Thinking of getting my first credit card

[dank69]

That's thankfully automated. Comes out at every pay cheque. Every other bill is automated too. It's the way to go. Weeks, months just go by too fast to try to remember to be on top of all that, rather have it just happen automatically and not have to worry.

If I just pay every time I login I don't have to try to make sure I'm within a specific window, I just pay whatever the balance is now. Easier. But I automated it it now so don't really have to worry.

You could automate paying the statement balance every month like all your other bills and literally never think about it again.

 

[Sonikku]

Go to your local bank with $2K and open a certificate of deposit. Use the CD as collateral for a personal loan of same or lesser amount, whichever meets the minimum amount. Pay loan off early. Bam, you now have a positive credit history. Repeat, repeat, repeat. It is costing you interest on each cycle of personal loan and repayment but it builds positive credit fast. Then once the CD has matured, cash out and get a personal loan at same bank using your now positive credit history. After this go get a decent credit card.

BTW, I am not aware of any well-known local/regional banks near me that offer secured credit cards. They use to some 15-20 years ago but seemed to have stopped that. This is why I suggested the CD as collateral to a personal loan.

Step 1: Get $2000.

 

[Red Squirrel]

You could automate paying the statement balance every month like all your other bills and literally never think about it again.

Which is exactly what I ended up doing. My old credit card did not have that option but my new one does. I still have not cancelled the old one yet, trying to get the points up high enough so I can redeem most of them first.

 

[esquared]

So what part of that is not true then?

If you only choose to pay once a month when the statement comes out, you have a pretty small window between when the statement comes out and when it's due. I rather not have to mess with that and try to remember. I just make regular payment so I'm always ahead. It's not that complicated.

That's not true. As I said it's 15-20 days from statement date to due date
I underestimated. I looked at my cards.
- Statement date out the 26th- due date the 23rd the following month
- statement date out the 1st and payment due on the 26th
Statement date out the 4th and payment due the 1st of the following month
- statement out on the 1st and payment due on thr 27th.

So I have, nearly the whole following month, after the statement, to make a payment.
Not hard to remember. Way more time that the mortgage gives you.
If you have trouble remembering, do as other have said and just set up automatic payment of the balance due on the date you want.

 

[Red Squirrel]

Like I said, I already setup the automatic payment. But BEFORE I found that it was even an option, I still preferred staying on top of the balance and not waiting last minute (ex: when statement comes out).

My only thing left now that does not have automatic payment is my server hosting and that one always makes me a bit nervous as despite having backups it would still suck if I forgot to pay and then I ended up losing the server and having to rebuild everything as it's all online production stuff. It's important, but not important enough to justify having two servers. That, and this was a once in a life time deal so doubt I'd find something comparable. But that too I make sure to be well ahead. I pay like 3-4 months at a time. So far so good after a few years at least. If they would offer auto pay I would jump on that regardless though. It's nice not having to even think about it.

 

[esquared]

Which is exactly what I ended up doing. My old credit card did not have that option but my new one does. I still have not cancelled the old one yet, trying to get the points up high enough so I can redeem most of them first.

Don't cancel old cards. Big mistake. (Unless you have a lot of card with longer credit history and have a large, total credit line.)
Just keep them active. Make a couple small purchases every several months and pay it off

They can drop your FICO in two ways.
1) They will shorten the average length of credit history

See : What goes into my FICO® Scores?
35% - Payment History
30% - Amounts owed
15% - Length of Credit history
10% - New credit
10% - Credit Mix

2) It will affect total utilization of credit.
If you have two 10K cards you have 20K credit. If you charge up to 2K at some point, you are using 10% of your total available credit.
If you drop/close on of those card because of non-use or the other card has better benefits/cashback, you now have 10K credit.
Now if you charge (at some point) 2K again, you have 20% credit utilization. That's worse for your credit and will show
up as a drop in your FICO.

 

[Red Squirrel]

Not really sure how big of a difference it really makes though, especially when I'm in the 800 range. But one thing I've been wanting to do is ask for a credit line increase so imagine I could do that if I cancel the other card. I hardly use the credit line but it's good to know it's there in case of emergency or if I need a new vehicle as the interest is way lower than a credit card.

