Credit Cards

[amanda6035]

Originally Posted by psusue

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.

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."

[knight_shadow]

Originally Posted by amanda6035

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.

[amanda6035]

Originally Posted by knight_shadow

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 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.

[excelblue]

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.

[knight_shadow]

Agree with everything, but...

Originally Posted by excelblue

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.

...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.

[amanda6035]

Originally Posted by excelblue

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.

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.

Originally Posted by excelblue

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

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?

Originally Posted by excelblue

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).

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.

Originally Posted by knight_shadow

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 credit history (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 creditworthiness ~$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)

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.

[knight_shadow]

Originally Posted by amanda6035

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.

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.

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.

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

[amanda6035]

Originally Posted by knight_shadow

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.

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.

[knight_shadow]

Originally Posted by amanda6035

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 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

[MysticCat]

Originally Posted by amanda6035

Yes, a bill that you have to pay...with interest.

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

Originally Posted by ADqtPiMel

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.

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.