Credit Cards

[r2vq]

[color=#007520]Now that I've grown older, moved out, and am earning my own bread and butter, I've been thinking that planning for my future would probably be a good idea. Although I've heard a lot of horror stories about them, one of the things I'm planning on doing is getting a credit card.

What I'd like to do is build a good credit history. This way I can get a mortgage or take out a loan in the future if I need to for any reason. It'll take some time, but I'm young. It'll take discipline, but I think I've got some pretty good money managing skills, even if I could be slightly more aware when it comes to daily things. There's a risk, but the risk isn't as great as the reward.

Besides building a credit history for the future, having a credit card gives me access to things that may have been blocked off in the past. Online shopping is a good example. Renting hotel rooms or cars would also become available to me, though the latter would probably happen only if I got a driver's license. I also wouldn't have to carry around much cash with me.

The risks, though, are true horror stories. Credit card debt is no joke and is a financial nightmare that way too many people have fallen prey to. High interest rates make the debt difficult to pay off and the bad credit rating will haunt me for a long time to come. Some of my friends tell me how slowly they're credit card debts are being paid off, and I don't want to be one of them.

I think with some careful planning, calculated spending, and good habits, that I'll be able to control my credit card. But that leads me to my current problem, I have to get a credit card first. Since I'm young, have no credit history yet, and am not a student living with his parents, banks don't want to give me credit.

One of my options is getting a department store or secured credit card for a couple months... but I'm not sure about those just yet. I've been asking everyone I know for advice and thoughts on credit cards but have yet to come to a conclusion about what I'm going to do.

Since I've been thinking about this for a while now, I thought I'd bring the topic out to the boards.

Who has a credit card here? If so, has it helped or hindered you financially?
What is the best advice you can give to someone who is trying to get their first ever credit card?
How did you OB'ers get your first credit cards?
...and any other stories or if you just want to talk about credit cards, etc. You know the jazz.

Let's kick this pig. :)

-r2[/color]

[AzureWolf]

[COLOR=maroon]My personal tricks and experiences:

Never go "eye" shopping - spontaneously shopping and going on impulse - with your credit card. Force yourself to use money in that case so you don't splurge.

Don't spend money you don't have. There's no penalty/interest for paying before the interest sets in - at least on my credit cards.

Link your credit card with a checking account (Wachovia!). This way, money's always covered as long as you know you have it.[/COLOR]

[Japan]

[COLOR="DarkRed"]Simple answer, and a few steps to a safe and awesome credit history:


[LIST=1]
[*]Get a Credit Card
[*]Buy a suitcase or safe
[*]Put credit card in said suitcase or safe
[*]Lock said said suitcase or safe
[*]5. Hide key
[/LIST]


And only use the card for booking flights or emergencies!

Thus you can build up good credit history[/COLOR]

[Fasteriskhead]

First of all, there are some people who just [i]should not have credit cards[/i]. I'll assume that most of you already know who you are, in which case you've probably either A) cut yourself off/limited yourself somehow, or B) already ruined your credit history to the point where no one is going to give you any more cards to abuse anyways. I figure that you folks already know how the game is played, so I'm skipping y'all to deal with the greener crowd.

For the rest of you, I assume you can hunt down cards with low interest rates and promotional deals on your own. I'm just going to give you three tips on how to use the accursed things once you've already gotten one you like. I'm no economist so take everything with a grain of salt, but this is general common-sense advice.

1. PAY YOUR BILL ON TIME. I cannot emphasize this enough. Credit card companies are absolutely unforgiving about late payments: you might have been a paying customer for years, but drop that envelope in the box a day late and you get stung for a late charge and will suddenly see your interest rate shoot up to the low 30s. Seriously, pay the bill as soon as it arrives if possible, which leads us to...

