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Credit Cards?
Forbe!
Registered User regular
Registered User regular
So, I've graduated college, moved out of my parents house and relocated to a different state. I make enough money to comfortably live while saving money, as well as paying off my student loans.
I've never had a single credit card in my life. The only card I've had is a debit/checking card that directly links to my bank account. I would like to start building up my credit, I have no idea how to go about getting a credit card, or what a good credit card is.
I've never had a single credit card in my life. The only card I've had is a debit/checking card that directly links to my bank account. I would like to start building up my credit, I have no idea how to go about getting a credit card, or what a good credit card is.
Forbe! on
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I have one through my local credit union.
All cards are the same as long as you carry a zero balance. Just depends on what points or whatever you want will vary, but don't pay any annual fees.
Check out http://www.annualcreditreport.com to see your report. Like Skoal Cat said, your score will determine what you can get.
Skoal is right though; your options will really depend on your credit score.
I'd kind of avoid them on moral grounds.
If you don't get approved your options would be to try something like a store based card, like Target's Redcard. It won't be an actual credit card but will build credit. Failing that, and it is rather hard to fail that, you could try something like buying furniture/appliances/whatever with a store based line of credit.
You sorta skipped the "typical" way to get a first card, being given one for practically nothing in college. I know cards are much easier to get for college students, you would think that'd extend to grads.....but who knows.
Will this have any effect of my credit score though, good or bad? My credit report states that all my loans are in good standing, which I already knew.
I've never really had a reason to own a credit card. I have a very low overhead and don't spend money on much, so I've never really needed one. I would just like to have one for emergencies, and the occasional purchase to help improve my credit.
As long as you've been paying off your monthy dues on the student loans, it'll help. If you had a card off of your parents' account and purchased things under your name, that (from what I'm told) should help too.
If you already have a debit card, get a rewards card from your bank, make sure you always pay the balance and use it like it was a debit card (never buy anything if you cant pay for it right now).
If you can get two cards get two. If you are already living away from home having more than one card can help simplify your budget, its much easier to see if your coming in over/under if you are putting all your groceries/food on one card for example. When you get the statement you can see exactly how much you are spending on that budget item.
Forbe! having loans that are constantly paid on time is good. If you ever plan on taking out a loan in the future for something like a house, I strongly recommend you get a credit card.
You can call and ask them about credit cards and explain you've moved out of the immediate area and ask if they can do it over the phone or via mail.
It depends, how long have you been paying, have you been paying on time, how much are they, how much do you make? Assuming no late payments, they're not hurting, and may be going up slightly (total guess). Once you pay it off your credit rating will go way up though. All loans usually follow this rule.
You're not going to run into any serious trouble in that department, it's all about how you handle the credit card once you get it that will be an issue. Your banks will usually be able to offer you one with 0 fees, Lower rated people have annual fees of like $50. You may have to take a fee based one, but I'm guessing you can get approved for one with 0 fees if I can, and my credit rating is terrible.
If you get a fee card, often times they refuse to switch you over to a non-fee account once you've got established credit. This happened to me recently. So essentially to get away from the fee, i had to close my oldest credit card. Which makes your score take a hit. I don't really need any new credit at the moment, so it was the best time to pull the trigger, so my score can rebound eventually.
Don't not use it. It may get closed, and that negatively affects your score.
I had mine closed when I didn't use it after paying it off -- granted I hadn't used it for 1.5-2 years, but still be aware.
Honestly, though...do yourself a huge favor: avoid credit cards in every way that you can. If you do end up with one, do not use it unless you have to or unless you fully intend to pay each amount you spend back at month's end. If you're not very careful, they can and will get away from you and you'll be in a whole mess of shit.
Aside from getting yourself an established credit history, you're better off saving your money for a rainy day.
I also have never paid any credit card interest, and plan to remain that way. There's nothing wrong with using a credit card, but there is something wrong with paying credit card interest. They're not for buying things you otherwise couldn't afford, because it's all still your money. It's just a lot easier than paying cash and a lot faster than writing a check.
You should watch for monthly or annual fees. As long as you don't pay interest, the interest rate is meaningless. Also, don't use it for getting cash from ATMs -- cash advances are probably the lamest thing ever.
I'm not sure how it works in the states (assuming you are in the US) but technically it can work against or for your advantages. I'll elaborate.
Basically everyone has a credit score. Your credit score is base on your borrowing and banking history. For example, you borrowed some student loans and after college you being to pay it off... if you miss a payment your credit score is lowered. It's the same with having an account or any financial instrument, and your credit score is lowered if your account balance is in the negatives and you refuse to bring the balance above zero. In Canada, credit record are wiped after seven years, meaning that your credit score is base on your score for the last seven years.
Also your credit score can be negatively impacted if you have a credit card. Basically the idea is that bank want to lend their money to someone that has a habit of paying back money they owed.
