Credit Cards
 

Ok, my credit score report said my score would improve by opening another credit card account or two. Currently I have three BofA cards (two Visas, one Mastercard), a GM Card, and a Home Depot card.

I'm debating between an AmEx and a Discover card. I know for sure I do NOT want a Capitol One.

I pay off all of my cards every month, so I'm not really worried about interest rates. I'm also not going to get a card with an annual fee.

Suggestions? Experiences?


There was a thread on this, but it was 7 years old, so not very helpful.

I'd figure out something you'd use a lot and get a rewards card that gives you points toward that. My Lowe's Visa was awesomeness when I re-did the bathroom because I used it to pay for everything, paid it off right away (because I had the cash) and got a ton of money in rewards, which were like using gift cards to buy the last minute things for the bathroom. Saved me about $80.00 total. Since you're getting ready to move away from family, an airlines rewards Visa could be an idea.

I'm a huge fan of American Express. I got my first card when I was in college (tiny limit) in part because my parents recommended it.

12 years later, I still have that card, but I also have a Charge Card (where you're required to pay in full each month). I have it set up for Rewards, where virtually everything you buy gives you rewards and, for things like mobile phones, you get double points. I use the rewards points towards my Delta SkyMiles.

The level of consumer protection is fantastic; also, I've been stranded in travel and been able to have AmEx travel services rebook my flights instead of staying on the phone with Delta.

Not all AmEx cards have an annual fee, but the one I mentioned (Green, Gold, or Platinum) do. My friends who have CostCo AmEx cards are also really happy with the rewards.

My classmate has a credit card that her family uses to pay tuition. Since they have the cash, they pay it off right away and use the points to get free plane tickets multiple times a year. She just got back into town yesterday--she flew home for the weekend just because the ticket was there and she could.

Seriously? During my time in banking, we advised against this.

The report that explained my score gave me low marks in length of credit history and number of credit accounts. I got excellent marks for diversity of credit, available credit and timely payments. :)

I have both a AmEx and Discover Card and from my experience AmEx is way better BUT it doesn't sound right that opening a new credit card will boost your FICO score. Once you get apply for a new card your credit score is actually going to take a 30-50 pt hit that will take anywhere from 3-9 months to recover from so if you are looking to improve your FICO score because you want to get a mortgage or new car DO NOT apply for any credit. The only thing I can think of is that they are suggesting that having more available credit will improve your score but if that is the case, you are better off calling your current cards and asking them to raise your credit limit

Opening a new account would not increase your length of credit history, though. Was this report through one of the Big 3/FICO/someone else (I'm being nosey lol)?

Quote:

Originally Posted by PiKA2001 (Post 2147927) I have both a AmEx and Discover Card and from my experience AmEx is way better BUT it doesn't sound right that opening a new credit card will boost your FICO score. Once you get apply for a new card your credit score is actually going to take a 30-50 pt hit that will take anywhere from 3-9 months to recover from so if you are looking to improve your FICO score because you want to get a mortgage or new car DO NOT apply for any credit. The only thing I can think of is that they are suggesting that having more available credit will improve your score but if that is the case, you are better off calling your current cards and asking them to raise your credit limit

This is what I've always been told as well.

I was just approved for a re-fi on my house and should close within a week or so (almost 2% lower than my current rate), and am not planning on buying a car or anything else any time soon. Being that I'm heading off to school, and I may not have much income to report for a school year, and having extra available credit would be awesome, now is probably the time to do this. If my credit score comes out better in 9 months when I'm just getting done with school, it will be a good thing.

CreditKarma, which is a subsidy of TransUnion.

I was working on number, not length.

Interesting. Times are a-changing.

I would mirror what PiKA said re: increasing existing credit rather than applying for new credit accounts. The debt-to-available credit ratio > total number of credit accounts

It will as long as you keep paying off the 5 cards you currently have every month. The biggest part of your credit score (and the part that seems to be holding your score down) is the length that you've had your accounts in good standing. The only way to improve that is to play the waiting game.

