jail, they can’t tell you they’ll sue you. Credit card collectors knowingly break this law because they know that you are not aware of this law, and that they can create fear by saying these things to force you to pay. Or, they can make you feel guilty to try to get you to pay. This is part of their tactics, it is psychological, and it is ILLEGAL. It is also common practice for companies to call your neighbors and mention that you owe money. This, too, is illegal. They can’t discuss your personal financial situation with anyone not on the account. It is a tactic to embarrass you but they should not do it.

If you do not make a payment at all for 180 days, the credit card companies will write it off as a loss. They may try to sue you, but they won’t get much money from you. They will often settle (with or without a lawsuit) for about 25% of what you owe, a year after you stop paying. This is a worst-case scenario; if you CAN pay it back, you should. But if you literally cannot afford to pay your debt and take care of your basic needs, your basic needs come first. Always.

You CAN Do This

And yes, you CAN do this no matter what your situation. When we got married, our house payment was 60% of our take-home pay and we didn’t make enough money on paper to pay our basic bills. We had credit card debt and used credit cards for groceries and other basics. But then, despite our lack of money, we canceled all our cards and started getting serious about paying down our debt. I took a job working as a therapist for kids with autism part time. Ben worked a second job part time. I did some freelance writing, too. We made money however we could, and we got rid of our cable, subscription to Netflix, and anything else we didn’t need.

Most importantly, we remained faithful in our tithing. 10% of our money went to God even when it seemed like 100% wasn’t enough to live on. And somehow, with our faithful giving and humble spirits, we managed to pay off all our credit card debt before Ben ever got a raise.

Keep Your Head Up

Don’t listen to your friends if they try to tell you that you need a credit card, or that you have to pay if you can’t afford to, or that you should give in to the companies’ bullying. If you truly can’t afford to pay, there is NOTHING the credit card companies can do other than sue you (and, of course, tack on lots of extra charges in late fees and finance charges, which will go away mostly if they sue you), and that will take them a year. They can garnish your wages if they sue you, but the truth is, you hold most or all of the power in the situation. They try to use their psychological warfare to make you feel terrible so you’ll pay. And, as I mentioned in my review of Maxed Out, some people succumb to the pressure and actually run away or commit suicide. But you CAN rise above this, get away from your debt, and rebuild your life. IF you’re willing to make serious and permanent changes now.

Paying off your credit cards is an important step to take towards financial responsibility. In the future, plan for major purchases and save for them. Then, when you make those purchases (be it a $200 appliance, a car, or even a house), they are YOURS. You have saved, and you have EARNED the right to own it. Free and clear. If you’ve paid in cash, and something bad happens later (losing a job, etc.), it’s still YOURS. You don’t have to worry that anyone’s going to come and take it, or that you’ll have to sell it to pay for your life. It’s an exhilarating feeling!

Do you have credit card debt? Are you working to pay it off? How is it going?

 


This is the writings of:

Kate is wife to Ben and mommy to Bekah (6.5), Daniel (5), Jacob (3), and Nathan (1.5). She is passionate about God, health, and food. She has written 7 cookbooks and a popular book entitled A Practical Guide to Children's Health. She also recently released Healing With God's Earthly Gifts: Natural and Herbal Remedies, which teaches people to use natural remedies to keep their families healthy. When she's not blogging, she's in the kitchen, sewing, or homeschooling her children.

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23 Comments

  1. I am shocked that you state that people don't really have to pay off their credit card debt. It is wrong for the credit card companies to harass consumers, but it is just as wrong for consumers to accumulate debt and then not pay it off. That just shifts the debt burden to either consumers who have credit cards or to the tax payer through government bailouts. It is totally irresponsible to walk away from debt just because the credit card companies can't really do anything about it. Your suggestions may encourage some people to purposely obtain credit cards to buy things for which they have no intention of paying.

