Credit cards

[Integraholic]

I've always felt a credit card is bad news. Got into trouble with one when I was younger. Question is, is having one credit card a good idea? Is it best to make small purchases and pay it off monthly? I'd like to hear from you credit smart people.

 

[megalomaniac]

you should have at least one. Buy your gas with it and pay it off in full every month. Your credit will improve vastly.

 

[MrsXtremeVel]

I've had a credit card since I was 18. I always keep it at the lowest credit limit they offer. If they try to up it, I call them and make them lower it. I always pay it off every month. It's safer to use than a debit card when purchasing over the internet. I never buy more than what I can afford. Believe you me.... it's hard. I love shoes ( and guns ).

 

[EvilBlackGun]

Don't try to kid us:

You ain't gonna "pay it off monthly." Why not save for that month, and pay cash??

I've always felt a credit card is bad news. Got into trouble with one when I was younger. Question is, is having one credit card a good idea? Is it best to make small purchases and pay it off monthly? I'd like to hear from you credit smart people.

 

[Integraholic]

That's why I'm asking. Trying to find out if it will help build credit.

 

[EvilBlackGun]

"Improve?"

"Your credit ... improve, vastly." For what? Getting another credit card? No, it won't. For a mortgage? PROBABLY NOT. OOOps. A clean sheet is the best for you if you are thinking of a house or vehicle. Gas cards prove nothing except where you buy gas. Have you noticed now, they bait buyers with 10¢ a gallon gas rebates JUST TO G E T AT your savings account records! ! ! ! ! Wise UP! people ! ! ! ! All the rest is Crap and Trap. Believe an experienced vet. Spend only out the ¢a$h you have, and save at least ten percent of what you earn.

you should have at least one. Buy your gas with it and pay it off in full every month. Your credit will improve vastly.

 

[eldirector]

My credit cards pay me.

Seriously.

If you can get one, find a Discover or Visa card with cash back. I get 3-5% cash on EVERY purchase. Made me a couple-hundred bucks in FREE MONEY last year, on stuff I had to buy anyway. We swipe for about everything (gas, groceries, dinner out).

The trick is to TREAT IT LIKE CASH. If you couldn't otherwise pay in greenbacks, you can't pay for it on credit either. Takes some discipline, which is why so many folks get in trouble. Keep your credit limit low. Just call the card company when they try to raise it, and have them drop it back down. Don't fall for special offers, because there is ALWAYS a catch. Points cards are a BAD idea, IMHO. Unless the points can be used on something you NEED to buy anyway, it is just money wasted.

That's ElDirector's wisdom, for what it is worth. It has worked for us for about 15 years.

 

[Mr.JAG]

"Your credit ... improve, vastly." For what? Getting another credit card? No, it won't. For a mortgage? PROBABLY NOT. OOOps. A clean sheet is the best for you if you are thinking of a house or vehicle. Gas cards prove nothing except where you buy gas. Have you noticed now, they bait buyers with 10¢ a gallon gas rebates JUST TO G E T AT your savings account records! ! ! ! ! Wise UP! people ! ! ! ! All the rest is Crap and Trap. Believe an experienced vet. Spend only out the ¢a$h you have, and save at least ten percent of what you earn.

I can tell from your post that you are most likely money wise, however, you know little to nothing about how the "credit game" works.

Yes, using a credit card (the *right* way) WILL improve your credit score.
Yes, having a mortgage and making timely payments on it WILL improve your credit score.

In fact, NOT having at least SOME kind of revolving credit line and long-term payment debt WILL HURT your credit score.

 

[Mr Evilwrench]

I've had credit cards for a long time; wife got me in trouble there for a while, but I have a whole deck of them once again. I try to use each one every few months just so they don't get canceled for inactivity, but it's nice to have the backup. I've been using one of them pretty hard for a couple of weeks because the bank bungled my debit card for me. Paid off $900 tonight just to keep it clear. I think the bank is straightened out now.

 

[EvilBlackGun]

"Do you have a job?"