Having a credit card, using it at least once a month, and paying it promptly will positively impact your credit rating, and that's important when you want to buy a house, or other large purchases that you simply can't afford to pay off in one go. A person with a good credit rating will get a lower rate of interest in comparison to a person who has a less desirable credit rating, or their loan might not get approved at all. Not having a borrowing history can also leads to banks charging high interest rate... from their perspective there's more risk involved handing over cash to a guy that they know nothing about at all, verses some guy they know that has a history of paying back the loan for at least the last seven years.
The whole process is call building up your credit and I think of it as a necessary evil in life and the lesser of two evils... as in the other choice is renting a place which is technically paying mortgage for your landlord for a place you'll never eventually own. As the poster above said, never cash advance, never go over your limit, never apply for more limit, and make your payment on time so you won't have to pay more interest then you have to.
As for the credit building thing... I'll worry more about paying off the student loan first because you simply don't want any bad rating in your credit report. You should get a card with a small limit thou because just having a student loan isn't enough.
The only thing usage wise that will hurt you is if you miss payments or are late. Honestly, i've been late occasionally, and it's not showed up on my credit report that i've noticed. It's bad, because of fees etc, but being late one payment will not necessarily torpedo your score.
Don't be late. Ever. If you have to be late, lock the card up and don't use it until your finances improve.
I've been burned by bad financial planning (not really planning I guess, but just financial hardship in general) in the past and it is not a path you ever want to go down.
I just treat my credit card like my debit card. Imaginary money is the root of all evil. Real money is ok.
I am confused as to why someone suggested for you to get TWO credit cards.
To build a credit history? For credit scores?
As bowen pointed out: you have a credit history already.
You don't need a CC to build a good credit score.
Paying your student loan on time will do that.
You already have a debit card so I'm pretty sure you get the same protections for purchases as you do with a credit card.
Is there a reason you have to have a credit card?
If you have enough positive credit history from student loans why do you need an additional way to build positive credit history?
He doesn't need to carry cash everywhere since he already has a debit card.
If he likes to pay for stuff online, and he doesn't want to use his debit card, why would using a credit card protect him more?
My wife did not qualify for a mortgage with her sterling student loan payment history. Fact.
Debit card transactions are ACH (electronic check bank draws), you have absolutely no protection should your card get skimmed or stolen or otherwise intercepted in on online transaction, while credit cards offer fraud protection and often credit back fraudulent charges to your account (they always have in my case).
It's not like he's asking about elective surgery, it's a credit card. Jesus.
To elaborate. I moved across country with about $1,500 in cash (my entire savings) and a 15 year old car. After apartment deposits, 1st and last month rent and initial utility deposits and all the other bullshit, I quickly drained what little I had left of the $1,500. While I've been able to slowly replenish some of my savings, I fear the coming winter be brutal on my already fragile car. As of right now, I cannot afford a random mechanic bill or to rent a car with the cash in my account.
This, then is a different set of reasoning. It's no longer about just building credit, it's about having an emergency system in place to help mitigate the cost of entropy.
I still don't think it's a bad idea to get a card, but you'll need to be very, very careful with it. You'll probably want to go secured in that situation, which means you'll essentially have to pay the maximum balance up front, as insurance in case you don't pay the bill. Make sure you get one that, even if you max it out, will have a minimum monthly payment that is smaller than the amount of money you regularly put into savings each month. This way, if an emergency happens and you have to max the card, you can pay eventually pay it off.
For example for a mortgage where you only put 10% down my bank wants at minimum 3 lines on my credit report that are in good standing. Like 3 credit cards, or 2 credit cards and a student loan. Or a car payment, student loan, and a single credit card, etc. Having excellent credit can help get better interest rates on loans as well.
If you plan on buying a house in the next 7 years, building your credit is never a bad idea. It only becomes a bad idea if you mismanage your finances and buy something you cannot pay for. If you are responsible it will not hurt you to have one or more pieces of plastic.
Also if you already have a checking account getting a rewards card and using it as if it was a debit card can actually help you. And you avoid the 3-5$ a month fee for using your debit card in a retail transaction.
Be very very careful with it, use it properly.
As long as you pay the balance in full each month, its fine. I use mine for all my bills, it essentially just kicks the due date back a month.
1) Regulations governing theft of credit cards are better than debit card regulations.
2) Revolving credit accounts are treated differently than installment loans like student loan debt, and both are vital in building good credit history for instances where a lender scrutinizes you - auto loans and home loans.
3) Credit cards have rewards. of course those rewards are designed to get us to over-use them, hence most of the good advice on the thread on being disciplined.
If you can't afford mechanic repairs, you may find yourself in an even worse hole if you use a credit card to pay the bill. Interest adds up far too fast. I mean, if you have to use it you have to use it, but study your public transportation or carpooling options very hard before you go that route.