    I'm amazed that you would make some of the suggestions you do above when you feel so strongly about personal responsibility. Did you pay off your credit cards when you accumulated debt, or did you simply walk away from your debt? It sounds as if you payed for the purchases you made, so why would you encourage others not to do so?

    Reply

  2. There is nothing wrong with using a credit card as long as you pay off your balance every month. I do not like to carry cash and bank debit cards are not protected from fraudulent activities like a normal credit card.

    A word of caution if you have a lot of credit card debt…If you close all of your credit card accounts your utilization rate will increase and in turn lower your credit score. When a credit card company analyzes your account and sees this they will increase your interest rate.

    I would say if you have a lot of credit card debt keep the accounts open, cut up the cards so you cant use them, and pay the balance down as soon as you can.

    Reply

  3. Helen,

    Yes, we paid all our debt. We are not in any way ENCOURAGING people to ignore their debt. The first solution would be to sell anything unnecessary (including a second car, your house, etc.) and get another job, to do anything you can to pay off your debt. The section on what happens if you don't pay is really there because it is legally how it works and if that is the ONLY way to manage to live, that can help. BUT everyone should be aware you can only declare bankruptcy once and I STRONGLY suggest you seek counseling for spending addiction and learn to live within your means (more posts on this coming up).

    Reply

  4. Anonymous,

    The problem with having a credit card is that WHAT IF you have an emergency (and no emergency fund) and you use your credit card and don't pay off the balance in full, "just this once." That's how we got in trouble. For a few years we always paid it…then we were getting married and we needed stuff, so we just…didn't.

    The credit score issue is a problem if it jacks up your interest rates while you're trying to pay off your debt. But once you are debt-free, it is useless. Go to Dave Ramsey's website to read more about it.

    Reply

  5. What if you have an emergency and your emergency fund is used up? Would that not be the right time to use credit? If I have to pay some interest because of an emergency I can live with that.

    Reply

  6. Anonymous,

    If you have an emergency and your emergency fund is used up, don't turn to credit cards. A short-term bank loan is a better option, or another type of low-interest loan. The high interest on credit cards makes them not worth it.

    Reply

  7. We use cash only, and use our debit card to pay for gas at the pump, and on bigger purchases for which we have budgeted. (By the way, when using a debit card, when asked if it's debit or credit, one can use his/her debit card as credit. It will take money out of your bank account as well as giving you the Visa/Mastercard protection that many like having when using an actual credit card.)

    Often, a well meaning family member will tell us to hold on to one credit card, "for emergencies." The fallacy with that is that we have more money saved up in our emergency fund than we did with the card with the highest credit limit.

    Switching to using cash only and getting rid of all credit cards was a big change and a huge paradigm shift. However, we are in a much better financial situation now than ever in our marriage. It did require a lot of discipline, restraint, and obedience, but we would never turn back, because there is so much more freedom living like this (contrary to mainstream society today)than how we lived two years ago.

    Reply

  8. karly,

    I totally agree.

    Remember not 10 years ago when no restaurants took credit cards? Well they found that when people paid with credit, they would spend 15%-200% more then with cash. There is an emotional response when using cash, or to a lesser degree with debit cards because you see your bank statement going down, that doesn't exist when using credit. (http://poorerthanyou.com/2007/10/12/do-we-spend-more-when-we-use-swipe-plastic/“ rel=”nofollow”>more info)

    Using a debit card as a credit card will give you all the same protection, without getting you in debt, and without causing you to overspend. If you use one long enough, even if you always pay it off, eventually you will make a mistake and they'll ding you with late fees, overdrafts, or interest. It's just not worth the hassle or risk, when you can have it drawn directly from your checking account.

    Anonymous,

    "What if you have an emergency and your emergency fund is used up? Would that not be the right time to use credit? If I have to pay some interest because of an emergency I can live with that."

    NEEDING to have a credit card for emergencies is a myth. The truth is, that having the ability to easily borrow money (payday loan, bank loan, credit card) will cause you to make foolish decisions in a time of crisis.

