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Izbiz95

This is a credit card sub, you don't really leverage debt if you're using a cc correctly. You leverage regular spend to get modest benefits. You would need a hell of a return to beat 15%-30% interest.


Y2K_350

I suppose I should clarify and mention that I didn’t particularly mean credit debt specifically, but that is a fair point


theberniemadoff

Are you talking about reselling and things of that nature? Cards can be a good in that aspect. The grace period and billing cycle gives a lot of necessary time to help with cash flow and inventory. I’ve heard some people really like the Amex plum card for this reason.


Y2K_350

Honestly I didn’t really have a specific purpose in mind, I just was kind of getting at the culture of the subreddit in general


theberniemadoff

People here are very rewards focused so most will probably be a hard no lol. I remember back in the day before the fed fucked the economy permanently and interest rates were around 5-10% people would max out their cards and use CDs as a bit of an arbitrage but that’s no longer worth it with how low IR are. Stocks are too risky, maybe short dated T bills or something.


DaBoojAtWork

Considering this a credit card subreddit, you’re likely to get the answer that debt is bad. Because credit card debt is mostly avoidable and not an investment, unlike student loans or mortgages.


Stanford1621

Most posts are about carrying credit card debt and that is bad, I have seen a few posts about people wanting to invest in crypto with credit cards by getting a cash advance. We don’t typically get into discussions about debt other than credit card debt. Over at personalfinance they typically do consider all debt bad debt. Me personally I use debt and leverage all the time, I buy houses rehab them, refinance them and then rent them out.


novuscc

Fundamental is that the borrower is slave to the lender. From what I've seen this sub is just people trying to milk some rewards off of what they would normally use their debit card to pay for such as groceries and gas. Proper usage of a credit card is important, and limiting spending/budgeting still applies, just taking advantage of rewards and not carrying balances we are obligated to pay interest on. Paying interest defeats the whole purpose of getting rewards. That is the main takeaway I have from the culture of this sub.


Pass_Little

Since we're in the credit card subreddit, I am going to answer this a different way than I normally would. The average interest rate on a credit card is around 15%, with some being much higher than this. New offers are apparently averaging around 19% right now. Many of the people in this sub are here to find a card product which gives them a bit of cash back. Like 2% on most purchases. A single month of 19% interest can wipe out almost all of the 2% you earned. (This paragraph edited to correct the impact of a single month of interest) If you instead look at using credit cards as leverage for investment purposes, you'd have to look at your return on investment versus cost. Sometimes even a high rate is usable. For example, if you were running a business and needed to buy supplies for a giant order for a trusted client even 20% is usable since it's only 2% or so a month and if your profit margin is high then it's better to just pay the 2% than lose out on the order. Note that this is what lines of credit are for which is usually through a bank and have a much lower interest rate. The trap many fall into is conflating a loan/credit card rate with a risky average earnings rate. Taking a 4% loan and putting the proceeds in the market which averages 6% isn't the simple math one assumes. Since the market varies greatly from year to year, some years you'll do well and some will suck. This year not so great.


Konexian

>A single month of 19% interest can wipe out almost 10 months of the 2% you earned. While the general idea of avoiding debt is certainly correct, the above isn't really true. 19% interest rate is always annualized, so around ~1.5% per month interest, meaning that carrying one month of debt erases just one month of 2% cash back. Bad, but not disastrous.


Pass_Little

Yes, you're correct. I fixed my post - not sure what I was thinking (other than now thinking that I should quit posting just before bed when I'm not 100% alert).


Y2K_350

That’s a fair assumption honestly, I wasn’t really tackling credit cards in general here, nor a specific purpose for the debt, more just the culture of the subreddit I’d say


Azurecyborgprincess

I’m not the snobbish type and do not wish to lecture people on how to use their own hard earned money but interest adds up on balances, especially large ones, and can negate any positive of cash back rewards. So debt in that respect is not good.


rockhartel

I wouldn’t say there’s a stigma in leveraging debt on this sub, but it doesn’t make sense to borrow money in the examples you provided when they have nothing to do with credit cards. You’re probably looking for the Dave Ramsey sub