Originally posted by: DrPizza
Originally posted by: FlyLice
Originally posted by: DrPizza
Not that I mean to defend the tard that started this thread, but he does have a point about saving for items and paying cash, rather than charging them, which increases your debt in the long run. It's not a matter of "I charge them then pay the entire balance off at the end of the month" - I'd consider that more of a personal accounting management plan... It's the people who want the new big screen tv, but can't afford it right now, so they charge it right now. If they saved $100 a month, they'd have it in 10 months. Instead, they charge it, and end up paying 2 or 3 times the value of it over the course of a few years - money they could have spent on something else.
I think there's a big difference though between such discretionary purchases and purchases of things that may be considered a necessity - housing and transportation... interest rates on those two items are typically lower over the longer term. Plus, you gain equity in a home (especially if real estate prices increase) rather than have absolutely nothing to show for your money if you rent.
It really doesn't matter though... the OP is just trolling.
Sensing by your name, I don't think you are a Dr of Finance. TIME VALUE OF MONEY. It does NOT cost 2-3 times the value of the item if you charge it up. In your case of the $1000 TV ( $100/month * 10 months), instead of SAVING $100 per month for 10 months to buying that TV, one can charge his CC to get the TV now and pay $118.17 per month (assuming a high 15% interest rate) for a total payment of $1,063.53, which is 6.353% higher NOT 2-3 times the value of the item as you so stupidly stated.
Oh, I certainly understand the time value of money...
However, I also understand reality, which is a HUGE number of people go out and max out their credit cards and pay the minimum balance. The typical family that purchases the television in my example don't typically get the credit card and only purchase that one thing... .and the minimum payment on a $1000 balance is NOT $100. The typical credit card in such situations is charged up close to the limit, and the minimum payment isn't much higher than the interest on the card... it takes practically forever to pay the card down. This isn't a problem about the "time value of money" - but rather is about people spending more than they can afford, then paying the price for years to come (hence the proliferation of commercials on tv of companies that will help you consolidate your debts so you can either escape the spiral, or have more room to make it worse.)
Also, allow me to introduce myself, since you're relatively new to the forums: Apparently my nic conceals that I graduated summa cum laude in applied mathematics (ranked #1 in my class as of my junior year), have 3 1/2 years of engineering courses on top of that, am working on a master's in physics concurrently with a masters in technology in education, and am considering the PhD in mathematics education when I'm done with those - but 2 weeks into this semester, I'm rethinking that I may want to relax. (plus I have a bunch of other grad work that isn't going toward anything).... I'm a math and physics teacher, as well as an adjunct college professor teaching calculus. I know a little bit about interest, and, as a matter of fact, just finished a mini-unit on the subject in pre-calculus (since it lends itself so well to exponential and logarithmic problems, plus will apply to most of their lives more than many of the other topics I cover)