    Kate and I will never borrow money again (though we currently have a mortgage and student loan). The reason people NEED debt, is they make the WRONG decision.

    For example, three years, our central a/c died. We had a repair done, which let it limp along for for another year, but then it died completely. Now a new central heating and air system runs about 3,000-7,000. (both units were over 25 years old) Did we have the money, no. We COULD have gone into debt for one, like 95% of America, but instead we paid $250 for two window a/c units which we've been using for two years. It's not ideal, and at times it is very uncomfortable in the house, but we paid cash for it.

    Last year, my 15 year old Honda Accord with 145,000 miles on it I'd been driving for nearly 10 years broke down. The repairs would have cost more the it was worth. If we were normal, at that point we would have gone out and financed a new car, or a used one at least.

    We had a small emergency fund, $1,000, that we could have used for a beater, but we decided to drive only one car while we saved like crazy for 6 months until we could afford to pay cash for a 6 year old mini van.

    In over 15 years of being on the air and taking calls 3 hours a day from listeners, Dave Ramsey has not found a single situation that couldn't have been handled without debt. I listened everyday for two years and I'll firmly stand behind that.

    If you don't have an emergency fund to cover your emergency, then you need to re-evaluate the emergency and find a way to make your cash (or what you can sell/earn) solve the issue. It may not be the easiest way to handle it, but at the end of the day YOU CAN run your own life without relying on banks to finance you.

    Reply

  9. We have a large emergency fund (two years), are saving for retirement, own our cars, and have no debt except our mortgage (which we could easily pay off), and still use credit cards for almost every purchase to get the rewards. Our family of five has flown to Hawaii, and I visit family in Florida every year just on the rewards. The problem isn't the credit cards, it's the way people use them. Only buy what you have cash to pay for, and pay off the cards every month. You can't get into any trouble if you think of the card as cash. It takes discipline, but no more discipline than actually paying cash.

    Your pay off suggestions and the idea of cutting up the cards are good for undisciplined people.

    I also wonder if everyone would actually qualify for a short-term bank loan without any kind of credit score. Using a credit card responsibly is usually the first step in building credit so that bank loans for things like mortgages are possible.

    Credit cards aren't the problem. Irresponsible peole are.

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  10. I saw that you posted never to use a home equity line of credit to pay off credit card debt. This option if done properly can eliminate all of your debt AND YOU GET A TAX CREDIT. How? You are paying interest on a credit card, but it can not be deducted anywhere. If you have to pay that interest anyways why not pay on the one that you will receive a tax credit on? This still gives you the option to cancel your cards. And save.

    Until I have 0 debt. No house, No car, No student loan, and upwards of $50,000 (the limit of my credit card) in savings I will always carry a credit card. It is my personal decision. One that I don't think is wrong. Why? The credit card has a better rate than the bank can offer for a short-term loan at this time.

    Reply

  11. Ben-

    1. What restaurants didn't take credit cards 10 years ago? Any decent restaurant has taken credit cards for decades.

    2. When is Dave Ramsey on the radio? Did you really listen to him EVERY DAY for two years? How do you find the time?

    3. How do you know that you will never borrow money again? What will you do if someone in your family gets sick? How will you pay for the medical bills?

    Striving to be debt free is admirable and a cause I fully support, but never say never. Stuff happens and all responsible adults should have the ability to obtain credit to cover their family's finanacial responsibilities. The world is not quite as black and white as you seem to see it right now, but life experience will correct that.

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  12. Helen,

    I'm so sorry that you think that someone would NEED credit to live. If you are taking care of your family well and provide financially very carefully, it is absolutely possible to get through ANY emergency without credit. First, like Karla mentioned above, save a LARGE emergency fund — a year or more of expenses. I can't think of an emergency in which you would need to get your hands on more than several thousand dollars RIGHT NOW. So that should cover any minor emergency — furnace going out, car dying, etc. Second, HAVE INSURANCE!! Health insurance, life insurance, car insurance, home insurance, etc. This should cover you in the event of MANY catastrophes. So if your house burns down, the insurance will cover it. If you get in a serious accident and rack up medical bills, your insurance will cover it. Our insurance is excellent and has a maximum $5000 out of pocket. I'm quite sure we could handle any medical bills that come our way.