I think this is good advice.

That said, I love my American Express. It's been my "go to" card for many years and I love the rewards. My rewards definitely outweigh the annual fee, but I use it for almost everything I can and pay it off every month. I used reward points to pay for my plane ticket to the Gamma Phi Beta Convention next month. But, I don't think if it would be worth the hefty annual fee if you don't plan to use it and just want it in your wallet to boost your available credit.

I echo what most others said -- opening new accounts won't improve your credit score until you've had them a while. In fact, every authorized query into your credit history (which happens every time you apply for credit) will actually ding your score. But if you are looking to extend your line of credit before embarking on a year of school, Amex is the way to go. They have long had the most respected and most popular membership rewards program in the world. Plus, if you get a revolve (i.e. credit) card, you can usually get one that has no annual fee. Since you pay your cards off every month, you won't have the worry about paying interest. But if you hit a cash flow crunch during your year of higher education and limited income, you can still carry a balance if you need to. I have a Delta rewards card but my parents rave about their Costco rewards card (big cash back rewards) and I'm thinking of switching to that.

The reason to get new cards is to lower your total credit utilization. While the typical rule of thumb is no more than 33%, the optimal number is actually around 10%.

So, if you are using more than 10% of your limit on your other cards, it might help to get a new one.

That said, I have both an AmEx and Discover. They both have their different benefits, but I like the AmEx much better.

I have the Blue Cash AmEx. The 3% cash back on groceries and 2% on gas is really nice. I also like how each purchase I make with it is covered by a warranty from AmEx itself, so if I have a defective item and the merchant is being useless, I'm covered. It's also extremely fun to have a transparent credit card.

The Discover card has 5% cash back on various categories at various times, but they tend to be for certain luxuries that I generally tend not to indulge in. As a result, it builds real slowly. Whenever I had to call them, they're also noticeably less professional than AmEx.

Generally speaking:

AmEx: better cash back for essentials, extra protection, high APR
Discover: better cash back for luxuries, low APR

I decided to try for an AmEx, and they couldn't instantly approve and are mailing a decision. I've had that go both ways as far as getting approved. The last two (a year ago) both got approved. Annnnd, due to my lack of patience, I went ahead and applied for a Discover as well. I got instant approval for a fairly decent amount. Whether I come out ahead on my credit score in the end, I've now got some windfall financially for NYC.


Ironic confession time: My oldest card was a tiny limit card with an annual fee. I called the bank to see, since I've had this card since 2008 and neeeever been late on a payment including the other two cards I've had with this same bank, if they would waive the fee or convert it to a different type of card. They said they couldn't without losing the credit history. So it got put out of my mind, and I forgot to make the payment on the fee (I don't use this card much anymore). :o I called the bank (again) to see if they would waive the late fee and not report to the credit bureau since I've neeeever been late on a payment, and I was only 1 day late, and he told me that it was all good - my type of card doesn't charge a late fee on a balance under $100, and doesn't report unless you're 30 days past due.:cool:

I opened 2 credit cards iin the past 2 years (one in mid 2010 and one last year). It has taken 2 years to recover from the hit on my credit from the first card I opened and likely will take another year to recover from the second card. So I would say it takes about 2 years to recover. I will not do that again!

Since the topic has been started, does anyone have any advice for a first credit card? I want to start building credit and I know that takes time. I'd only use it for things I could pay off right away. I was thinking a secured credit card but I wanted to see if anyone had any recommendations.

My first credit card was a secured one and it served me well for its purpose. After a year or so, they moved it to an unsecured one, so as long as you're being responsible with it, it's fine.

I think that several banks have credit cards for "new to credit" people and students, so I'd investigate those as well, as you won't have to front any money to open those.

Don't do it! If you don't already have a credit card, DON'T get one! Check out the Ecredable website for "establishing credit."

I've never heard of that service before, but I just read about it and it seems a little suspect.

Have you used it? I'm trying to understand it a bit more.