2a: TRY TO PAY OFF YOUR BILL COMPLETELY EVERY MONTH. If you're controlling your spending, this should be a cinch. There are a lot of people who think they're being clever by just paying the $20 (or whatever) minimum every month and leaving the rest to collect interest ("hey, I get to keep more money around that way!!"). These people are [i]morons[/i]. Generally it's better to have your bank account in double digits and a paid credit card bill than a massive balance that's growing by the day. On the other hand, you're only human and bad things do happen, so if you're still massively screwed over somehow... 2b: LOANS ARE BETTER THAN CREDIT CARD DEBT. Look, I know it's easier to just let a credit card balance sit and forget about it, but don't. While you are in debt you are [i]bleeding money[/i]. That should be staunched as much as possible, so you want to see if you can get someone less greedy to help you pay your Visa bill. Head down to your local bank (or, if you're a student, the loan office) and see what they can do - at worst, you'll only lose a few hours of your time. The math is pretty simple: would you rather be paying the bank at 12%, or credit card interest at 19? A few points doesn't seem important, but it adds up very quickly.

3. Four words: TREAT IT LIKE CASH. This is a thought exercise that's good for when you're just starting off with credit. Every time you're thinking of pulling out your card to pay for something, ask yourself: would I be comfortable paying this much [i]in cash[/i]? Imagine yourself digging into your pocket and thumbing through the bills. Imagine yourself passing over a wad of twenties (or whatever) to the cashier. Then, ask: am I [i]comfortable[/i] with that? Because really, that's what you're doing when you swipe the plastic - you are giving the store [i]real god damn money[/i], not otherworldly phantom currency that you'll never have to worry about. I like this exercise not only because it gives the amount you may be spending a more tangible feel, but also because it shows how you should really be using the card. Basically, treat it as a way to save yourself a run over to the ATM, and [i]that's all[/i]. If you have no money in your account, [i]you are still broke[/i] even if you've got a financial poker deck dozens of cards strong - so for god's sake [i]act like it[/i], and hold off on buying Bioshock and the next Black Lagoon DVD until you are no longer in a ramen-for-dinner-every-night situation.

Look, credit cards aren't evil. You don't have to treat them like The Bomb, only to be used in the worst possible circumstances. They can be extremely useful, they give an enormous flexibility to your purchasing power, and using them will help to build up your credit history. But seriously, [i]be careful[/i]. Don't begin to think of your card as a magic wand you can wave to have anything you want - these things will [i]ruin your life[/i] if you aren't paying attention. Just as gun owners should know to keep their weapons pointed downrange when the safety's off, card owners should know to never ever purchase anything with plastic that they couldn't buy some other way if they wanted to. Use some common sense and keep track of yourself, and that's really all there is to it.

[James]

[color=#606060]Credit cards definitely have pros and cons but I think that if you handle them appropriately they are really valuable.

First and foremost, there are just some situations where you'll really need one. For example, hotel bookings. Most hotels (pretty much all I've ever dealt with) require a credit card. If you don't present one they will often take more money than needed (usually they will take additional money as a deposit to protect themselves if you use mini bar items or things like that).

Credit cards are also a useful form of identification in some areas - so they have uses outside simply the financial aspect.

I did experience one incident of credit card fraud, whereby someone in Italy apparently tried to buy a train pass on my card. Luckily I pay extra for 24 hour transaction monitoring. The transaction was picked up and put on hold until the bank could confirm that the purchase was made by me or not. When they determined that it wasn't me, they immediately cancelled the card and sent me a new one with new numbers and such.

So although credit card fraud is a problem, the truth is that fraud can occur on many levels and in many different ways; you are never invulnerable. Your best bet is, if you can, to find a company that will offer extra fraud protection. It's worth the money.

In my case, I only use my credit card for particular circumstances (like booking flights, hotels and things of that nature). I also use the card for certain major purchases (i.e. computers).

I always keep to two particular rules:

1) If I spend a smaller amount of money on the card (or if the card goes under its limit at all), I immediately pay back into it to bring it over its limit.

2) If I want to make a big purchase, I put extra money on my card to put it into credit. This way I'm not actually borrowing any money at all, I'm just spending my own money that I've put on top.

So say you have a $2,000 limit for example. If you put another $1,000 on that, you'll have $3,000 available. But if you only spend the $1,000, you're basically spending your own money.

This allows you to have a transaction history on your card without actually borrowing anything.

The benefit of this is that you are constantly contributing to your credit rating without putting yourself out too much.

