The Dave Ramsey Dichotomy...

[Irvrobinson]

To be fair to Blue, if as a household, they've collectively managed everything well, then the few upshots of having a 720+ score simply doesn't outweigh the other positives they've managed. I 100% get that. Right now if I wanted to I would simply write a check and pay off the mortgage and experience that peace of mind. That point is not lost on me.

After that's done and I have significant savings and investments I really don't need a FICO score. I maintain it because I have it down to a science, it doesn't cost me anything, and if I would ever need it for any advantage it would give me, I have it. The only point I want to make is you don't need to go into debt to get there. Just put your non-negotiable spend on it and automate the payments.

My take on credit cards is more predatory. Credit card companies charge billions of dollars in transaction fees. I remember reading that in 2018, MasterCard alone recognized over $7.5B in transaction fee revenue. Add in all of the other credit card processors (AmEx, Visa, Discover, etc.) and you got perhaps a $20B+/year transaction tax on retail product pricing. Since there's a lot of competition in the credit card business, mostly because they want a bigger chunk of the ~$150B+/yr revenue from CC interest and late fees, as you and I have pointed out you can get a cut of the transaction fee rebated for free, just by playing the game. No debt required. Since I'm in the middle of doing my taxes for 2020, untaxed income is looking better than ever. And you're right, I forgot about the 5% cash back I get from the Amazon card, the 5% I get back from our REI spending with another card, and even AmEx lured me into 6% back on grocery store spending. Now that you reminded me, I think I'm probably in the range of getting well over a $2K/yr no-tax cut of that $20B in transaction fees. Mostly for free. I think I'll keep taking it.

 

[jinjuku]

That was speculation. I'll ask my insurance broker. I was hypothesizing needing specialty insurance, for which manual underwriting is possible.

It's possible to get insurance this way but it reduces the competitive pool of providers. Soon as you lose that pool you lose the competitive rates that you can take advantage of.

I would ask your provider and make sure to also ask what the median rate is for someone with your driving history if they have a stellar FICO. When I talked to my agent the indicated I was roughly at 50% of the median premium. Across two cars this is $1200 a year in my pocket. If everything was reversed and I could simply pick up a few CC's and re-establish a 720+ score for the cost of a cup of coffee once a month why wouldn't I do it?

 

[jinjuku]

I just participate as little as possible in the bank-created rat race equating financial health with their willingness to lend you money for their benefit. That's all FICO is.

I'm not in disagreement with you on this. But it can be gamed. Credit piggy-backing is a perfect example. So are CC's that you carry no 32 day debt on.

As an experiment I invite you to PM me with simply your full name. I'll put you on three of my cards as a named user. Report back in 60-90 days how much your FICO score improved and you barely had to lift a finger. Obviously you don't have to but I'm simply making the offer. Find out if your auto premium is based partly on your credit score. Then shop it after the new score and let everyone know what you put back in your pocket.

 

[Blue Dude]

I'm not in disagreement with you on this. But it can be gamed. Credit piggy-backing is a perfect example. So are CC's that you carry no 32 day debt on.

As an experiment I invite you to PM me with simply your full name. I'll put you on three of my cards as a named user. Report back in 60-90 days how much your FICO score improved and you barely had to lift a finger. Obviously you don't have to but I'm simply making the offer. Find out if your auto premium is based partly on your credit score. Then shop it after the new score and let everyone know what you put back in your pocket.

LOL. Thanks for the offer, I'm almost tempted to try it. You guys have given me some food for thought though. I'll follow up with my insurance broker to see what if any effect it has on my current policies. Because you're correct, if it has significant effect and all it would take is setting up my system to use one card instead of another to pick up free money sitting on the table, it would be worthwhile to make the switch. I'd have to guard against point-chasing and other psychological incentives to spend more than I otherwise would have. Which is why the banks try so hard to get everyone to use them. I'm as vulnerable to such things as anyone else.

