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Tell me about credit cards
Zetx
🐧Registered User regular
🐧Registered User regular
Hello H/A,
I am planning to sign up for my first credit card in the next couple months. At the moment, I have a bank account and debit card (check card?) but I hear that doesn't really mean anything in regards to signing up for a credit card.
So I've done some googling and alot of terms seem to be abit over my head (for one thing, I tried looking up APR in wiki and I see a math equation
)
I know I really gotta pay my (correct) balance in full every month and all, but beyond that, I'm pretty lost.
With no credit background where should I start out? Am I going to be getting these cards and trying these crazy sounding schemes?
I am planning to sign up for my first credit card in the next couple months. At the moment, I have a bank account and debit card (check card?) but I hear that doesn't really mean anything in regards to signing up for a credit card.
So I've done some googling and alot of terms seem to be abit over my head (for one thing, I tried looking up APR in wiki and I see a math equation
)I know I really gotta pay my (correct) balance in full every month and all, but beyond that, I'm pretty lost.
With no credit background where should I start out? Am I going to be getting these cards and trying these crazy sounding schemes?
Zetx on
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If the former, it doesn't matter what card. Buy a tank of gas on it every month and pay it off. For convenience sake, get one at the same place you bank now so you can pay via 2 clicks.
If the latter, dont.
(You mean there's no real catch if I just pay the bills and all?)
This is correct.
Also know that if you miss a payment (statement doesn't come in and you don't realize it in time, for example), there will be a hefty fee for the missed payment, you will typically lose your grace period for the next month, and if you had a nice introductory rate like 9%, it will likely instantly go up to 20+ percent.
Very technically, there is a catch even if you pay in full always, but it doesn't involve the cardholder. The "catch" is that when you buy a $5 item cash, the store gets $5. When you pay it with a Visa, the store gets $4.85, and Visa gets $0.15. The store makes less money on credit card purchases than the same items bought in cash.
The only 'catch' of sorts that you want to check is whether the card you are applying for has fees, and what kind of fees. Hunt around and you should be able to find a card with no annual fees. Also check the interest free terms, if any. Finally, check out the value of any rewards schemes the card offers.
spoiled for wall of text:
The true danger is obviously sitting on a large balance and incurring interest over time. What traps a lot of people is where their statement says 'Minimum payment' and they just pay that amount. Yes, you avoid paying a late fee/no payment fee, but you're effectively doing nothing to pay down your card and are generally just throwing money away and treading water. Ignore the minimum payment figure, and pay either the entire balance each month, or as much as you possibly can. Even if it means you'll end up using the card during the month to make up for the shortfall, at least you wont be incurring as much interest during the month, assuming interest is calculated daily (check how often interest is calculated). Plus you may be able to take advantage of built-in interest free terms on your card. Ask the person at the bank to explain the interest free terms in detail to you.
Anything you dont understand about the card you are applying for, ask the person offering it to you to explain until you understand. If you just cant figure it out, take a brochure and walk out without signing up for the card. Get home and start doing your research on the net, even if it means typing out bits that are confusing you into H/A and getting us to help. The reason many people get in trouble with credit cards is because they dont understand how they really work, or any of the built in fees and charges on thier particular card. Used properly (ie paying the entire balance every month) you build credit, claim rewards, and have the convenience of not having to keep carrying around cash.
TL: DR Just dont rush into getting any old card, understand what you are getting, always pay your full balance, and you'll be fine.
I've been noticing a deluge of these threads in H/A the past couple weeks, and figure it's not unrelated to the large number of high school grads/incoming college freshmen figuring their shit out. So here's a tip about getting credit cards (this is particularly aimed at the new freshmen).
Free sandwiches or pizza are not good reasons to sign up for a credit card. Even if you're just going to cancel it.
You will see this all over the place on campuses especially. Tons of fliers being distributed the first half of the week for "Free sandwich at Jimmy Johns Thursday!!!!!!" The only truly free deals I saw at my campus were free breadsticks at a pizza place and free burritos at Chipotle. EVERYTHING ELSE was tied to you signing up for a credit card. This nets the credit card companies a huge amount of extra customers at the expense of naive, uneducated students (mostly freshmen). Can you REALLY not afford that pizza so much that you HAVE to go through the paper trail of signing up for and cancelling a card? Is the food court really that bad? Don't do it. Do your homework, shop around, and pick the card that makes the most sense, not the one with the best free lunch day.