But yeah, generally I'd agree with what others here are saying; if you're an impulse shopper or you aren't diligent with money, a credit card can be a problem. You have to be careful.

But as long as you are, it shouldn't ever be a horror story - it can be a very useful part of your life if you manage it properly.[/color]

[Flagg]

[QUOTE]Originally posted by [B]Japan_86[/B]
[SIZE="1"][I]Simple answer, and a few steps to a safe and awesome credit history:

1. Get a Credit Card
2. Buy a suitcase or safe
3. Put credit card in said suitcase or safe
4. Lock said said suitcase or safe
5. 5. Hide key



And only use the card for booking flights or emergencies!

Thus you can build up good credit history[/I][/SIZE][/QUOTE]

I pretty much agree with Japan here. You will probably need one at one point or at least find yourself in a better position to have one, but only use it for emergencies. Don't go around using it to pay for normal things. Bottom line is don't spend money that you don't have. It's 2 bad that this world is set up so you practically need a credit card for some things cuz I really just don't like the idea of the things.

[r2vq]

[color=#ff7520][quote name='Japan_86'][COLOR="DarkRed"]4. Lock said said suitcase or safe
5. Hide key
[/COLOR][/QUOTE][/color][color=#007520]The only issue is that I'm not getting the card for emergencies, I'm getting it to build credit. And the way credit works is that it wont grow if I don't use it.

[color=#ff7520][quote name='Fasteriskhead']Look, credit cards aren't evil. //snip// But seriously, [i]be careful[/i].[/QUOTE][/color]I like the advice you gave. It's a lot along the lines of what I was thinking, but it spins it around from a different perspective, I think.

[color=#ff7520][quote name='James'][color=#606060]I did experience one incident of credit card fraud, whereby someone in Italy apparently tried to buy a train pass on my card.[/color][/QUOTE][/color]I forgot about credit card fraud. It's something that is a little scary. You got lucky because you were paying extra, I don't really want to pay that extra fee... there's got to be another way around it.

I heard that (in the states at least, I don't know about Canada) that if you report your missing card on the day of, you're not allowed to be charged for more than $50 of what was spent. Some plans don't get charged at all. But I'm not sure how that all works out, disputing charges like that.

-r2[/color]

[Allamorph]

[FONT=Arial]I know what you mean about having no credit history. I recently split a cell-phone plan with my sister; she wanted something to use with her friends (:therock:) and I needed an emergency contact device. Because she wasn't yet eighteen I was the one who signed for the transaction, but since I had no credit history we were charged a $250 security deposit to make certain we'd pay our bills and what. Providing we haven't defaulted (and we shouldn't), we'll get the money back in January, which isn't so bad when you think about it. Still, that [I]was[/I] an extra two-fifty up front that a person with a good history might not have had to pay.

The only thing I dislike about credit cards is the type of money it uses, and I know that sounds a little odd. What I mean is, a credit card doesn't actually pay with money you possess, it pays with money [I]you plan on having[/I], which is money you do not have. (Excepting James' method, of course. That's a right spiffy idea.) The credit card company isn't just gifting you with an extra two-, three-, ten-thousand dollars ? that's their money, and they expect you to come up with it should you use it. The thought that occurs to me is: if one is spending the money one plans on having, why doesn't one just wait until one has it before spending it? If you know you'll have the money later, buy later. There isn't much to be gained by purchasing sooner that I can see.

This is, of course, discounting the emergency scenarios where one happens to need immediate temporary access to funds like this. That's understandable, and in my mind for what the whole credit system should have been designed ? that, and small business ventures. I am only talking about everyday common usage.

You said something else that caught my attention, though:
[quote name='r2vq][COLOR=#007520']Besides building a credit history for the future, having a credit card gives me access to things that may have been blocked off in the past. Online shopping is a good example. Renting hotel rooms or cars would also become available to me, though the latter would probably happen only if I got a driver's license. I also wouldn't have to carry around much cash with me.[/COLOR][/quote]
You can do all of these thing with a debit card, I believe, which is nice in that it ties directly into your checking account and is still under the Visa/Mastercard/AE label, allowing you to use it for online or over-the-phone transactions. Also, using it means you're still spending your own money, not someone else's.

