Should i get a credit card to start building credit?

[erikiksaz]

I was reading about credit cards and all that and i was under the impression that it's NOT good to use a check card for purchases on the internet. This is what i've been doing ever since i received my card, so i guess it's time to put a stop to it! Anyways, the only thing i like about the card is that so long as i have money in the account, i could charge and charge and charge. What about a credit card though? For an 18 year old student, what would the limit be? I've read that most float around the 500 mark? How long before it rises to 1k? And how do people get credit cards that have limits such as 50k?! :Q

 

I applied and was approved for an American Express Blue for Students in December 2002. I don't use it much (only when I'm buying used books online from Amazon Marketplace or Half.com sellers) but if you're looking for a good customer service experience if/when you have problems, go with AMEX.

My credit limit is $2500, but I don't even care. The most I ever spend on it each month is $50. If you're (as a student who likely has a PART TIME job) thinking of spending >$500/mo. on stuff with a CC, then you have a spending problem and you probably shouldn't get a card. Since you're a student, I'm assuming that you DON'T have $500/mo. to spend on stuff.

EDIT: the reason I'm lecturing you is because a credit card should be used to take advantage of the CREDIT CARD COMPANIES...not to have them take advantage of you. If you pay off your bill each month, you're getting at least a 15-day grace period to pay, and you're also able to take advantage of their great customer benefits (travel insurance, customer service help, etc.). If you're carrying a balance, then you're paying the credit card companies for something that should and can be free (delaying your payments). If you can't afford to pay for something right then and there, then you sure as hell can't afford to pay for it with interest in a few months.

 

[notfred]

Most cards that a college studnet with no credit can get have a limit around $500, and a ridiculously high interest rate around 22%

If you use a card like that responsibly, you can probably get the limit increased to $1000 in six months to a year.

The reason that people can get $50,000 limits is because they have perfect credit. My mom owns her own business, has been a homeowner for 20 years, has no debt other than the mortgage, and makes $100,000/year. She could go to the bank tomorrow and get a $500,000 loan no problem, she normally gets offers for credit cards with $30-50k limits and 1.9% introductory rates. Of course, she's been building credit for 30 years.

 

[erikiksaz]

If you're (as a student who likely has a PART TIME job) thinking of spending >$500/mo. on stuff with a CC, then you have a spending problem and you probably shouldn't get a card. Since you're a student, I'm assuming that you DON'T have $500/mo. to spend on stuff.

No, i generally don't have too much cash to throw around, but it's just been lately that i've sold some of my belongings in order to purchase other things. That's how i've been able to throw around a few hundred. And after seeing how my sister was caught up with credit card charges, i know for damn sure that i won't charge something unless i can pay it off right then and there.

Thanks for the informative post! Btw, does AMEX still have that pricematching thing? That might come in handy for a poor college student

 

[eklass]

just after turning 18, i applied for a capital one card

many of my friends got capital one as thier firt card. sure the limit is like $300, but it's a great starting point and almost garunteed to get approved for a studen card. anyways... YES is the answer to your question

a few years later, i now have 4 cards, a car loan, and a couple personal loans... too much debt! NO don't get a credit card



ah... you decide

 

[erikiksaz]

Most cards that a college studnet with no credit can get have a limit around $500, and a ridiculously high interest rate around 22%

What would i do to avoid that interest rate? In the past, i've always thought that if you charged 500 on the credit card, you'd have 500 dollars to pay off when the credit card statement rolls around. But lately, i've heard and seen that you make several payments to pay off that 500. Which is true? And how could i avoid the ~22% interest rate?

 

Originally posted by: erikiksaz
Btw, does AMEX still have that pricematching thing? That might come in handy for a poor college student

Negative...that's never been a part of Blue for Students as long as I've had the card, and I think they might be phasing it out across the entire AMEX line.

 

Originally posted by: erikiksaz

Most cards that a college studnet with no credit can get have a limit around $500, and a ridiculously high interest rate around 22%

What would i do to avoid that interest rate? In the past, i've always thought that if you charged 500 on the credit card, you'd have 500 dollars to pay off when the credit card statement rolls around. But lately, i've heard and seen that you make several payments to pay off that 500. Which is true? And how could i avoid the ~22% interest rate?

If you pay off the entire bill each month when it comes (i.e., if you charge $652 on your credit card in April 2003, then you pay $652 when the statement comes in early May), then you're basically getting free money for half a month. Call it a grace period.

If, however you make the unwise financial decision to pay the minimum amount each month (or some amount less than $652) you will be charged interest in the following months on the remaining balance. This interest is often high on a student card (mine is 14.5%, but it can be much higher). I'm not worried about the interest rate, however, as I pay off my bill each month. The only reason I got a credit card is to build my credit history. I'm thinking of buying a new car within the next 2 years or so, so I'm just planning ahead. It's easier to get a car loan if you have a history of making payments on time.

