Can someone explain some credit card questions?

[nboy22]

I just got my credit card, it's a college card with a limit of 500 bucks (first credit card).

So anyways I've been reading some things on the internet about all the different rates and etc. I have a few questions.

What's the best way to use a credit card? -- Buy things that are medium in price compared to the card's limit? Let's say a few sessions of 30-100 bucks?

Also, Let's say I buy a 300 dollar item with my credit card this month and pay it all off at the end of the period. Will that look bad and count for me, against me, or will it be neutral?

Also.. I'm having a little trouble with minimum payments. Let's say I buy a 300 dollar item on the credit card for the month and then make a 50 dollar payment when my minimum payment is 15 dollars. Will that count against me if I pay it off month after month with 50 dollar installments?

I just want some general clarification on how it is best to use the card and what will increase my credit score the best, I already have my apartment, electricity, and water bill under my name so that is building a little credit.

Here's the card specs:

Summary of U.S. Bank College Rewards Visa® Card Account Terms

Annual Percentage Rate for Purchases1 14.24% to 23.24% variable

Other Annual Percentage Rates

Balance Transfers:
14.24% to 23.24% variable

Cash Advances:
24.24% variable

Delinquency Rate2:
32.24% variable

Variable Rate Information
Your annual percentage rate may vary monthly. The rate is determined by adding a margin to the Prime Rate3. The margin used is as follows:

Purchases and Balance Transfers:
5.99% to 14.99%

Cash Advances:
15.99%

Delinquency Rate:
23.99%

Grace Period 20 - 25 days for purchases only

Method of Computing the Balance for Purchases Average Daily Balance Method (Including new purchases).

Annual Membership/Program Fee $0.00 the first year and every year that you charge at least one purchase to the account, otherwise $20.00

Minimum or Fixed Finance Charge $2.00 minimum finance charge when interest is due, $2.50 closed Account management fee if you voluntarily close your Account with a balance.

Other Fees

Cash Advance Fee:
4.00% of the transaction amount, $10.00 minimum

Balance Transfer Fee:
3.00% of the transaction amount, $5.00 minimum

Cash Equivalent Fee:
4.00% of the transaction amount, $20.00 minimum

Late Payment Fee:
Balance over $0.01 up to $99.99
$19.00

Balance of $100.00 up to $249.99
$29.00

Balance of $250.00 and up
$39.00

Overlimit Fee:
$39.00

Convenience Check Advance Fee:
3.00% of the transaction amount, $5.00 minimum

Overdraft Protection Advance Fee:
$10.00 per occurrence

Foreign Transaction Fee:
3.00% of the amount of your transaction in U.S. dollars

 

[Demon-Xanth]

Honestly, I'd chuck that offer in the trash in a heartbeat.

If you buy a $300 item and pay it off, it's not bad for your credit score. There's absolutely nothing against you for paying over your minimum payment (hell, you're expected to!)

 

[Noirish]

1. don't use more than 50% of available credit unless it's an emergency, it counts against you.
2. always pay off your balance

 

[nboy22]

Originally posted by: Demon-Xanth
Honestly, I'd chuck that offer in the trash in a heartbeat.

If you buy a $300 item and pay it off, it's not bad for your credit score. There's absolutely nothing against you for paying over your minimum payment (hell, you're expected to!)

I know.. a lot of people would.. but personally I've had some real problems.. and I don't have a lot of time to mess around with credit card companies so it's easiest just going through my bank. Keep in mind my rates are going to be horrible -- this is the first card I've ever gotten

1st financial bank sent me an offer, I sent my info back, and they said I don't exist under the USA Patriot act. OK... Then don't send me an offer if you can't honor it, idiots.

 

[RossMAN]

It's very simple, almost too simple.

Don't charge stupid stuff like $8 at McDonalds or $25 for two movies tickets.
Only charge something if you can pay it off in 20 days or budget for it a few months.
Payoff your entire balance in full every month to avoid interest charges.

Just use it, pay it off in full and repeat. Sounds easy doesn't it?

If you cannot pay it off in full, make at least the minimum monthly payment. Anything more than that will be applied to the principal balance.

Let's say you charge $450 and only pay the minimum payment of $20 per month. What you don't know is $18.50 of that is interest and the remaining $1.50 reduces your balance. So the following month you would owe $450 - $1.50 = $448.50 and the cycle continues. If you continued only paying $20 per month it would take forever to payoff your original $450 purchase.

NEVER EVER use the cc at an atm or as a cash advance unless it's a real emergency.

 

[nboy22]

Originally posted by: RossMAN
It's very simple, almost too simple.