 

[zinfamous]

How much are you spending to save that much on flights? You have to spend a LOT to accumulate an significant points. I redeemed points on a card I had for a good 5 years and it was enough for around $500 worth of Home Depot cards. It's something, but it's no vacation. I tend to just buy Home Depot cards anyway since I'm always spending money there on projects. Last's longer than a vacation.

well, you do have to spend a lot of money...but the way travel points work is that the value for flights/hotels (Travel) is often worth 3x (or more) your worthless home depot cards. so, your $500 HD cards were actually worth $1.5k if you instead chose to spend it on travel, for most proper travel cards.

That's a real difference.

 

[Red Squirrel]

Oh I see that does make more sense then if it's worth 3x.

 

[manly]

well, you do have to spend a lot of money...but the way travel points work is that the value for flights/hotels (Travel) is often worth 3x (or more) your worthless home depot cards. so, your $500 HD cards were actually worth $1.5k if you instead chose to spend it on travel, for most proper travel cards.

That's a real difference.

That's not how the math works. Travel related expenses earn 3x points. That doesn't mean that he could have redeemed his $500 worth in points for $1500 in travel. It does mean he accrues points faster depending on the spending category. For most "normal" people, I think the Citi Double Cash back card is close to ideal: 2% back.

If you go by Chase Sapphire Reserve (one of the top high-end cards), the points redemption value is 1.5x for travel. Now some of the most savvy travelers can redeem points for awards travel at even better valuations, but that depends on how you look at things. Let's say you can travel biz class round-trip for 60k points to some international destination. That's a great deal compared to what the cash price of the airfare is, but is it worth 60k points to me? No, not really if the coach fare is a lot cheaper.

Finally, as far as what purbeast is talking about is card churning. I have excellent credit and I suppose I could do this, but it's never really piqued my interest. It's perfectly legal, but if too many people do it, the card companies will get stingier. That's why airline miles/points are devalued every couple years, because a very small percentage of people abuse the system.

 

[BarkingGhostar]

Step 1: Get $2000.

Step #0: If you can't raise $2K then you have other problems and need to stay away from credit cards.

 

[ImpulsE69]

it really isn't hard. my credit is outstanding....all you have to do is just pay your bills on time. CC's aren't for the irresponsible.

I stayed away from using them except for necessity for years, but now with the cash back cards, I use them quite often and pay them off a few days before the due date.

 

[Exterous]

How much are you spending to save that much on flights? You have to spend a LOT to accumulate an significant points. I redeemed points on a card I had for a good 5 years and it was enough for around $500 worth of Home Depot cards. It's something, but it's no vacation. I tend to just buy Home Depot cards anyway since I'm always spending money there on projects. Last's longer than a vacation.

A lot of Americans open and close cards frequently for sign up bonuses. Because of patterns in utilization and no cap on merchant fees US credit cards tend to offer high value sign up bonuses. The better offers are easily worth $700 (And this includes straight statement travel credit options) and I don't bother applying for anything worth less than $500. I'm reasonably certain Canada is a distant #2 in terms of sign up bonus options with everyone else barely registering at #3

Don't cancel old cards. Big mistake. (Unless you have a lot of card with longer credit history and have a large, total credit line.)

I think the cutoff for that having an impact is a very short duration if everything else (except Hard Inquiries) is in great shape. I just checked my history before adding this reply and my average account length is under 3 years and my overall score is currently at 802. My hard inquiries are high but everything else is in great shape. I open and close about 5 cards per year although 2-3 of those are business cards

perfectly legal, but if too many people do it, the card companies will get stingier. That's why airline miles/points are devalued every couple years, because a very small percentage of people abuse the system.

Mass consolidation of carriers and major hotel chains along with several years of record breaking and near record ridership and hotel occupancy has probably had a larger impact. Why bother rewarding loyalty if you're busy and people don't have a choice?

 

[nakedfrog]

Step #0: If you can't raise $2K then you have other problems and need to stay away from credit cards.

A huge swath of Americans don't have $400 to cover an emergency...

 

[zinfamous]

Which is exactly what I ended up doing. My old credit card did not have that option but my new one does. I still have not cancelled the old one yet, trying to get the points up high enough so I can redeem most of them first.

Don't cancel your old credit card--credit history is part of your report. If you suddenly go from having a 10 year credit history (it is based on your oldest, current account) to a 5 year one, you will get a huge ding. A lot of people keep old cards that they no longer do anything with--except maybe $20 per month, here and there--just to maintain the length of credit history. And you can pretty much only do this with a cc because loans get paid off.