    The real truth is, it's NOT about life experience and becoming jaded. YES, there are rainy days. NO, you can't always prevent bad things from happening. But plan, prepare, have back ups for your back up plan. Insurance and emergency funds for everything. And then you will know you are ready for anything and you will NOT have to rely on credit. I'm very sorry that life has taught you to worry instead of plan and prepare for your future so that you don't need to worry. But you CAN plan, you CAN prepare, and it WILL be okay.

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  13. Helen,

    1) I was thinking of fast food type places, not more upscale places. I remember when it went from being kind of a weird thing and you used to have to still sign for them, to being 90%+ of transactions.

    2) Dave Ramsey is on from 3-6pm on the radio everyday and has a TV show on Fox Business in the evenings for an hour. Yes, I really did listen to the full three hours of the radio show every weekday for a year. I listened while driving, working around the house, etc… I have a huge knowledge of real life situations where people made bad decisions and how to get out of them. Now every time I'm headed toward a mistake, I realize it well before it become an issue. It was some of the most valuable time I've ever spend.

    3) "Nothing is certain but death and taxes" – Benjamin Franklin. Let's just say I wouldn't bet against us. The thing is, with proper planning, you will never need to borrow money. Our health insurance has a maximum yearly out of pocket of $5,000. If I need a $750,000 heart surgery, we need to find $5,000, which we certainly can do since we save several hundred dollars a month toward building that fund.

    We also have life insurance, so if either of us die, the other is taken care of. We have car insurance, in case something happens to our cars. We have an emergency fund for minor (<$1,000) issues. Anything else, we'll deal with it as it comes. Ever wonder how men with two prosthetic limbs or who are blind can climb Mount Everest? It's because they refuse to believe that they can fail. I refuse to believe that we'll ever need debt for any reason and we spend a lot of time making sure that we plan for every issue.

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  14. Ben and Kate-

    Hypothetical siutation: You have an emergency fund and you have health insurance. One of you or your kids gets very sick. The best surgeon to perform an operation to perhaps save your life does NOT participate with your insurance. He or she will not perform the surgery unless you pay for his or her services up front. His fees are larger than your emergency fund (say $30,000.) What would you do?

    Additionally, the illness you have is chronic and you reach your lifetime maximum (most people have a 1 or 2 million dollar max, so your $750,000. heart surgery example just about wipes that out). Then what?

    Even Christopher Reeves, who I'm guessing had more money than you do, went broke paying for his medical needs.

    The truth is, it really is about life experience and realizing that you can and should plan for the worst by insuring yourselves and your belongings, but there are no guarantees (except death and taxes). Some of the hypothetical situation above happened to me (the non-participating doctor, pay up front portion but not – YET- the lifetime maximum portion). My sister-in-law was a type I diabetic, her kidneys failed, and she received a kidney and pancreas transplant. She must take expensive anti-rejection medication for the rest of her life. Her lifetime max was met a LONG time ago. I'm not worried or jaded, just an experienced realist. By the way, I really don't like being called names as I'm sure you would find it insulting if I called you niave and told you to grow up.

    I don't have any problem with your goals of saving and planning, but they are theories and may not actually happen the way you hope. Having the ability to obtain credit is a GOOD thing if people use the credit responsibly and not for foolish things like restaurant meals and other frippery they can't afford which is what you did when you ran up credit card debt. I'm keeping my credit cards, using them to buy only what I can afford, and hoping for no more rainy days. But if I ever have to pay for something really necessary for my kids, or my husband, or myself with credit, I would. I bet you would too.