I think the main issue with companies giving or not giving you access to credit is mainly due to your age. It falls in with the why of higher insurance rates for young drivers. Because younger drivers or borrowers tend to be more prone to costly mistakes [I]on average[/I], banks and credit and insurance companies are significantly more wary of that age group. I agree that having no history can't help you in such ventures, but neither should it hurt you, since it is, after all, an absence of information rather than negative information.

I know that the powers-that-be look kindly upon those who show that they can maintain a house or job for extended periods of time. I also think that it looks good if you have credit and simply don't use it ? it looks responsible of you.

I'm not sure, but can you also make your report more favorable by paying rent and utility bills on time consistently? I can't seem to find out if that kind of bill applies....[/FONT]

[Horendithas]

[COLOR="Indigo"][quote name='Allamorph'][FONT=Arial]You can do all of these thing with a debit card, I believe, which is nice in that it ties directly into your checking account and is still under the Visa/Mastercard/AE label, allowing you to use it for online or over-the-phone transactions. Also, using it means you're still spending your own money, not someone else's.

I think the main issue with companies giving or not giving you access to credit is mainly due to your age. It falls in with the why of higher insurance rates for young drivers. Because younger drivers or borrowers tend to be more prone to costly mistakes [I]on average[/I], banks and credit and insurance companies are significantly more wary of that age group. I agree that having no history can't help you in such ventures, but neither should it hurt you, since it is, after all, an absence of information rather than negative information.[/FONT][/QUOTE]I have a debit/visa card myself, it is rather handy since it comes straight from your checking account. However it's still a good idea to have an actual credit card for those emergencies that your checking account would not cover. As well as for booking hotels, flights, etc.

Also, an easy way to build credit is to use it for normal purchases like buying food. If you're like me and you plan your meals you already know what you are going to buy. And since you can use online services to pay it's easy to make sure that card is always paid off. Also, never, ever, max a card out. Or be late with a payment, those two things will hurt you more than anything. Just as having too many cards will as well, honestly I've never seen a need for more than two. Three if you count the one my parents insist that I have for true emergencies, but my father is the main person on that account, not me and I rarely use it.

One other thing, I will disagree with what Allamorph is saying about having no credit history not hurting you. Sure it won't right now, but later? When you start looking for a home or getting a loan for a car... Having no credit history will work against you at that point. They will be looking at your credit history to determine how much you would qualify for as well as for how good an interest rate you'll get. As well as seeing how responsible you are. So not having a credit history at that point will really hurt.[/COLOR]

[Allamorph]

[quote name='indifference][COLOR="Indigo"']One other thing, I will disagree with what Allamorph is saying about having no credit history not hurting you. Sure it won't right now, but later?[/COLOR][/quote]
[FONT=Arial]I was referring to now. Also, I did mention that there are other ways to create/improve your credit [I]history[/I] besides using a credit [I]card[/I]. The former doesn't necessitate the latter, unless I misunderstand the concept of credit history.[/FONT]

[James]

[quote]You got lucky because you were paying extra, I don't really want to pay that extra fee... there's got to be another way around it.

I heard that (in the states at least, I don't know about Canada) that if you report your missing card on the day of, you're not allowed to be charged for more than $50 of what was spent. Some plans don't get charged at all. But I'm not sure how that all works out, disputing charges like that.[/quote]

[color=#606060]Well there are two things about this. First, you have to know that your card was used inappropriately on the day it was used - it's unlikely you'll know unless you either a) retrieve a statement (which may not show the transaction on the day) or b) you go to use it and there's no money available.

If someone uses your card (and it isn't you), then you should not have to pay for that transaction - it should be wiped and the person should be pursued/reported.

I only pay a tiny yearly fee to have extra card protection and monitoring...and I feel it's worth it. You don't want to mess around with a credit card.[/color]

[r2vq]

[color=#007520][quote name='Allamorph'][FONT=Arial]You can do all of these thing with a debit card, I believe, which is nice in that it ties directly into your checking account and is still under the Visa/Mastercard/AE label...[/font][/quote]I haven't seen a bank in Canada yet that lets your debit card tie in with Visa/Mastercard/AMEX companies.