 

[jinjuku]

We three can all agree that any industry that spends as much on advertising the 'freebie-ness' of credit cards have figured out to create the golden goose.

I just like gaming the house as much as possible.

 

[Mikado463]

We three can all agree that any industry that spends as much on advertising the 'freebie-ness' of credit cards have figured out to create the golden goose.

I just like gaming the house as much as possible.

Agreed, thus as we have figured out, get the CC to work for you !

As a life long rail enthusiast I enjoy the benefits of my Amtrak CC

 

[Trell]

We three can all agree that any industry that spends as much on advertising the 'freebie-ness' of credit cards have figured out to create the golden goose.

I just like gaming the house as much as possible.

That credit card 'freebie-ness' have been strongly curtailed in EU some years ago by quite simply limiting the fees the credit card issuer can take out from the merchant. In my opinion that is a good thing, though I do use a credit card when shopping on internet for legality reasons: In Sweden use of credit card is similar to take a loan and thus a different law is applied as opposed to use of a debit card. Practically, for me, that means if I don't get the item ordered and it's not resolved with the seller, I can make a claim on the credit card issuer that I will not pay the bill for that particular item. This makes for safer Internet shopping, though I do a due diligence as I don't want to have a dispute in the first place.

 

[Irvrobinson]

We three can all agree that any industry that spends as much on advertising the 'freebie-ness' of credit cards have figured out to create the golden goose.

I just like gaming the house as much as possible.

And well you should, because that freebie-ness and the resulting multi-billion dollar transaction fee golden goose are the result of the merchant agreements that the card companies (MC, Visa, AmEx, Discover) make merchants sign. Since the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, merchants are allowed to offer customers discounts for paying cash, or charge a service fee for taking credit and debit cards. (My county charges a 2% service fee for putting my property taxes on a charge card.) The CC companies' merchant agreements say that merchants can't advertise two different prices, but some gas stations seem to do it anyway with impunity. (No one cares?) Anyway, the bottom line is that most consumers want to pay with credit cards, the CC companies know that, so the no-advertising cash prices rule manipulates the system to some degree. I occasionally ask for a cash price on big ticket items, but since every card I have offers me a baseline 1% cash back, it takes a pretty expensive item to get me to save a net 1% (most transaction fees are about 2% for large purchases).

All of these shenanigans makes gaming the system practically a patriotic duty. It's also profitable to game the other side of the transaction, and own MC and Visa stock, which are the pure plays in this market.

 

[Trell]

And well you should, because that freebie-ness and the resulting multi-billion dollar transaction fee golden goose are the result of the merchant agreements that the card companies (MC, Visa, AmEx, Discover) make merchants sign. Since the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, merchants are allowed to offer customers discounts for paying cash, or charge a service fee for taking credit and debit cards. (My county charges a 2% service fee for putting my property taxes on a charge card.) The CC companies' merchant agreements say that merchants can't advertise two different prices, but some gas stations seem to do it anyway with impunity. (No one cares?) Anyway, the bottom line is that most consumers want to pay with credit cards, the CC companies know that, so the no-advertising cash prices rule manipulates the system to some degree. I occasionally ask for a cash price on big ticket items, but since every card I have offers me a baseline 1% cash back, it takes a pretty expensive item to get me to save a net 1% (most transaction fees are about 2% for large purchases).

All of these shenanigans makes gaming the system practically a patriotic duty. It's also profitable to game the other side of the transaction, and own MC and Visa stock, which are the pure plays in this market.

In EU cash back and similar went away and I got new yearly fees on my credit card

I think this is a very good thing, and as I wrote above in Sweden there are legal reasons, apart from costs, to use a credit card.

 

[jinjuku]

The CC companies' merchant agreements say that merchants can't advertise two different prices, but some gas stations seem to do it anyway with impunity.

Gas stations have a carve out. The way other merchants get around this is simply advertise a cash discount. I did PCI DSS audits for 10 years so I know a decent bit about the industry on the merchant processing side.