    By the way, my husband and I had an emergency fund of $20,000 (this was more than 6 months of our monthly expenses)when I got sick. We spent it all, and it still wasn't enough. Saving several hundred dollars a month isn't going to be enough for you if you have a real emergency (something less trivial than your car breaking down or your AC quitting). We now save about $3,000 a month plus we max out our 401Ks, and we are hoping for the best. Good luck to you, but unless you have rich, generous relatives with high credit lines, keep a credit card even if you don't regularly use it.

    Reply

    • Helen, I truly feel for everyone involved in these extreme situations you describe here.
      As a medical professional, I’ve heard legends of practitioners refusing services without an upfront fee … but here’s the thing: those professionals are attached to hospitals, of which an overwhelming majority have patient care reps who will gladly point you to financial services and medical social workers to assist you in paying for your procedures. On a purely anecdotal note, my family and I have had to rely on those very services and payment plans when I was diagnosed with endocrine cancer in 2000, after the birth of our 4th child in 2005 and again for the OB care and birthing center birth (20k less than a hospital birth down the street) of our 5th child. Going on a payment plan at ZERO % interest is a far better option than taking out a loan or using up lines of emergency credit. Quite honestly, I do not know of anyone who has over a few thousand available on their “emergency” card, so I’m not sure how this reconciles with your position on needing credit to live in extreme situations.
      As for me and my house, we live an 80-10-10 lifestyle : live off 80% of our income, tithe 10% and save 10%. That applies to my husband’s income alone. My income goes straight to savings. My in-laws lived like this on factory workers’ wages and were able to pay off their first house with cash in less than 5 years, save up to buy their 2nd home with cash and have lived debt free since 1983. If *they* can do it, with no “rich, generous relatives” – anyone can.

      Reply

  15. Ben-

    Last point: The men who are blind or who have prothetic limbs that climb Mt. Everest are extremly rare AND they have help. Bad analogy.

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  16. Helen,

    First situation — if surgery were the ONLY option, we would accept the best surgeon our plan covered. Also, if you've read other parts of the blog, you know we believe in natural healing, so we would be trying any natural alternatives before seeing a doctor or agreeing to surgery. We believe (and so do the health practitioners we see) that if illnesses or imbalances are caught early, then they can be managed and treated before they turn into a chronic or serious illness. Some testing we've recently undergone was like getting a full-body scan, but without the use of invasive procedures, like the CT scan. I won't talk about it here because there's not enough room, but I will blog about it later. I would also encourage you to seek an opinion from any of several alternative practitioners to see if they can help you at all.

    I don't agree that using credit is "taking care of your family." In a situation like you described (which is very, very hard, I'm sure), if you are using credit because you can't afford the treatments and your condition is chronic (meaning you will keep not being able to afford the treatment), using credit is not a solution. You'll keep racking up the debt and never be able to pay it back. I know it seems impossible to do anything else when you can't afford it and know you can't ever afford it, but that's the way the system is and that's why the system needs to be changed. But I don't think going in deep, permanent debt (which is going to make your situation worse) is really the answer. I don't know what the answer is, but I don't think it's that.

    Again, I would encourage you to seek out an alternative health practitioner to see if he or she could help you.

    Please also remember that although tragedy COULD strike anyone, it is unlikely to strike most, so chances are we will get through life without anything major. We're definitely planning and preparing in case that's not what happens. And we wish the best of health to EVERYONE, and hope that others wish the same.

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  17. You are correct. The health system does need to be fixed, but I don't think the current proposed legislation is the answer.

    If one of you needed surgery and the best surgeon did not participate with your health insurance plan, I really think you would go to whomever was most likely to save your loved one's life and money be damned. There are some things in life – like life itself- that are more important than money. I hope you would agree.

    As to tragedy being unlikely to strike, I think it is more common than you may think. I worked for many years for a major insurance company. I dealt with clients every day that were facing horrible medical problems that no amount of natural healing would help. For example, one client's daughter fell off her horse and the horse stepped on her face shattering the left side. The little girl was 11 years old. She had multiple surgeries to reconstruct her face. MOST plastic surgeons do not participate with insurance companies AND make patients pay up front. Partial reimbursement is sent to the patient. If she had been my child, I would have sold everything I had and borrowed every panny I could to get the absolute best result. I would never "settle" for a second rate doctor. Her father was a lawyer with a prestigous law firm in Washington DC, so I know he made a great deal of money (more than you and me combined I'm sure), yet he was still distraught at how much of his daughter's treatment was uncovered.