I'm not sure about the States but the difference between Credit Cards and Debit Cards are really big here. Hotel Rooms wont take a Debit Card as a deposit, but they will with Credit Cards. And although it's pretty easy to use a Credit Card Number and Expiry Date online, my Debit Account would require... a little more elbow grease (and possibly some headlight fluid).
Using my Debit Card also means that I have to pay fees for certain transactions...

[quote name='Allamorph'][FONT=Arial]I think the main issue with companies giving or not giving you access to credit is mainly due to your age. //snip// I agree that having no history can't help you in such ventures, but neither should it hurt you, since it is, after all, an absence of information rather than negative information.[/font][/quote]I don't entirely agree with you here, but I don't entirely disagree with you either. Having no credit is better than having [i]bad[/i] credit, but having no credit can still hurt you. With no credit I can't take out mortgages on houses or cars, and I can't take out a loan for one reason or another.
Credit card companies look at you as a customer, but one that they have to trust since they're giving you their money. If they don't know your credit history, how can they trust you at all?
But after seeing what you replied earlier, yes, having no credit history can't hurt me right now since there's less risk involved with using my own cash.

[quote name='Allamorph'][FONT=Arial]I'm not sure, but can you also make your report more favorable by paying rent and utility bills on time consistently? I can't seem to find out if that kind of bill applies....[/FONT][/QUOTE]Bill companies hardly ever report how well and how early you pay a bill, unless it's late. So paying a bill on time doesn't always give you good credit, but paying it late will definately give you bad credit. 8) Don't you love the way that works?

That, and I pay my rent/utillities in cash so... lol.

[quote name='James'][color=#606060]First, you have to know that your card was used inappropriately on the day it was used - it's unlikely you'll know unless you either a) retrieve a statement (which may not show the transaction on the day) or b) you go to use it and there's no money available.
//snip//
I only pay a tiny yearly fee to have extra card protection and monitoring...and I feel it's worth it. You don't want to mess around with a credit card.[/color][/QUOTE]:-/ You're talking about card cloning aren't you? That's a little scarier than what I had in mind, having my card/wallet stolen. In my scenario, I'd be reporting the card missing on the day I realise it's gone. In your scenario... I wouldn't even know the card was cloned, so I would have to dispute credit card statements...

I think security is a good thing, though... I'll have to ask the banker about it when I talk to her on Thursday. :3

-r2[/color]

[Allamorph]

[quote name='r2vq][color=#007520']I haven't seen a bank in Canada yet that lets your debit card tie in with Visa/Mastercard/AMEX companies.[/color][/quote]
[FONT=Arial]Ah. I admit that Canada is outside my experience. That bites for you guys, though. I paid an online transaction two weeks ago with a debit. :animesigh[/FONT]

[Rachmaninoff]

[quote name='r2vq'][color=#007520]I haven't seen a bank in Canada yet that lets your debit card tie in with Visa/Mastercard/AMEX companies.

I'm not sure about the States but the difference between Credit Cards and Debit Cards are really big here. Hotel Rooms wont take a Debit Card as a deposit, but they will with Credit Cards. And although it's pretty easy to use a Credit Card Number and Expiry Date online, my Debit Account would require... a little more elbow grease (and possibly some headlight fluid).
Using my Debit Card also means that I have to pay fees for certain transactions...[/color][/QUOTE]Interesting since in the states, if I understand it correctly a debit card is separate from a visa/check card since the bank I go to has both. The card runs as if it was a credit card but it comes from your checking account. But the advantage is that so long as you have the funds, you can use it anywhere. Which is why I like it. It's really no different than a Visa card except you aren't borrowing money, simply using your own. You just have to make sure you keep track of what's in your account so you don't try to spend money you don't have.

It also has no fees like a debit card does, some of those fees for debit cards are nothing more than a way to gouge you. Anyway, I think everyone has already given you pretty good advice. I'd start with just one card and keep it paid off and avoid the temptation of getting more than you really need.