First thing a lender wants to know. "What's your income?" O.K. you know the drill. Here is the way to stay ay ahead of the curve: Everyone knows WalMart. Did you know that they have a credit-card? Yupper! GET ONE. YOU AND YOUR SPOUSE BOTH GET ONE (easier if you are not married, but going through their hoops is worth it.) Buy with it, BUT pay it off every time the bill comes in, and you will generate the best credit ever. Tires, clothing, electronics, tooth-paste, band-aids, groceries, liquor, ammo, ... ... everything on your credit card. O.K. ya'GOTTA keep track of all of your expenditures, cuz some of you are gonna go completely berserk on your card. That is why it is limited for a year. But for the serios credit-seeker, this is it! Who is bigger than WalMart? After a year go to Sears &/or Penney's and get another card. Now, unnerstan', you have just entered the "danger zone" of credit cards: two or more. But I trust you, since you have behaved by WalMart's terms for a year. You SHOULD be responsible by now. You might even have your bank make automatic payments to WalMart. If the bank payment does not cover the monthly, mail it in. SPEND NO MONEY ON UNNECESSARY INTEREST! THIS IS IMPORTANT. Use your credit, and don't let it abuse you.

That's why I'm asking. Trying to find out if it will help build credit.

 

[DocHoliday]

Had credit card fraud within a week of using it on Midway USA. I can't trace it back to them but it was the last time I used it. Just be careful with it.

 

[EvilBlackGun]

We're both right, a little

See my post re building credit through a Dept. Store credit card. It IS a "game" designed to screw over the unsuspecting consumer. I was / am a watchdog to prevent that. I am a Credit Social Worker w/ 25 yrs in my field. And your credentials are ... ...?? I know nothing of you or your prejiduces. Are YOU going to tell us all "the right way" to use a credit card? Do so, while we wait. Revolving Credit is a misnomer for "meat-grinder credit" which I am sure you know, but am equally sure you will not share. How does a young consumer -- 25~30 y.o. -- develop "long-term credit?" I suggested WalMart but YMMV. Fill us in. EBG

I can tell from your post that you are most likely money wise, however, you know little to nothing about how the "credit game" works.

Yes, using a credit card (the *right* way) WILL improve your credit score.
Yes, having a mortgage and making timely payments on it WILL improve your credit score.

In fact, NOT having at least SOME kind of revolving credit line and long-term payment debt WILL HURT your credit score.

 

[mrjarrell]

A credit card is not a bad thing to have. Having a lot of them is. We use ours for online purchases and travel and pay it off. It has a nice high credit limit that could be of use in a true emergency, like a medical emergency. Just keep them paid off and your credit will improve, even with small purchases. It's nice to have access to money in case there's a real emergency that requires instant funds.

 

[MrsXtremeVel]

I can tell from your post that you are most likely money wise, however, you know little to nothing about how the "credit game" works.

Yes, using a credit card (the *right* way) WILL improve your credit score.
Yes, having a mortgage and making timely payments on it WILL improve your credit score.

In fact, NOT having at least SOME kind of revolving credit line and long-term payment debt WILL HURT your credit score.[/QUOTE




This is true. The last loan I got for a vehicle ( thru the dealership ) they said my credit score was so good, that I could leave with the new Corvette they had on the show room floor. Obviously, if I was that rich, I wouldn't need a loan. I paid the loan off a year early. I never had a late payment. Little by little over the years I built my credit up. Don't be suckered in by using the credit card companies " line of credit ". It's a rip-off. It will cost you more in the end. Be wise and you'll be fine.

 

[jkaetz]

Short and sweet

1. Get CC with no annual fee.
2. Buy stuff with it, how much is up to you but don't go over the limit if it is low and don't buy anything you wouldn't normally buy. As someone else said, treat it the same as cash.
3. Pay the balance in full every month.

Having one and using it like the above will improve your score and keep you from paying any interest or penalties. I've done the above for the last 18+ years. I currently have several cards with a total available limit nearly double my annual income, a couple student loans, a car payment, and a mortgage payment. At last check my score was 841. Simply possessing credit cards and carrying debt will not hurt you. Buying more than you can afford will.

 

[Doug]

I put essentially everything on my card. I pay it off every month.
I get 1% to 5% cash back on purchases. I just bought a gun with my last cash-back check.
I also get a printout of my purchases, organized by category, evey year around tax time. This helps track medical expenses.

The most important thing is to pay it off every month.

 

[mbills2223]

I'm curious as to why many of you have chosen to keep your credit limit low. "They" say that the higher your line of credit, the higher your credit score will go. If you are already responsible enough to treat it as cash and pay it off every month, why not let them give you more credit?

 

[Indy_Guy_77]

They are neither good nor bad.

Responsible use can be good... irresponsible use can be bad. That sounds a lot like a hobby most of us have in common...

If you don't think you can stay out of trouble, then do yourself a favor and don't get one.

Getting loans usually depends on credit score...which can be built up with responsible CC usage. But one does not NEED a credit score to qualify for a loan (mortgage, for instance)

I believe they are a useful tool for me. Especially for hotel stays, rental cars, and online purchases.