PSN: TheScrublet
To get more on track to your OP...why do you think the companies do this? Because while those articles make it seem easy to game the system, 9 out of 10 people are going to fuck it up. All you're doing is getting a loan and investing it with the idea that any return is greater than 0. If you screw this up, then you're even worse than normal people with credit issues...you don't have an HDTV or a new car to show for it.
PSN: TheScrublet
They also up your credit like crazy, since mine has gone up $1000 since I joined less than a year ago. Though I'm not sure how it compares to other cards APR wise, since I pay off the balance every month and mainly use it to just build good credit and have something for emergencies.
I prefer AMEX Blue because the online management tools and e-mail system is basically awesome and makes it easier to track and manage your cards.
AMEX might be harder to get though.
In most cases AMEX will carry annual fees, and they will be higher than other cards. Because of my bank, I'm lucky enough to get it for free. But I'm not sure how many other banks do that. I would NOT recommend this as someone's first card, as it is still frequently rejected from non-major locations. While most restaurants and normal retail places take it, I had some issues with bars and smaller places over Spring Break in Fort Myers this year. Stick with MC or Visa for the first one.
PSN: TheScrublet
AMEX Blue does not have an annual fee (as far as I am aware), but the Rewards cards like Gold do. I made that mistake with the Gold, in a way, but the Gold also saved my ass when I first moved out of my parents house.
The Rewards cards aren't really credit cards though, they are more like paycheck advances, because if you don't pay them back in full, as soon as they ask for it, they take the card away.
But yeah like the previous two said, not everyone takes it.
Agreed, Visa and mastercard can be used everywhere, I wouldn't go with AMEX for a first card.
Also, I'll echo above again, Pay in full, every month, on time. Always. ALWAYS. IF you can't afford to pay for it with cash, don't even think about bringing out the card.
I would go for AMEX Blue as your primary card, with a Visa or Mastercard as a reserve.
The points earning and ease of payment with Amex Blue is great and you've got a backup in the rare cases where it isn't accepted (Amex is accepted at most online shops and major stores these days, the only time I ever really use my Visa is paying my ticket at the machines in multistory carparks - our Amex bill regularly peaks £1000 a month, the visa is lucky if it exceeds £5).
The only issue you may have getting an Amex is if your income is too low. Not sure how much they expect you to be earning these days though, as the Blue is really positioned as an everyman card.
Plus you have your debit card for minor transactions anyway.
Pay it back on time every month (or whatever it is), the banks hope people wont be able to pay it back on time.
If you vacation to ski towns frequenty, or beaches, or any other place that tends to have more places locally owned with small customer bases, I assure you your experience will be different.
Edit - ski towns. Start quoting examples from Vail or BC or other major places and I'm going to have to ask you set yourself on fire.
PSN: TheScrublet
My first credit card I got I just signed up for some random one that came in the mail to me in HS. Just pay it off ASAP and it doesn't really matter. Then after a while you can get a nicer card.
Beyond always paying off the bill (think of it simply as a delayed transaction), you may want to get your main credit card and then sign up for a Discover card. Discover isn't accepted everywhere, but it's accepted 95% and the cash-back is one of the best around without any strings attached. Everything is 1% back, and you can sign up for common things to get 5% back (July-September is 5% back on gas... hello!).
Other cards have similar deals, but they're not as easy to get if you don't have established credit card history. They can also be confusing (for example, Chase has a thing where you get triple-points in the top 3 merchant categories each month. Great if you limit your purchases, but confusing as hell if you're trying to really use it). Discover's plans are the same for all of their members, so there's no confusion, AND having a backup card is VERY USEFUL. I typically only use my Discover card, but if I end up somewhere that doesn't take it, it's very handy to actually, you know, be able to buy stuff.
But yes, what everyone is saying above is true that if you pay your card off every month, as long as the card doesn't have fees they're all essentially the same. Talk to your bank to get started (as they'll likely have no fees).
I've done something similar to this...twice now. On two occasions store purchases that amounted to around $800 (each) I signed up for a store credit card to get 10% off, saving $80. Both times I simply payed off the card in full after the purchase and canceled it. I don't know if I'm fucking with my credit rating, but $80 is worth a bit of paperwork for me.
He's talking about the free food things. I've seen that too. I went to Famiglia's to get some free pizza and they wanted me to sign up for a credit card. No thanks. They do this a lot at colleges.