Don't charge stupid stuff like $8 at McDonalds or $25 for two movies tickets.
Only charge something if you can pay it off in 20 days or budget for it a few months.
Payoff your entire balance in full every month to avoid interest charges.

Just use it, pay it off in full and repeat. Sounds easy doesn't it?

If you cannot pay it off in full, make at least the minimum monthly payment. Anything more than that will be applied to the principal balance.

Let's say you charge $450 and only pay the minimum payment of $20 per month. What you don't know is $18.50 of that is interest and the remaining $1.50 reduces your balance. So the following month you would owe $450 - $1.50 = $448.50 and the cycle continues. If you continued only paying $20 per month it would take forever to payoff your original $450 purchase.

NEVER EVER use the cc at an atm or as a cash advance unless it's a real emergency.

Thanks a lot man, this is exactly what I was looking for, especially the part about minimum payments. I was talking with my room mate over the minimum payments and I knew there was something about interest because that's how the credit card companies are able to stay in business, I just did not know EXACTLY how it worked.. I just wanted to get stuff cleared up before I get myself into some debt or something.

 

[RossMAN]

Originally posted by: nboy22

Originally posted by: RossMAN
It's very simple, almost too simple.

Don't charge stupid stuff like $8 at McDonalds or $25 for two movies tickets.
Only charge something if you can pay it off in 20 days or budget for it a few months.
Payoff your entire balance in full every month to avoid interest charges.

Just use it, pay it off in full and repeat. Sounds easy doesn't it?

If you cannot pay it off in full, make at least the minimum monthly payment. Anything more than that will be applied to the principal balance.

Let's say you charge $450 and only pay the minimum payment of $20 per month. What you don't know is $18.50 of that is interest and the remaining $1.50 reduces your balance. So the following month you would owe $450 - $1.50 = $448.50 and the cycle continues. If you continued only paying $20 per month it would take forever to payoff your original $450 purchase.

NEVER EVER use the cc at an atm or as a cash advance unless it's a real emergency.

Thanks a lot man, this is exactly what I was looking for, especially the part about minimum payments. I was talking with my room mate over the minimum payments and I knew there was something about interest because that's how the credit card companies are able to stay in business, I just did not know EXACTLY how it worked.. I just wanted to get stuff cleared up before I get myself into some debt or something.

You're welcome.

This is all basic stuff I learned in personal finance (high school) and on the job (consumer credit customer service and lending).

 

[nboy22]

Originally posted by: RossMAN

Originally posted by: nboy22

Originally posted by: RossMAN
It's very simple, almost too simple.

Don't charge stupid stuff like $8 at McDonalds or $25 for two movies tickets.
Only charge something if you can pay it off in 20 days or budget for it a few months.
Payoff your entire balance in full every month to avoid interest charges.

Just use it, pay it off in full and repeat. Sounds easy doesn't it?

If you cannot pay it off in full, make at least the minimum monthly payment. Anything more than that will be applied to the principal balance.

Let's say you charge $450 and only pay the minimum payment of $20 per month. What you don't know is $18.50 of that is interest and the remaining $1.50 reduces your balance. So the following month you would owe $450 - $1.50 = $448.50 and the cycle continues. If you continued only paying $20 per month it would take forever to payoff your original $450 purchase.

NEVER EVER use the cc at an atm or as a cash advance unless it's a real emergency.

Thanks a lot man, this is exactly what I was looking for, especially the part about minimum payments. I was talking with my room mate over the minimum payments and I knew there was something about interest because that's how the credit card companies are able to stay in business, I just did not know EXACTLY how it worked.. I just wanted to get stuff cleared up before I get myself into some debt or something.

You're welcome.

This is all basic stuff I learned in personal finance (high school) and on the job (consumer credit customer service and lending).

Yeah.. Unfortunately I haven't really gotten the chance to learn all this stuff yet. I'm sure I have in high school but I just forgot it over time, it's been a while.

I just didn't want to go charge some massive amount of money and get screwed, better safe than sorry

 

[Demon-Xanth]

Rossman+CPA+Vic=a team that could get a house paid off in two years if you loaned them $5.

 

[RossMAN]

Originally posted by: Demon-Xanth
Rossman+CPA+Vic=a team that could get a house paid off in two years if you loaned them $5.

Replace RossMAN with dullard and add kranky, four awesome guys who know their shit!

 

[oogabooga]

Originally posted by: Demon-Xanth
Rossman+CPA+Vic=a team that could get a house paid off in two years if you loaned them $5.

and that's in a down economy.

 

[nboy22]

Well I know who to talk to when it's time to buy a house. haha

 

[RossMAN]

Originally posted by: nboy22
Well I know who to talk to when it's time to buy a house. haha

Vic can hook you up on the mortgage side and the dullard and kranky can help you pay it off quicker.

