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Tell me about credit cards.
Adus
Registered User regular
Registered User regular
So I've pretty much used my debit card for everything until now and I'm feeling like I really need to do something to build credit. I figure a good way to do this is to get a credit card, use it to pay bills that I'd normally just pay with my debit card, and then just pay off the credit card in full and on time.
But I'm not really the most knowledgeable on what good rates are, or which fees are acceptable and which are bullshit. My living expenses are pretty basic, so I don't need a card with like a ten thousand dollar limit or anything outrageous.
Does this seem like a reasonable idea? If so, what do I need to know?
But I'm not really the most knowledgeable on what good rates are, or which fees are acceptable and which are bullshit. My living expenses are pretty basic, so I don't need a card with like a ten thousand dollar limit or anything outrageous.
Does this seem like a reasonable idea? If so, what do I need to know?
Adus on
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If you're paying it off immediately, the APRs don't matter. Go talk to your bank and see what they can offer you.
1. Get a credit card with a decent rewards program and no annual fee (I can't recommend any)
2. Buy gas and groceries on it - pay the bill in its entirety every month
3. Profit
BEFORE YOU AGREE TO ANYTHING read the ridiculously large pamphlet that comes with a credit card offer. That pamphlet filled with legalese and other gobbledygook is actually a contract that you agree to if you take the credit card. The key portions of that contract are:
1. Your obligation to repay a certain amount of the credit card balance every month
2. Interest rates assessed against your balance to constitute your new monthly balance
3. Since most credit cards have "No interest for x month" terms, you also need to check for when you actually have to start paying interest.
4. Liabilities incurred for failure to pay
5. Actions you can take against the credit card company, and the credit card company will leverage against you should either of you feel that the other is not holding up their end of the bargain.
6. Extra fees applied for services towards the account, for example, credit watch fees, monitoring programs, and other services that nominally add to the security of your credit card, while also costing you extra money per month.
7. Finally, should you need to make direct cash withdrawal, there is a section that discusses your rate should you wish to take out money directly to cash (the rate generally goes up significantly until you repay the cash advance).
Now: for what you want to do, most of these above terms bear little significance on your goal of building credit. If you are responsible then you won't have to worry about most of this.
BUT there are times when life doesn't go as planned, you need to think about:
1. what if I need to use my credit card beyond my normal usage? Can I use the credit card in emergency situations (they happen to everyone and sometimes credit is needed to get you back on your feet).
2. What if my credit card is stolen? You should monitor your account frequently to ensure that no one is charging your account against your name.
3. How to contest a charge: (The credit card normally has a number that you can call for general help which can lead to contesting a charge)
4. Will my credit be significantly established? - For first time credit holders, most of the things you buy will be enough to get you an okay credit score, but due to a lack of significant financial history (even with one credit card) you won't be able to make really huge purchases. Your credit card, will the first in what is surely to be a long history of future credit transactions. If you start off well, and don't end up late, then you will be given further opportunities to prove that you are a credit worthy consumer.
5. As time wears on, it is acceptable to call you company and ask for a limit increase, thereby increasing the maximum amount of money a credit institution will lend.
Side tips:
1. If you are a college student or member of some kind of association, there may be a credit union that is able to get you a card with preferential services or treatment over traditional bank/lending institutions. Compare and choose from your available options.
2. Go to your local high school or college to see if there is any further information they can give you about smart lending practices.
Hope that helps mate, good luck.
Don't let them fuck you with the fine print.