 

[Doug]

I'm curious as to why many of you have chosen to keep your credit limit low. "They" say that the higher your line of credit, the higher your credit score will go. If you are already responsible enough to treat it as cash and pay it off every month, why not let them give you more credit?

Some keep their limit low thniking that if the card is stolen, it will limit their liability.
My understanding is that you are not liable for fraudulent charges.
My limit is about 3 times my usual monthly spending.

 

[Mr.JAG]

See my post re building credit through a Dept. Store credit card. It IS a "game" designed to screw over the unsuspecting consumer. I was / am a watchdog to prevent that. I am a Credit Social Worker w/ 25 yrs in my field. And your credentials are ... ...?? I know nothing of you or your prejiduces. Are YOU going to tell us all "the right way" to use a credit card? Do so, while we wait. Revolving Credit is a misnomer for "meat-grinder credit" which I am sure you know, but am equally sure you will not share. How does a young consumer -- 25~30 y.o. -- develop "long-term credit?" I suggested WalMart but YMMV. Fill us in. EBG

It looks like we may have a misunderstanding here, so let me clear a few things up.

1. By "credit game" - I am referring to the game of achieving a high credit score.

It sounds like you are referring to the game of "credit trap", where the credit companies fool the consumer into getting in over their head. This is a valid concern for a consumer to have, but NOT what I was referring to.

2. Your original post claimed that a "clean sheet" was the OP best option for getting a house or vehicle. I took that as you suggesting he not use ANY credit at all, which of course is NOT the answer. Running a cash only system only hurts your credit, and thus, your chance of getting favorable interest rates (or loans at all).

3. I can see where you, as a credit social worker, have bias against credit card companies. I'm willing to bet you deal with people day in and day out that have made some horrible life choices when it comes to finances. You've probably seen the worse of the worse when it comes to the detrimental effects of poor credit use. Typically, I blame the consumers themselves for their own situation - and not the credit card companies. That is probably where we differ here (just guessing).

4. Your post about rebuilding credit came AFTER my reply to your original post. I would have suggested using a major credit company with cash rewards instead, rather than a store card, but the credit building effects will be much the same. Again, you made that post after mine - so it was not input I had from you before then.

5. Yes, I know the credit game. I play it very well. Do I have "professional experience" in a field directly related to it? No, I don't. I'm just an informed consumer who makes smart choices. (814 from Equifax as of today, at the age of 27 AND that is after taking a small hit from the recent mortgage I just signed). I subscribe to MyFico and get immediate updates to any changes or alerts with my credit. It costs me somewhere around 80 bucks a year and is worth every single penny.

6. The "RIGHT" way to use a credit card (i.e. How to make it improve your score).

- You have to actually OWN a credit card
- You actually have to use it!
- The most important factor is making timely payments (duh)
- Secondary factors are your credit age, debt to credit availability ratio, and overall credit availability.

The secondary factors are where most people mess up.
-They cancel their unused credit cards, which kill their ability to increase their credit age.
-They take out too many credit cards, which make their overall credit availability too large.
-They use more than 25% (approximation here) of their available credit balance. This is the one mistake I see a lot. If you have a credit limit of 1,000 - you should never carry a balance above 250 on it (approximation). I see all these people talking about keeping their limits super low, and they don't even realize that by doing so they are likely hurting their credit. A balance of 400 bucks on a 500 dollar limit is throwing your debt to available ratio off by a large margin (and thus, hurting their score)! That same balance of 400 dollars on a 2,000 dollar limit would actually HELP your score. Go figure uh?

I could go on forever on this subject.


Look, we both agree that this IS a game. I just know the rules that THEY want me to play by. I play by those rules because I understand it will save me money on interest rates in the future for when I NEED a loan (Home, auto, etc). With all that said, I never pay interest on credit card debt. That is always paid off in full. But I do use credit cards... and it's because I HAVE to in order to maintain a good credit score.




P.S.

To answer your question about building credit age as a young consumer. Yes, that can be a tough one. You really just need to get educated and get started as soon as possible. Honestly, I wish a "credit" class was a requirement in High School. It would surely do a lot more to help people than 80 percent of the crap they teach today.

For me? I was able to cheat a bit and piggy back a well-off relative. I'm not sure if they allow that anymore, but if they do and you have a strong credit score and a child, you would be doing that child a HUGE service by helping him with a piggyback. My relative did that for me when I was teen, but he also did it only AFTER teaching me a great deal of how the world of finances work.