I highly suggest a credit card, not for the credit, but for the security:

1.) Much better protection; if your card gets stolen, you have no liability, and invalid charges are very easily protested via a phone call (chargeback). In contrast, with most debit cards, you're liable up to $50 and have to go thru a certain (relatively long) process to recover your money.

2.) Security. It's not linked to any of your actual money. That's why there's a bill at the end.

3.) Safety margin. Despite the high rates, in case of emergency, it's a great source of extra money. You don't even pay interest if it's extremely short term (i.e. within the month).

For a first card, if you don't have any credit already, I'd suggest asking your bank whether or not they offer any credit cards. They're usually easier to apply for since they already have access to your bank accounts, and it's nice to know where you can speak to someone in person about your card. It probably won't come with any interesting features, but it'll also be the easiest to manage. You want your first card to either be MasterCard or Visa since those are most widely accepted. AmEx is much harder to get approved for, and both AmEx and Discover are not as widely accepted as MC/Visa.

Agree with everything, but...

...most of the regional and larger banks will take no more than a week or 2 to finalize claims, but give you provisional credit in the interim (so you still have access to your money). I've never heard of this pseudo-deductable, though.

I haven't used it because unfortunately, I'm in debt, and therefore, I have a credit score right now and don't have a need to use it. It's a service that's highly recommended by Dave Ramsey. I was really trying to not play "the Dave card" in this thread. It's basically a service for you to build your own alternative credit. Okay, so you may pay $8-$10 bucks a month for the service to do so, but if you used a credit card (even the folks who "pay it off every month") it's likely that you're going to pay more than that in interest fees.

This isn't the thread to get into why credit cards are evil. I wasn't even going to say anything until I saw that someone who doesn't have a card pipe in....and I swear if I had known then what I know now, no way on God's green earth would I have ever gotten my first CC. I posted the information so that people without CCs will know there ARE alternatives to "building your credit score." Sure, you might have to put down a deposit for some things (like getting your electricity hooked up), or you may have to shop around until you find a mortgage lender with a brain who can look at other sources of financial responsibility other than how much debt you already have, but there are ways to do everything you need to do that you otherwise would have had someone check your credit. If you try to get a lease at an apartment and they insist that they have to check your traditional credit and you don't have any, then again, keep shopping.

Ugh - I could go on and on, but this isn't the place for it. Simply put, There are alternatives to building your credit score, and ecredable is a way to help you do that.

Oh, I wasn't trying to trash you for posting it -- I was just trying to get a better understanding of it.

From what I read, it seemed like this company would compile its own "credit report" for you and, when you need to apply for credit (which is the kicker), they will give you a document that you can give to the lender. I cannot think of one business that would accept a printout from me as proof of creditworthiness (as much as FICO, et al have their faults, they ARE the standards).

As long as you're using credit responsibly, I don't see a problem with it. Getting a CC and paying it off within the grace period = no interest, so I'm not sure how you'd "pay more in finance charges" than you would on a membership to this site. For someone establishing credit history, spending ~$50 on gas/groceries or whatever and paying it off each month is a good jumping off point.

(ex-banker here, so I always jump in on these topics lol)

Not true. If your debit card has a visa or mastercard logo on it, and you run your debit card AS a credit card when paying for purchases (ie, you do NOT enter your pin), it's got the same protections as a credit card.

Yes, a bill that you have to pay...with interest. Why pay some ridiculous fee to a credit card company because for the convenience of using "their money" to make the purchase rather than using my own money? For rewards points? Okay, so how much money do you have to spend to get something "free" back as a reward?

What constitutes an emergency? The girls are going out tonight and I don't get paid until next week? Oh I'll just put it on my credit card! That's what ends up happening. If instead, you build up an emergency fund of 3-6 months of your monthly expenses, you won't need a credit card for "emergencies. If you have $10-$15K in an easily accessible (but not too easy) bank account, if your car dies, or your air conditioning unit goes out on your house, you will have the money to fix the emergency. You don't need a credit card for that.


I understand :) I used to work at a credit union.

