Thinking of getting my first credit card

[BarkingGhostar]

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

And being poor means BEING poor. Just because you want something doesn't mean you have a right to have it while being poor.

 

[nakedfrog]

Okay?

 

[Mai72]

Dave Ramsey says it perfectly in this video. 9/10 people with credit cards do not pay their balances off at the end of the month. People lie all the time.

And, Dave says it perfectly again. How are you developing wealth with your credit card again? You're not.

 

[Sonikku]

Yes, I'm poor. I get it. But it should be fairly evident from the OP that this is about slowly building up my credit rating through responsible use. Not about going for a mad dash spending spree on what I can't afford to buy that will leave me in perpetual debt.

 

[rcpratt]

Dave Ramsey says it perfectly in this video. 9/10 people with credit cards do not pay their balances off at the end of the month. People lie all the time.

And, Dave says it perfectly again. How are you developing wealth with your credit card again? You're not.

I don’t care what 9/10 people do (and I doubt that stat is accurate), but the other “1/10” people can still use the system to their advantage.

Enough Ramsey videos, seriously.

 

[purbeast0]

I open 1-3 cards per year and cancel 1-3 cards per year when the annual fee comes up, and my score has been lingering around 830 for the past decade. Whenever I try to tell friends to get into the credit card game to save thousands of dollars a year on flights, they are always shocked to hear I cancel cards and are like 'doesnt it hurt your credit score?'.

My response is that I don't care because it's so temporary and my credit is already high, and when I open cards I get like $15k limits.

The whole "closing and opening accounts hurts your score" is completely overblown.

 

[highland145]

The whole "closing and opening accounts hurts your score" is completely overblown.

It's just how you do it. Many have no clue and will cancel older lines because they don't use them anymore. I have a BofA card from 1988 and pretty sure I'll still have that open until I drop dead. But at this point in my life it probably doesn't really matter.

 

[zinfamous]

I don’t care what 9/10 people do (and I doubt that stat is accurate), but the other “1/10” people can still use the system to their advantage.

Enough Ramsey videos, seriously.

I think I only know of Dave Ramsey because of Mai posts. I also get the feeling that he is basically the Herbalife or Amway for that "financial responsibility" sector?

 

[Muse]

I'm 34, have no credit and have never owned a credit card, having always saved and used a debit.

What do I need to know? Which cards are best? What red flags are there to look out for?

I was there. I wanted a CC and every time I applied they'd say I have no credit, so no soap. I kept applying and eventually was issued a card, obviously with a minimal credit limit. Once I had a card, I paid on time every time and eventually was able to get other cards.

My best advice is to not carry a balance, pay off your balance by the due date EVERY TIME. This will improve your credit rating. They higher your credit rating (tops out at 850, IIRC), the better... the easier it will be to get credit, the higher credit limits you will get.

The best way to insure you're not going to screw up your credit and also the easiest way to handle the whole credit card scene is to ALWAYS SET UP AUTOMATIC PAYMENT AGAINST YOUR CHECKING ACCOUNT... for each and every credit card you have. I do this every time. Also, set up automatic payment of all things you can against your checking account (e.g. utilities, even rent if you can). You then just have to do one thing instead of having to juggle a bunch of things and that one thing is keep enough $$$ in your checking account to pay all your bills.

One more thing: If you can get ahold of a credit card that gives you a % discount. My favorite is Citi Double Cash. It effectively gives you 2% cash back on your CC usage. My Citi Costco CC gives me 3% cash back on most travel expenses and all restaurants. My Chase Rewards card and Discover card have rotating 5% cash back categories. I utilize those discounts sometimes.

 

[skull]

Dave Ramsey says it perfectly in this video. 9/10 people with credit cards do not pay their balances off at the end of the month. People lie all the time.

And, Dave says it perfectly again. How are you developing wealth with your credit card again? You're not.

I'm not worried about what the idiots do, are you saying you can't handle credit responsibly?

I might not be getting wealthy but I'll gladly take the $1200/year I get running business expenses through my 2% cash back business card.

