Options

Credit Cards?

2»

Posts

  • Options
    EggyToastEggyToast Jersey CityRegistered User regular
    Why get a credit card:

    Credit cards function as "revolving debt/credit," which means that a lending entity allows you to take up to [credit limit] on credit per month, due back the next month. Simply having a credit card counts in your favor for credit scores because it implies that you are a safe credit risk up to [credit limit], and using that credit and paying it monthly implies that you pay your revolving debt. Loans are a separate debt, and typically split into different classifications anyway -- student loans (often called "good" debt, simply because it is debt you obtain in order to improve your life in some way), mortgages (a serious loan with significant assets backing it up), unsecured loans (simply taking a loan with no assets backing it up), etc. These all go into painting your credit history and make up a part of your credit score. The catch is that credit cards are one of the easiest ways to build a credit history, and are typically necessary prior to obtaining other, more substantial forms of debt.

    Credit cards are often more convenient than other forms of payment. They are also safer as they do not require a PIN, and the protections are more favorable compared to debit. For example, while debit cards nowadays have limits to how much money you are responsible for when stolen, the money used from the debit account is your actual money. So, if you have $2000 in your account, your card is skimmed, and someone uses it to buy stereo equipment in Puerto Rico, your bank will issue a fraud alert and refund you your money. Until the fraud alert and refund, though, your bank account reads at $0, which really sucks if you're trying to pay your bills. Credit cards offer a buffer between your purchases and your real money.

    Credit cards, when used responsibly, often provide some benefit to their use. Many cards have 1% "cash back" or "points" for simply using them. I get 3% back on every Amazon.com purchase, for example. Debit cards seem to be moving in the opposite direction -- Bank of America now charges you $5 per month if you use your debit card.

    They're not for everyone, but they are useful tools and, when used responsibly, are a net positive for one's finances.

    || Flickr — || PSN: EggyToast
  • Options
    Dr. FrenchensteinDr. Frenchenstein Registered User regular
    A lot of credit cards extend warrantees as well i think. They also offer chargeback capabilities in case you get ripped off. Pretty sure check cards don't. there are a lot of benefits to using a credit card, but using one stupidly can really burn you/be expensive.

  • Options
    bowenbowen How you doin'? Registered User regular
    As long as your debit card is a Visa/Mastercard it should offer a lot of those same protections. The only problem is that buffer. That's a huge problem and has been for a while.

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
  • Options
    DjeetDjeet Registered User regular
    I oversimplified a bit earlier when I said debit cards offer no protection. Consumer protection/liability w/r/to credit card is governed by the Fair Credit Billing Act, while for debit transactions it's governed by the Electronic Fund Transfer Act. FCBA is more consumer-friendly than EFTA, though the card issuer or bank may offer credits/concessions over and above what's required by these acts. Link.

    Dodd-Frank may have modified this a bit, but I think those changes were mainly limited to fees assessed by issuers and minimum purchase amount.

  • Options
    bowenbowen How you doin'? Registered User regular
    Yeah this is true.

    I would still absolutely use a credit card assuming you can control yourself.

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
  • Options
    ShawnaseeShawnasee Registered User regular
    Keep saving your money and and put some of your savings aside for emergencies. Paying for emergencies on a credit card is really only delaying the inevitable and adding an interest rate on top of it but I can see the appeal.

    If you want to improve your credit score there are lots of ways to do it besides credit cards so don't pigeon hole yourself into thinking that credit cards are the only way, or even the best way, maybe just the easiest.

    http://articles.moneycentral.msn.com/Banking/YourCreditRating/build-credit-without-credit-cards.aspx?page=1


    If you have to absolutely have a credit card then a lot of the advice given in this thread is sound: avoid Chase and Bank of America / control yourself / be responsible.


    Good luck and congrats on graduating!








  • Options
    bowenbowen How you doin'? Registered User regular
    4,5, and 6 are myths. The rest are okay.

    They haven't been a thing in a few years, anyways. Especially authorized users and co-signers. Cosigning is dangerous for that reason, you assume all the risk and get none of the rewards because as soon as the debtor pays off their loans, it gets put as good mark on their account. As for authorized users, I haven't seen much either way but my lawyer informed me that they get no tangible benefit other than utilizing your pre-awarded credit card.

    not a doctor, not a lawyer, examples I use may not be fully researched so don't take out of context plz, don't @ me
This discussion has been closed.