I agree....but the problem is, simply put most people do NOT use credit responsibly. They don't pay it off immediately. And even those that "do", the credit card industry is finding ways that they are still going to make money off of you. You can't temporarily borrow money from a credit card company and not pay some kind of fee for it. Credit card companies aren't charity. They are in it to make money. The consumer has no way to pull a fast one on the credit card company; the CC company WILL make a profit off of you somehow. One day, you'll slip up. You'll have an "emergency" and you won't be able to pay it in full that month. Then it becomes a slippery slope.

While you're probably right that many places won't necessary take a print out for credit worthiness, it's a start. Ecredable has only been around 3-4 years I believe, and there are companies who WILL take a report on how often you've paid your regular utilities, and other monthly bills, on time. It may be that you rent from a landlord with a house, rather than a mega apartment complex. As I mentioned previously, you may be required to put down a deposit (but if you don't have debt, a couple hundred dollar deposit shouldn't be an issue for you).

Now, if FICO would get their CRAP together and determine credit worthiness on a scale that was based on financial responsibility rather than "how well you played the game" with debt, then people wouldnt feel like they had to get a credit card and play with debt in order to prove credit worthiness for large scale purchases, such as a car or house. Or you could just be totally weird and save up to pay cash for those kinds of purchases and credit wouldn't even be a factor.

If you're not managing your credit properly, there's a good chance you won't manage your finances PERIOD properly, making this tool useless.

Amen @ the bold. That's always been my beef with FICO.

I agree that credit cards CAN be evil, but they aren't evil if you pay it off every month and don't pay interest. It seems to me that people who have the discipline to save 3-6 months of expenses, then you also have the discipline to use your credit cards with restraint. If you think of credit card availability as cash availability, then you probably aren't a person who is able to save up 3-6 months of expenses. There are situations where using your debit card can severely limit your available cash flow, especially if you have to travel for work. Scenario: You are staying at a hotel for work and when you check in, they put a certain dollar amount on hold as pending, for incidentals. I've had this amount be as much as $50 a day. So you're there Sunday-Friday and they've put your hotel bill plus this pending $250 on your bill. You had to rent a car too and they put a $300 deposit hold on the car, even though the total rental bill is $150.00 for the week. So there, you have $400, plus your $900.00 hotel bill and your $150.00 car bill all coming out of your checking account but it won't be reimbursed for a couple weeks.

The next week, same thing, different city. So by now, you've got $3000 of your own money tied up (because you paid cash for all your meals too). I'd much rather toss that all on a card and pay it the minute I get reimbursed than to pay it out up front, taking money from savings to cover it and losing the interest I'd be earning on it.

Or, like I said, when I was doing my bathroom and had the cash to pay for everything but put it on my Lowe's Visa so that I got $40 back to buy more of the things I needed. I paid it off before I even got the bill. I know people at work who used a credit card to pay for day care that was being reimbursed through their FSA dependent care account. They got massive frequent flier miles doing that and never paid a dime in interest.

Bottom line is.. you can't succumb to the temptation to use for anything you don't have the cash to pay for. Too many people can't do that. You have to know yourself and your own limits.

All that said, hypo and I have been discussing her getting a student card in case of real emergencies with her several states away and no convenient way to get her money. For years she has had a VisaBuxx teen card which is like a secure card that I could put funds on right from my checking account. The bank we have her VisaBuxx card from is no longer going to participate in the program so we have to find a new option. Her having that card has been wonderful for us because I could put cash on it and she could go school clothes shopping, buy gas, pick up groceries for me, etc. I could transfer money to it online and it was immediately available to her. There was no annual fee but there was a $2.00 fee each time I put cash on it, so we tried to anticipate her needs in advance and put exactly what we needed on it. I felt better about her having that than carrying a bunch of cash around with her. She used it when she went to Europe and I could monitor how she was spending her money and whether she would need more. It was great when she was in NYC last summer and she could use it for her baggage fees and taxi's to and from the airport without carrying huge amounts of cash. We loved that card and I'm sad that it's going away!