    Your insurance is excellent as long as you have routine illnesses. Dig a bit deeper and you will see that it's not as good as you think it is.

    I wish you and everyone good health, but guess what, we all are going to die. More than likely we will die from an illness, even if we take really good care of ourselves, and illnesses cost a lot of money. Like I've said before, I think your goal of saving and planning is admirable and is something I do to an even greater degree than you. However, I have a problem with your "always do this" and never do that" way of thinking or at least communicating. The world is not so black and white and your method of doing things is not the ONE CORRECT WAY. There are exceptions to every rule, and you don't seem to be able to understand that.

    This is off the above topic, but how do you plan to pay for your children's college educations? Will you borrow, or do you plan to save for it. A year of college, with room and board, costs about $20,000 right now. It could likely double by the time your kids are in college. That's more than a quarter of a million dollars for just the two kids you currently have and it sounds as if you want more children.

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  18. Helen,

    There are ALWAYS unforeseen circumstances. And we can't plan for those. But under ORDINARY circumstances, one should strive never to use credit. We do not agree with financing cars, boats, clothing, etc. We believe that you should avoid it at all costs. If something simply tragic and unavoidable happens, you deal with it as you can. But too many people feel that using credit to get their morning coffee is a good idea — and it's not. Ever.

    I don't think the current legislation is the answer, either. We need a real system overhaul and that is just not it.

    We have invested for our childrens' college educations. We have an account for each of them and the money is in high-risk stocks (we have advisors) since they are so young. We plan to pay for school that way — and, hopefully, through scholarships and grants if they receive any.

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  19. Sounds like you are less intractible than I thought.

    So you won't let your kids go into debt to pay for their educations?

    Scholarships are a possibility, but currently grants only go to students whose parents don't have money. The more you save the more you will pay.

    College tuition is another system that needs to be fixed because people who do finance cars, boats, etc. typicallly aren't saversm, and they receive the grants. People who forgo those pleasures pay full price for college. We are penalized for being responsible.

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    • There are people who don’t count on their parents to finance their education who work, who use any work-study, scholarship, and merit-based aid available (like my husband and me). My 14 year old has over 10k saved and has no intention of going into debt for her education. Should she get into debt for a degree, she can always live at home while working to pay that debt off within the first 1-2 years of her career.

      Reply

  20. Cancelling credit card accounts can mess up your credit rating. I know the Dave Ramsey's of the world say "who needs a credit rating" BUT…..one does need to have good credit, for if nothing else, getting a mortgage. I too agree that it is WRONG to walk away from credit card payments. If you have debt, you are accountable for it, not other taxpayers, who ultimately pay for it.

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  21. Theresa,

    While canceling credit cards DOES, mess up your credit rating, you do NOT need a credit rating. For the record, there are many companies, like http://www.churchillmortgage.com/“ rel=”nofollow”>Churchill Mortgage that Ramsey endorses, that do what is called "manually under-written mortgages". Through this process they look at your assets, debt, and income, and determine if you have a low risk of defaulting. My first house mortgage, before we got married, was manually under-written through 5/3 bank.

    Before the advent of the FICO score, ALL mortgages were manually under-written. Many major banks and mortgage brokers still do manual under-writing, they just prefer not to because a monkey can make a loan based on a credit score. Numbers high enough, loan; not high enough, no loan.

    Do you really want to support a system where if a person has 1 million in cash, but no debt for 7 years (resulting in a 0 credit score), they can't rent an apartment?

    Kate and I are happily awaiting the day our credit score hits zero due to inactivity (not having any debt for 7 years).

    Reply

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