 

[erikiksaz]

If you pay off the entire bill each month when it comes (i.e., if you charge $652 on your credit card in April 2003, then you pay $652 when the statement comes in early May), then you're basically getting free money for half a month. Call it a grace period.

I'm confused about that line.

 

Originally posted by: erikiksaz

If you pay off the entire bill each month when it comes (i.e., if you charge $652 on your credit card in April 2003, then you pay $652 when the statement comes in early May), then you're basically getting free money for half a month. Call it a grace period.

I'm confused about that line.

That's just the advantage (or so I call it) to having a credit card. You can use it to pay for something, and your checking account isn't debited right away. It's stored on your card's account until the end of the month, when the bill comes. Then, at the end of the month, you can pay the bill and you'll be all set with a clean slate for next month.

Just don't carry a balance. It'll get you into trouble and you'll end up paying a lot more than just what you bought.

 

[FoBoT]

no
wait until you graduate from college and get a job

 

[erub]

Yeah I think you should get one. I am a student and have two credit cards, an MBNA Student one and an American Express Blue for Students. The MBNA Mastercard started me off with a $500 limit but raised it 6 months later to $1000. The AMEX started me off at $500 and although I requested a higher limit, they denied me..no big deal though. I pay them all off each month, usually the day or two after the statement closes, and have made some midmonth payments when I thought I was going to get too close to the limit. Both MBNA and AMEX have great online websites, and I pay my bill electronically - no fumbling around with stamps/envelopes for me.

 

[jonmullen]

Whats bad about using check cards online?

 

[Uclagamer_99]

using a check card to pay is like handing them cash straight outta your checking account. once its gone its pretty much gone, if you have desputes like say some online company doesn't send a product it is MUCH HARDER to contest. With a credit card you can just call up the credit card company and contest charges and stop payment.

its a hassle to pay credit card bills every month but its worth it for the extra security it provides since you don't lose the money til you actually pay your monthly bills in comparison to taking out the money straight from your bank

 

[oniq]

After getting my credit card at a limit of $1000, I bought a couple items and paid it off right away. Within a couple months they raised the limit to $2000, so I bought a couple more things, paying it off right away, again. Now they've raised it to $3000. I bet they're trying to get me to buy something that I won't be able to pay off right away. :0

 

[jonmullen]

Originally posted by: HenHowC
using a check card to pay is like handing them cash straight outta your checking account. once its gone its pretty much gone, if you have desputes like say some online company doesn't send a product it is MUCH HARDER to contest. With a credit card you can just call up the credit card company and contest charges and stop payment.

its a hassle to pay credit card bills every month but its worth it for the extra security it provides since you don't lose the money til you actually pay your monthly bills in comparison to taking out the money straight from your bank

Thanks I guess I never though about this since most of my online stuff is done with Newegg and I trust them. What is a good starting Credit Card for a responsible 16 year old

 

[Mill]

Originally posted by: jonmullen

Originally posted by: HenHowC
using a check card to pay is like handing them cash straight outta your checking account. once its gone its pretty much gone, if you have desputes like say some online company doesn't send a product it is MUCH HARDER to contest. With a credit card you can just call up the credit card company and contest charges and stop payment.

its a hassle to pay credit card bills every month but its worth it for the extra security it provides since you don't lose the money til you actually pay your monthly bills in comparison to taking out the money straight from your bank

Thanks I guess I never though about this since most of my online stuff is done with Newegg and I trust them. What is a good starting Credit Card for a responsible 16 year old

In most cases you have to be over 18 to get a CC.

 

[Hector13]

Originally posted by: oniq
After getting my credit card at a limit of $1000, I bought a couple items and paid it off right away. Within a couple months they raised the limit to $2000, so I bought a couple more things, paying it off right away, again. Now they've raised it to $3000. I bet they're trying to get me to buy something that I won't be able to pay off right away. :0

card companies use some funky math to determine what credit limits should be. By the time I graduated college, my credit limit was around $12,000 eventhough my monthly bills were always $500 or so.

I've heard from others that if you pay slightly less than your full amount (ie, leave like $2 on you balance), your limit will be increased. I guess card companies like seeing some sort of financing charge or something.

 

[BruinEd03]

As long as you use it responsibly u should get a credit card. Just remember it's a tool to build ur credit and you'll be fine. E.g. use it to buy stuff you would normally buy (textbooks, groceries,etc. ), not something you've always wanted to buy but never had the cash to (new computer, cd player, etc.). Also make sure u mentally maintain a minimum balance in ur checking account so that you can always pay off the CC.

-Ed