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[Mason]

Basically, can someone explain the basics of a credit card? I was sort of raised that credit cards were "bad" so I've never had one. I'm interested in getting one now that I moved out a few months ago and am living on my own.

From what I understand, they will try to lure you in with 0% interest for like the first few months then crank it up to something high like 20%. The thing is, I will just make a few purchases (that I could afford to make otherwise) per month and pay it off in full at the end of the month anyway. So do I even need to worry about the interest rate?

And there are a ton of other numbers and percentages that I have no idea about. And what are the differences between different companies and the benefits you receive and whatnot. Can someone explain?

And obviously, I'm a young guy so I have no credit as of right now and I'm not sure how that will affect what cards I can get. I don't want to get turned down for a credit card because I've heard that getting turned down will reflect on your credit.

 

[ChrisReid]

From what I understand, they will try to lure you in with 0% interest for like the first few months then crank it up to something high like 20%. The thing is, I will just make a few purchases (that I could afford to make otherwise) per month and pay it off in full at the end of the month anyway. So do I even need to worry about the interest rate?

Yeah, this is a great way to do things. Buy stuff, pay it off completely at the end of the month, and there is no interest charged. Make sure the card has no fee. You'll get a tiny bit of interest for holding onto your money in your bank for a month, you'll build credit, and you'll have the card as a reserve for a true emergency.

Also check out this thread http://www.ga-forum.com/showthread.php?t=57488

 

[Comfort_Eagle]

Credit cards are great, as long as you dont get really stupid and buy shit you cant afford. If you pay them off then you are building very valuable credit.

 

[Space Age Playboy]

This advice came from a Mike Meyers "Middle Aged Man" skit on SNL, but I think it's good info. If you have no credit and you're worried about getting turned down, start with a card from a department store. Then buy something cheap there every month and pay it off to build your credit.

My guess is they're easier to get since they're loaning you such a small amount of money to buy merchandise from them.

But then again, read the beginning of this post and take it for what it's worth.

 

[mashoutposse]

Rejections are not reported to credit bureaus. However, a record is kept of each time a creditor looks up your report (called "inquiries") and remains for two years. Excessive inquiries in a short period of time are looked at negatively by practically all lenders.

Open two accounts and use them wisely. Avoid late payments at all costs. That positive history will help you in the future.

Do not concern yourself with APRs as you have no history and will not receive the best rates from any reputable bank. Pay your bill in full (and before the statement closing date) for best results.

BTW, you do NOT have to actually spend money on your cards to 'build credit.' The most attractive credit histories show large credit limits with low to no usage.

 

[silver]

I've had a CC since I was 18. Back then, I used to spend maybe $50-$100 a month with it (ordering books and stuff from Amazon, my only reason to have one) and I would pay it off immediately.

Works great. Started out with a $1000 limit but never even came close to that figure. Definitely get one that's free of charge though, and don't do monthly payments. Pay for your expenses.

 

[WrathOfOtaibah]

I've been using CCs since 18 also. Best advice is to pay it off that month. You don't have to worry about interest and your credit score will improve.

 

[sefskillz]

I just put a tank of gas on mine each month and pay it off when the bill comes. Don't ever miss your minimum monthly payment, that's when shit goes bad. I'm 23 and my credit score is somewhere in the 720s.

 

[WrathOfOtaibah]

ah, never mind.

 

[sonicfan]

Just be careful what you do.

I am just amazed at how stupid so many people are when it comes to money and credit. A credit card in the hands of stupid people is almost like giving the credit card company the right to print money. And learn the difference between a charge card, a credit card, and a debit card.

Card companies make money on a credit card several ways. First there can be an annual fee, but many card companies have cards without fees, so try to get one of those.

Second, and what most people see is the interest rate. When you carry a balance, you get charged the interest rate on the balance. This rate can be low, but alot of times the rate is downright Usury IMO. The key is to NOT CARRY A BALANCE. Don't buy things you couldn't afford to pay for in cash. I see so many people that get a card that has say a $1500 limit, and think that what they are supposed to do is max it out right away and just make the little old "minimum payment", like its free money!!! WRONG. This is how they rape you.

Just use the credit card like an interest free loan which you pay back after a few weeks. That way, the card company is in effect PAYING YOU. But to top it off, the best card to get is something where you get something back, like a Discover Card or American Express Blue Card. They will pay you a certain percentage (Discover pays 1% or so) on all of your charges for the year, and cut you check for that amount. Other cards have special promotions where you can earn frequent flier miles, cash towards certain goods, or just outright "prizes". This is what I have always done for years and years, I put every expense that I can on my credit card, but pay it in full every month. Gas, groceries, cable bill, other utilities, just about everything. It may not sound like much, but 1% on say $10,000 gets you back $100 a year. I have a freind that has gotten golf clubs after the end of each year the last couple of years worth probably $400 or so.

And don't cry for the card companies, as they get a fee from the merchant when you use their card, and from the bank. The only real "risk" they face is non-payment. But they give out cards to so many people who shouldn't have them, it is a risk. But all the other suckers who pay them interest each month are paying for that risk.

 

[levious]

just want to second the above mention of opening two lines of credit... at least eventually once you're comfortable with things.