As we continue looking at obtaining financial peace and dumping debt, I want to take another look at some more debt myths.
Part of the reason we get into trouble with debt to begin with, is because we buy into the what credit companies try to sell us on.
While our knee jerk reaction is to defend our debt and even the companies that provide these services, consider this: The total American consumer debt is more than $2.7 TRILLION. And the credit card industry takes in $43 BILLION per year just in additional, unexpected fees from the consumer (late fees, over-the-limit fees etc)
Myth – Leasing is a good deal and a sophisticated way to drive a car.
Truth – Any expert or analysis will tell you it’s one of the most expensive ways to drive a car.
Myth – I can get a great deal on a new car.
Truth – The value of the car goes down 60% in the first four years.
Myth – Home equity lines are good for tax deductions and are a good replacement for an emergency fund.
Truth – The math doesn’t work. You shouldn’t take out more debt just to avoid paying some taxes.
Myth - I’ll get a 30 year mortgage and pay extra.
Truth - Nobody pays extra. You should get a 15 year fixed-rate mortgage.
Myth – It’s ok to take out an adjustable rate or balloon mortgage because I know I’ll be moving.
Truth – You will be moving when they foreclose on your house.
Myth – You need to have credit cards and take out a car loan to build your credit.
Truth - Open credit card accounts with zero balances and car loans count against you when qualifying on a home.
Myth – You need a credit card to rent a car.
Truth - All major car rental operations accept debit cards.
Myth – It’s good to use a credit card for the rewards points.
Truth - 78% of credit card owners don’t pay off the balance every month.
Myth – I’ll make sure my teenager gets a credit card to teach them to be responsible with money.
Truth - Credit card companies target teens because they become life-long customers and can go deeply into debt.
Myth - Debt consolidation is good.
Truth - Personal finance is 80% behavior. If you don’t change your behavior, you’ll just end up taking on more debt.
Myth – Debt is a tool to be used to build wealth.
Truth - 75% of Forbes 400 wealthiest people said getting and staying out of debt is the #1 key to building wealth.
Read the other myths here and catch up on the discussion by reading these posts.
*Did you know that Dave Ramsey has a blog?
Next week: Relating with Money
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Great article. My brother is in the "must build credit mindset" and won't listen. He is convinced that he is getting the best of the credit card companies by putting everything he buys on there to get the cash back bonus.
FJH
http://www.daveramseyguru.com
Just a note on the rental cars: all national chains do take them, but specific locations of the chain may not. We've gotten stung before with that one and ended up paying twice the price because we had to find a company at the airport that accepted debit cards. It's best to call and check with the location where you are renting from.
I have no idea the reasoning behind the policy, but it is what it is.
He also has a podcast! We're taking the class now – so your posts are good reminders to what we JUST heard on Monday. Thanks!!! We're on step 2.
Great list!! It is all really about the math, isn't it?
A word about debit cards and car rentals: Since the debit card is directly linked to your bank account, you need to make sure you've got plenty of funds to secure the rental. A friend of mine had a huge problem when they used a debit card for the rental, and the car company put a hold on funds to cover the cost of the rental and then some (as a deposit) and then they didn't release the hold when the car was turned in. If you want to use a debit card for a rental, I'd get all the terms spelled out, before you ever get to the rental desk.
Remember, debit cards are linked to your bank account, so if it's lost or stolen and starts getting used, it can be a HUGE headache–it's not the same as if someone steals your credit card.
Unfortunately I have a note on the debit cards. They do not all take them, and if they do, you sometimes have to provide a recent pay stub and a utility bill to provide proof of credit. Hertz runs credit checks so it won't be necessary. If you're renting from an airport location and you have a return flight out of the same airport, sometimes this is all waived. Sometimes it isn't. They'll also instantly charge your card $400-$500 bucks, and refund you the difference when you return the car. The big downside to that for me is that I have a $500 a day limit, and banks count Friday-Monday as a single day. Not really fun.
Also, if you hear one thing from a rental agency in your hometown, the rules are probably not the same in your destination city. They're split into territories and zones throughout the country and there are no corporate rules guiding this.
I live in the city so I rent cars 1-2 times a month because it's way cheaper, even if it is annoying.