I paid interest once 2 months in a row when I bought my house. I was buying a fixer upper and I was supposed to get repair money at closing rolled into the loan. Instead 45 mins before closing they said sorry not only can we not fund repairs you have to put 12k in escrow on top of your down payment. Then I had to pay for repairs out of pocket before I could get my 12k back. Credit cards were a life saver I floated about 5k on cards for 2 months. Cost me around $150 in interest, which 4 years later is a lot cheaper than if I had rolled it into the mortgage as originally planned. If I didn't have cards I wouldn't of even been able to do it and would of been stuck renting a 1 bed apartment for more than the PITI on my 2 bed house.

 

[kt]

Dave Ramsey says it perfectly in this video. 9/10 people with credit cards do not pay their balances off at the end of the month. People lie all the time.

And, Dave says it perfectly again. How are you developing wealth with your credit card again? You're not.

No one ever said you build wealth with your credit card. Here we flaunt our wealth with our credit cards.

 

[dank69]

I open 1-3 cards per year and cancel 1-3 cards per year when the annual fee comes up, and my score has been lingering around 830 for the past decade. Whenever I try to tell friends to get into the credit card game to save thousands of dollars a year on flights, they are always shocked to hear I cancel cards and are like 'doesnt it hurt your credit score?'.

My response is that I don't care because it's so temporary and my credit is already high, and when I open cards I get like $15k limits.

The whole "closing and opening accounts hurts your score" is completely overblown.

It depends on the situation. The hit isn't going to hurt you because there is no difference between 750 and 830. But someone just above 720 cancelling a card will drop out of the excellent credit zone.

 

[purbeast0]

It depends on the situation. The hit isn't going to hurt you because there is no difference between 750 and 830. But someone just above 720 cancelling a card will drop out of the excellent credit zone.

For like a couple weeks. Then it goes right back up. So who cares.

 

[rcpratt]

For like a couple weeks. Then it goes right back up. So who cares.

Again, it depends. This kind of advice is geared towards the average consumer, and it sounds like that's not you. If you (like me) are churning cards and have lots of lines of credit with long histories, closing an account is not going to have a big impact. If you're a person with two credit cards and you close your oldest, largest line, you might see a big difference.

I have about $190k in total credit card limits between all my cards. When I close one, my credit utilization goes from like 3% to 4%. That's no different. If you go from 20% to 40%, that's a different story.

Similarly, if you're just closing a recently opened card that you're churning, you're not hurting your average age of credit, and you might actually be helping it. Not the same situation if you have fewer lines or its a line that you've had for longer.

The inquiry that you're going to see when you open a card has a very low impact overall in any case, but especially if you have a high score already.

 

[skull]

For like a couple weeks. Then it goes right back up. So who cares.

Actually positive credit history stays on your report for 10 years. So the card dropping off your report doesn't hit for a decade.

Getting the new card is what hurts. Average age of accounts is 15% of your credit score. So lets say you had one card for 3 years, you get a new one making your average age of accounts drop to 1.5 years. That could hurt quite a bit potentially. On the other hand lets say you've had 5 accounts for 2-10 years for an average age of accounts of 6 years, you get one new card and its barely a drop in the bucket taking you to 5 years AAOA.

 

[ringtail]

Suggestions:
a) shop around your local credi9t unions, find the best APR (annual % rate carge).

b) Some formerly restricted-membership credit unions whth beneficial terms recently relaxed their membership criteria. For example, The Golden 1 Credit Union recently opend it up to pretty much ANY & ALL people merely with a California address. Wherever you are may be similar? Probably. Dig into that and find out your CANDIDATE credit unions.

c) Go with the one with the lowest APR (annual percentage rate charge). As for the other "window dressing" features like cash back, travel points, etc., well some of those are really nice, but I don't know how to evaluate them against the BEDROCK CRITERIA of lowest APR. If you have enough spare time to shop the daylights out of this subject maybe (or not) you'll turn over a rock with a better combination of low APR plus BENEFITS like cash back (that was ALREADY YOUR' cash but now you're payoing interest on cash you previously owned outright), or travel or whatever. Essentially, if you're a working person without luxury of lots of time to put on this subject, then just shop lowest APR and you'll do fine.

 

[snoopy7548]

APR shouldn't even matter as the OP should always pay off their balance every month.