If it has an annual fee of any kind, I'd talk to the cc people and ask to get bumped down to a lower-tier, zero annual fee card on that same account, and just not use it.

 

[zinfamous]

That's not how the math works. Travel related expenses earn 3x points. That doesn't mean that he could have redeemed his $500 worth in points for $1500 in travel. It does mean he accrues points faster depending on the spending category. For most "normal" people, I think the Citi Double Cash back card is close to ideal: 2% back.

If you go by Chase Sapphire Reserve (one of the top high-end cards), the points redemption value is 1.5x for travel. Now some of the most savvy travelers can redeem points for awards travel at even better valuations, but that depends on how you look at things. Let's say you can travel biz class round-trip for 60k points to some international destination. That's a great deal compared to what the cash price of the airfare is, but is it worth 60k points to me? No, not really if the coach fare is a lot cheaper.

Finally, as far as what purbeast is talking about is card churning. I have excellent credit and I suppose I could do this, but it's never really piqued my interest. It's perfectly legal, but if too many people do it, the card companies will get stingier. That's why airline miles/points are devalued every couple years, because a very small percentage of people abuse the system.

oh you're right, I effed up the point redemption value and confused it with how they are accrued.

 

[snoopy7548]

A huge swath of Americans don't have $400 to cover an emergency...

Probably because they think credit cards are free money, or cheaper than shelling out $2k at once for a TV... "Hey! Instead of spending $2k now I only have to pay $50/month for 10 years!"

 

[nakedfrog]

Probably because they think credit cards are free money, or cheaper than shelling out $2k at once for a TV... "Hey! Instead of spending $2k now I only have to pay $50/month for 10 years!"

I'm pretty sure the situation is a lot more complex than that.

 

[highland145]

I'm pretty sure the situation is a lot more complex than that.

I've seen it 1st hand. Instant gratification trumps finance 101 a lot.

Article last said that last year (?) $20K and under auto sales dropped 20% and $80K sales went up 15%. Who the heck is buying $80K vehicles and why?

 

[nakedfrog]

I've seen it 1st hand. Instant gratification trumps finance 101 a lot.

Article last said that last year (?) $20K and under auto sales dropped 20% and $80K sales went up 15%. Who the heck is buying $80K vehicles and why?

Some people, yes. Overall, the situation is more complex than that.

 

[zinfamous]

I've seen it 1st hand. Instant gratification trumps finance 101 a lot.

Article last said that last year (?) $20K and under auto sales dropped 20% and $80K sales went up 15%. Who the heck is buying $80K vehicles and why?

To be fair, the consumers you deal with are more or less targeted by you because you don't want them bothering about the smarter things that they should do with their money.

 

[highland145]

To be fair, the consumers you deal with are more or less targeted by you because you don't want them bothering about the smarter things that they should do with their money.

Not true. I tell people all the time that they shouldn't borrow for their grown children, their irresponsible parents/siblings. They do it anyway.

 

[Red Squirrel]

I've also learned that lot of poor people are not the brightest. They only plan short term. By being "a good guy" I've fallen victim to that. I tried to help out when of my friend's friends that was suppose to pay me back. $200+ later I realized I'm never going to see that money again.

I feel bad for this guy, his wife went completely insane on him and ruined his life by spreading lies about him, and took everything away and put a restraining order on him so he can't even go to his own house. She got into drugs etc too. But at this point it's up to him to cut his losses and start over, as much as that sucks to do. Can't just rely on credit or borrowing money if you have no way to pay it back but so many people do just that.

 

[highland145]

I've also learned that lot of poor people are not the brightest. They only plan short term. By being "a good guy" I've fallen victim to that. I tried to help out when of my friend's friends that was suppose to pay me back. $200+ later I realized I'm never going to see that money again.

I feel bad for this guy, his wife went completely insane on him and ruined his life by spreading lies about him, and took everything away and put a restraining order on him so he can't even go to his own house. She got into drugs etc too. But at this point it's up to him to cut his losses and start over, as much as that sucks to do. Can't just rely on credit or borrowing money if you have no way to pay it back but so many people do just that.

Trust no one. Or be the good guy with lots of anal gel.

 

[snoopy7548]

Trust no one. Or be the good guy with lots of anal gel.

Assume that everyone is only looking out for themselves.