Not that getting a card through one's bank isn't a great idea, but for someone with a short/non-existent credit history, I don't think all banks are created equal as far as the approval chances - personally, I tried applying for a card from Wachovia about 6 months ago, and got turned down despite already having over 3 years of flawless payment history on my first card (crappy high-interest Sears/Citibank) and student loans.
Conversely, I applied for a card through my credit union last week, and got approved within hours at their lowest interest rate for the same limit as my current card.
This boils down to one of my earlier posts in this thread, when I was talking about using the zero percent balance transfer things for investing. 9 out of 10 people fuck it up (made up number, don't ask for a citation, they do this because enough people fuck it up to make money). You are obviously the one. I do not believe this fucks up your credit rating if you are behaving as you say in your post.
Also your post is more or less dealing with a totally separate issue. All you get is a free sandwich with what I'm talking about. Normally, deals like what you're dealing with are like best buy's deal where you get 0% for a certain amount of time (giving you the chance to buy a big-ticket item on a card with no interest rather than using your normal card with an APR).
PSN: TheScrublet
Is there a way to lower a card's apr. My Amazon's card is 19.5 I believe, and I want to see if I could lower it.
I been a perfect customer with them for a little less than a year. Use it a lot, but always pay it off before the month is up.
It does, however having scads of credit cards on your credit history doesn't actually improve it past a certain point and can harm your rating. IIRC. Plus anything you do, either opening or closing an account, will stay on there for 7 years, though the significance drops a good bit.
Personally I have a Visa (from my bank) and an AmEx blue (no fees) for credit cards and my debit is a Master Card. I figure this way I'm pretty much covered with the place accepting something no matter where I am. Discover isn't accepted in Europe, which isn't really a big deal since how often do you hop across the pond, but it's still something to consider.
I personally have no experience with how to do this, but I know people who have called up their credit card holder and renegotiated their rate. 19.5 seems a bit high, even for a credit card. I just went to Mastercard's site and did a quick search and even the worst cards on there seemed to have 16% APRs (this search was cursory, not exhaustive). Those figures were from choosing the "I am not new to credit and have been paying my bills on time" option. If you were new when you first got your Amazon card, I recommend you call them up and say lower the rate or you're leaving. You should be able to do better elsewhere if you haven't had any issues.
PSN: TheScrublet
This worked well for me. We told them that if our rate wasn't lowered, we were transferring our balance elsewhere and would never use the card again. Our rate went from a 17% variable to a 7% fixed. Though I believe my wife also hardballed on the fixed thing...seriously, fuck variable APRs.
Really, once you've been with a card for a while and not had any issues (no late payments, no nothing) you're in a position of power. Sure, to some extent they kind of prefer the people who also carry a tidy balance, but at the end of the day they want to keep you as a customer, and will almost always work with you to make that happen.
But, as everybody has said, the main thing to look for in a starter credit card is no annual fee and a grace period. Your APR (barring an introductory rate) is going to suck, period. Don't worry about that so much.
There's no point in lowering your APR as you shouldn't be carrying a balance (and you aren't.)
The point is, should god-forbid you ever wind up carrying a balance, you have the lower APR. Choosing to never ever have a balance versus having a controlled, low balance is a personal choice, and neither decision is a bad one. Some people are ok paying a little bit extra in interest to get immediate gratification on something they can't completely afford. You might as well have the lower APR so you have some freedom in these situations. For example: while my family was living in Alaska, my Grandpa died of terminal cancer. There was no way we could have afforded frequent travel to see him at that point, but we did want to see him. So we ate some credit card debt, on our card that didn't have an insanely high APR.
What you DON'T do is go on spending sprees with ANY level of APR when you're just going to rack up a big balance you can't pay any reasonable time soon. It's never a bad idea to reduce your APR when you can.
PSN: TheScrublet
Never go over half of your available credit line. I did this, over two cards, and my credit score took a massive (we're talking 70 points) dive.
Also, mentally deduct any amounts you charge on your credit card from your bank account.
Consider your credit card as a convenient substitute for cash you already have (plus points) and you'll be ahead of the game.
My suggestion is to get the simplest, most non fancy Visa you can get.
I had to do this during the final end of my fifth year of college before graduating. I've been quickly paying it off with sign-on bonuses and such and will be clear of it all by end of July. Did you fix your two card maxing, and if so how long did it take to recover?
PSN: TheScrublet