If you want to stick with the prepaid debit card option, you may consider the AMEX prepaid card. I use it (I don't like paying bills from my checking -- all bills/"bar" money is on the prepaid) and there's no annual fee or reload fee (unless you reload using Greendot/MoneyPak).

ETA:

The card I use says it also builds your AMEX history (read: not credit history) so they can have an idea how you manage money, should you ever apply for one of their cards.

There's also a teen card, if you want to check that out.

Thanks, I'll look into those. I was hoping to find a teen card for my son next. It makes me feel better when they are driving that they have some kind of emergency "fund" too. The only downside to this one, it seems, is that it says bank transfers may take up to 5 business days to show up on the card. I liked that the other one was instantaneous! But, we can probably work with 5 business days too.

Hypo will also be getting a checking account and I am hoping she can get a debit Visa with that. I will probably have to open an account at the same bank so I can do transfers more easily too. So much to think about with a kid going so far away!

Yea, the 5 day thing is a hassle, but I have my direct deposit split so some of it goes to the card.

If there's ever an emergency, I purchase a MoneyPak from Walgreens (or CVS or 7-eleven) and load it that way. The MP is $4.95 to buy, but AMEX doesn't charge you to load money that way. Walgreens has a one hour delay, but purchasing the MP from other places allows you to load it immediately.

I don't think it's useless. I think this tool could be used for someone young, who hasn't had a run in with borrowing money to establish credit, and also for people who are "recovering" from bad credit.

I think it's ridiculous to say there's no reason to have a credit card. Just because people misuse them all the time doesn't make them horrible.

My parents opened a credit card in my name when I was young and used it to pay bills, and then paid it off in full every month without fail. They gave me the physical card when I turned 18 and took over paying for everything myself. So as a young adult, I had a nice long established credit history. I still pay off the card in full (almost) every month and I have outstanding credit scores.

Obviously this wouldn't work for everyone -- I've always been really responsible. My parents did this same procedure for both of my younger siblings and it worked well for the middle sister and me. The youngest has required more parental oversight in her finances.

I meant useless in that specific context (someone who doesn't manage his/her finances well). Obviously, it fills a niche or it wouldn't be in existence ;)

Well, as others have said, not if you pay it off each month.

My father did something similar, putting my name along with his on a credit card when I was in college. I used it, he got the bill. Nothing like knowing your dad will get the bill to make you careful about how you use it.

I have three or so credit cards, not counting one for work expenses. I don't use any of them very often -- just often enough that they know I'm there and still paying my bills.

You do realize that this is identity theft, right?

This.

The "omg credit cardz are the devilllll" thing is ridiculous. They really are a great way to build your credit if you're using them responsibly and not treating them like they're "free money."



Credit cards aren't windfall, though. I don't mean to be rude, but I hope you're not planning to finance an NYC move all on credit cards.

I have a Paypal debit card that my mom used when I was at PSU to transfer money. If you have your Paypal account hooked up to your bank account you can send money instantaneously to hypo and if she has the card she can use it right away.

There's no fee to use it as a debit card but it is a $2 charge to take out cash (but you can also say take out $40 once instead of $20 twice to save money that way) and most places take debit cards anyway. The only issues that I've had with it is that last summer they were calling me every other day asking if my charges were legitimate. Which is good because I never worried about fraud but annoying the one time they froze my account. They call you before they do that though.

Also sometimes when I'd go to get gas it would automatically charge $75 to my account and if there wasn't $75 in there it would get declined. Sometimes it doesn't do that though. But overall I like it and it was very useful for my mom and I who don't have the same bank. The transfer is also instantaneous and can be done through a smartphone app/on a phone's browser on your end.

That's the gas station, not the card. If you pay at the pump, gas stations will sometimes preauthorize a set amount that will get cleared up when they submit their receipts for processing.

You can get around this by going inside and paying up front.

You're insane. It was a card joined with their account, and I took it over when I turned 18.