Then CPA can help you with your taxes

Meanwhile RossMAN will put you into the poor house convincing you to buy HDTVs, laptops, cell phones, hard drives and other must have gadgets

:thumbsup: :thumbsup: :thumbsup: :thumbsup:

 

[Demon-Xanth]

Originally posted by: RossMAN

Originally posted by: Demon-Xanth
Rossman+CPA+Vic=a team that could get a house paid off in two years if you loaned them $5.

Replace RossMAN with dullard and add kranky, four awesome guys who know their shit!

But you'll find a house, use a coupon, double up on the rebates and get the house down to $-2000 before tax.

 

[kranky]

Originally posted by: RossMAN
Meanwhile RossMAN will put you into the poor house convincing you to buy HDTVs, laptops, cell phones, hard drives and other must have gadgets

I thought that was the old RossMAN?

OP: I salute your efforts to fully understand the ins and outs of credit. I only wish more people did so BEFORE they woke up in horrific debt. If you want to see what carnage results from people not paying attention to their credit, look at the yahoo answers Credit forum and see how many people are begging for help getting out of massive debt.

There's not a whole lot you can to to influence your credit score by manipulating your purchases. But what you CAN do is this:
1. NEVER pay late, not ever, not even once. Ever. This is the biggest problem that young people have with credit. They can be lazy and sloppy and figure "So what, it's only a couple bucks for the late fee." Meanwhile, the black mark lingers on your record long after the late fee is paid.
2. Make a promise to yourself that you will pay your bill in full every single month no matter what. The first time you do not, punish yourself by not using your card for three months. Do not allow yourself to get in the habit of carrying a balance. That's how people get started down the road of debt, because you can look at a a $100 purchase and start to think "Hey, that's only another $3 a month." You stop thinking about the fact that it's really going to cost you $300 because of the interest that accumulates while you pay only $3 a month towards that $100 item.
3. Do not keep your balance high month after month. If you only charge a couple hundred a month (in your case, that's only 40% of your total limit), you are more likely to get an increase in your limit after 6 months to a year. If you keep charging up to the limit, it may not happen as fast.
4. NEVER go over your limit, not ever, not even by one cent. Ever.
5. Do not buy things because you convince yourself they will help build your credit. Only buy what you need. It's very easy to rationalize purchases by pretending you're doing it to help your credit history. If you don't use the card for a whole month, nothing bad is going to happen.

 

[novasatori]

Depending on how far you are into college you can usually raise your limit based on what year student you are.
If you need a higher limit I wouldn't hesitate to call just say you need it for rent charges or something.

I pay everything on my CC, and pay it off every month. If you're responsible there is almost no reason not to pay everything on CC, you defer the actual payments for a bit and you get cash back.

And as mentioned you never want to be put in a position where all you're paying is the minimum payment.

 

[JoeKing]

Originally posted by: novasatori
Summary of U.S. Bank College Rewards Visa® Card

WTH are the rewards?

in any case since you're a student after a year or so you'll either get a credit limit increase or new offers for cards will come in. judging by that card I'd go with almost any new offer that came in.

Look a little more deeply into what your card offers, any bonus points/cashback? Do they extend warranties? Why exactly do they call it a "rewards" card?

For example in my case I got an amex card a few months back (I travel a ton so the rewards and insurances make the yearly fee worthwhile for me) and earn points for every transaction I make. So I've gone over to making all daily purchases, monthly bills, anything I normally would spend on during the month and place it on the card so I'm constantly earning points. And since this is all normal expenses I pay it all off in full every month. What I get out of doing this is more purchase protection for the little gadgets I buy, fraud protection, and points! Which I'll be using to pay for my plane ticket in full come Christmas .

Just be wise with your card, don't spend more than you normally would, and resist the urge to charge it when you really want that something you couldn't normally afford at that moment.

 

[thepd7]

Originally posted by: RossMAN
It's very simple, almost too simple.

Don't charge stupid stuff like $8 at McDonalds or $25 for two movies tickets.
Only charge something if you can pay it off in 20 days or budget for it a few months.
Payoff your entire balance in full every month to avoid interest charges.

Just use it, pay it off in full and repeat. Sounds easy doesn't it?

If you cannot pay it off in full, make at least the minimum monthly payment. Anything more than that will be applied to the principal balance.

Let's say you charge $450 and only pay the minimum payment of $20 per month. What you don't know is $18.50 of that is interest and the remaining $1.50 reduces your balance. So the following month you would owe $450 - $1.50 = $448.50 and the cycle continues. If you continued only paying $20 per month it would take forever to payoff your original $450 purchase.

NEVER EVER use the cc at an atm or as a cash advance unless it's a real emergency.

I agree with those principles but I disagree with putting small items on there. If you have the money to pay them off, put everything on there. it will build your credit faster.

I started like you when I was 18 with a $500 limit. Spent $350 on a computer purchase, paid it off, next month my limit went up to $750. Starting putting more and more stuff on my credit card and now my limit is $10k at 22.

Note: This is ONLY good advice if you are BUDGETING PROPERLY. Meaning, realizing how much you are spending and that you NEED to have the money to cover it in the bank.

DO NOT fall into the spending without realizing mindset, set up your account so you can view everything online and check it OFTEN to realize how much you are spending.

Best of luck, OP!

 

[TheTony]

Originally posted by: JoeKing

Originally posted by: novasatori
Summary of U.S. Bank College Rewards Visa® Card

WTH are the rewards?

in any case since you're a student after a year or so you'll either get a credit limit increase or new offers for cards will come in. judging by that card I'd go with almost any new offer that came in.

Look a little more deeply into what your card offers, any bonus points/cashback?

Details

I'd expect him to receive an offer from them when he graduates to change his card type (probably to Classic/Platinum Rewards).

 

[Eos]

I am rebuilding my credit 3.5 years after finishing a chapter 7 bankruptcy.

Just got my first card last month and have been using it for every purchase. Monday, I paid it off before the statement arrived.

It's actually kind of cool the way we track what I've spent.

We use Quicken. Our regular bank account is setup in it and the new cc is setup in there as well.

Each purchase I make with the cc I put it into the regular checking account with the correct amount and category (to track spending) but with the notes "My credit card". When I am ready to make a payment, I ctrl+x all of the transactions out of the banking account in Quicken and ctrl+v into the credit card account in Quicken. Then I immediately go online and make the payment from my checking.

By entering each purchase into the checking account I will have known exactly how much money I have left based on the fact I am only using the cc as a debit card. Every purchase I make is to rebuild my credit.

Works for me. Very well.

 

[bctbct]

With rates like that make sure you pay on time. 32% is pretty steep default rate. I would go 6 months and apply for another card with a larger limit. CCs are for convience and not to buy things you cant afford so always pay the balance. As others have said if you are trying to build a higher score stay below 50% of your limit. GL

 

[nboy22]

Wow, thanks a lot guys, all this advice helps a ton! It's all good stuff to know and I guess it also helps that I'm not one to spend money I don't have- in fact, I don't let my parents pay for my food or housing because I know I can support myself (at least in those two areas), I hate taking money from others even when it's offered to me by my parents.

It's good to know that those minimum payments could screw me over and that I should pay in full for everything, which I will try my absolute hardest to do, debt is very scary to me, I don't want to find myself in that position.

Again, I thank every one of you for chiming in and helping me out!

 

[RossMAN]

Originally posted by: kranky

Originally posted by: RossMAN
Meanwhile RossMAN will put you into the poor house convincing you to buy HDTVs, laptops, cell phones, hard drives and other must have gadgets

I thought that was the old RossMAN?

OP: I salute your efforts to fully understand the ins and outs of credit. I only wish more people did so BEFORE they woke up in horrific debt. If you want to see what carnage results from people not paying attention to their credit, look at the yahoo answers Credit forum and see how many people are begging for help getting out of massive debt.

There's not a whole lot you can to to influence your credit score by manipulating your purchases. But what you CAN do is this:
1. NEVER pay late, not ever, not even once. Ever. This is the biggest problem that young people have with credit. They can be lazy and sloppy and figure "So what, it's only a couple bucks for the late fee." Meanwhile, the black mark lingers on your record long after the late fee is paid.
2. Make a promise to yourself that you will pay your bill in full every single month no matter what. The first time you do not, punish yourself by not using your card for three months. Do not allow yourself to get in the habit of carrying a balance. That's how people get started down the road of debt, because you can look at a a $100 purchase and start to think "Hey, that's only another $3 a month." You stop thinking about the fact that it's really going to cost you $300 because of the interest that accumulates while you pay only $3 a month towards that $100 item.
3. Do not keep your balance high month after month. If you only charge a couple hundred a month (in your case, that's only 40% of your total limit), you are more likely to get an increase in your limit after 6 months to a year. If you keep charging up to the limit, it may not happen as fast.
4. NEVER go over your limit, not ever, not even by one cent. Ever.
5. Do not buy things because you convince yourself they will help build your credit. Only buy what you need. It's very easy to rationalize purchases by pretending you're doing it to help your credit history. If you don't use the card for a whole month, nothing bad is going to happen.

Wow awesome advice!!!

I cannot emphasize #1 enough, NEVER EVER make a late payment.