Thoughts on Credit Cards

emmaaa · August 2014

A thread over on Etiquette made me start thinking of this:

I am 23 and FI and I want to build a house whenever we officially "settle". FI will be done with school May 2015 and if he finds a job in our area, we definitely want to stay. Now, we have land to build on already that will be "gifted" to us if the time is right.

At 23, I have limited credit. My credit score is decent but I haven't ever had a credit card and neither has FI. Our fear is over spending and going into debt. After seeing others suggest that a credit card is a good way to build your credit (honestly, we could use it to pay bills and just pay off the card the same month) I've started thinking about it. We both need to build our credit before we try to start getting a loan to build a house, obviously.

So what are your thoughts? What companies do you reccommened or ones to stay away from?

climbingsingle · August 2014

I have two credit cards - one from BofA and one from Citi Bank. Oh - I also have a Target card. I haven't had any problems with these companies. I would stay away from Capital One. Their customer service really sucks.

You will need credit cards to build up your credit. Charge things that you can afford to pay off right away. Don't ever carry a high balance. That will lower your credit score. And check your credit frequently. I use Credit Karma since it's free.

MadHops21 · August 2014

I personally have American Express and Visa. AMEX is not used everywhere, but I get money back for every purchase. Used it on school tuition and received hundreds back.

My Visa isn't that great. but I use it to buy little things, like gas and food, then pay it off the next day. But it's been helping me build credit since the first day of college, so my score is pretty solid.

Not sure who to avoid, I only have those 2 cards and doing very well with both.

JCbride2015 · August 2014

I have gotten into trouble with credit cards before, so I'm not the greatest example. I have been carrying around $8,000 of credit card debt since I graduated college five years ago. It's gone up and down over the years. I had it down to $3,000 before Hurricane Sandy happened. I put a bunch of stuff on a credit card thinking we'd pay it later, then of course we had to move and it just never happened.

Last year I opened a new card at my bank which allowed me to transfer the balance for a 3% fee and it's zero interest until this October. That has really helped.

But interestingly enough, I still have quite a good credit score. Why? I am never late. Plus I have a lot of available credit that I'm not using, so my total credit limit usage is right around 25%. That looks good because it shows companies you won't just max out your card.

I try not to stress about it too much. We have a plan in place to start paying it off quickly once I begin my job, and it's not costing me anything in interest right now. I don't feel great about it, but it is what it is, and once I'm out of the CC debt I really will not go back.

daria24 · August 2014

I have a personal Visa, and then a joint AMEX (the free one) with H. I personally like the AMEX better, in the 15+ years H has had his AMEX account I don't think he's had a single problem. If there is a large or unusual purchase, he gets a text alert, but that's it. Whenever we've gone abroad he hasn't even had to call them and put a travel alert on it.

With my Visa TWICE I've had them cancel the card while traveling, even after putting a travel alert on it. I seriously bought $10 worth of gifts my second day of our Hawaii honeymoon and they canceled the card without even contacting me. Stupid. We have run into a handful of restaurants that don't take AMEX but it happens maybe twice a year, NBD. AMEX's foreign transaction fees are also much lower than my Visa. Also I originally got my Visa through my bank and it's now on it's third corporate overlord-they keep selling my account to a new company. That hasn't happened with AMEX.

AprilH81 · August 2014

I am not opposed to credit cards if you are careful and smart with them. I like the increased fraud protection and rewards that mine carry.

I would apply for a card that has a low fixed interest rate (be careful of the ones that do 0% for one year and then it jumps up to 22%). Start out by making smallish purchases like gas or groceries and paying it off immediately.

In the beginning treat it like an ATM card, if you don't have the cash in the bank don't put it on the credit card.

If you find you can accurately track your spending and not overspend then you can gradually build up your spending to your comfort level.

***It is not necessary to carry credit card DEBT to increase a credit score.***

On time payments are all the credit card bureaus are looking at, so make the full payment on time and your score will go up as your credit history is established.

I've had a credit card since I was 18 (parents were co-signers) and I think there were only two times in my life I've carried a balance.

emmaaa said:

A thread over on Etiquette made me start thinking of this:

I am 23 and FI and I want to build a house whenever we officially "settle". FI will be done with school May 2015 and if he finds a job in our area, we definitely want to stay. Now, we have land to build on already that will be "gifted" to us if the time is right.

At 23, I have limited credit. My credit score is decent but I haven't ever had a credit card and neither has FI. Our fear is over spending and going into debt. After seeing others suggest that a credit card is a good way to build your credit (honestly, we could use it to pay bills and just pay off the card the same month) I've started thinking about it. We both need to build our credit before we try to start getting a loan to build a house, obviously.

So what are your thoughts? What companies do you reccommened or ones to stay away from?

daria24 · August 2014

I will also add that I've never had credit card debt, I just don't charge anything I can't afford to pay off the next month. My percent usage is about 10% of my total credit limit.

mysticl · August 2014

Make sure you get one that does't charge you fees just for having the card. I have the Chase Freedom card. I earn points on it for purchases and every quarter there are new offers where I can earn bonus points for purchases at certain places. I can trade my points in for gift cards, cash, or my personal favorite to make a payment on the card. I always go for that option. One thing you can't use the points instead of your minimum payment (they still want their cash every month) but you can use them to pay extra.

kat1114 · August 2014

Creditkarma.com has user reviews of credit cards, which might help you decide on a card OP.

theartistformerlyknownas · August 2014

JCbride2015 said:

I have gotten into trouble with credit cards before, so I'm not the greatest example. I have been carrying around $8,000 of credit card debt since I graduated college five years ago. It's gone up and down over the years. I had it down to $3,000 before Hurricane Sandy happened. I put a bunch of stuff on a credit card thinking we'd pay it later, then of course we had to move and it just never happened.

Last year I opened a new card at my bank which allowed me to transfer the balance for a 3% fee and it's zero interest until this October. That has really helped.

But interestingly enough, I still have quite a good credit score. Why? I am never late. Plus I have a lot of available credit that I'm not using, so my total credit limit usage is right around 25%. That looks good because it shows companies you won't just max out your card.

I try not to stress about it too much. We have a plan in place to start paying it off quickly once I begin my job, and it's not costing me anything in interest right now. I don't feel great about it, but it is what it is, and once I'm out of the CC debt I really will not go back.

Ha, exactly this. I relied a lot upon credit cards for living expenses in college, and it got a little out of hand for a few years after that - I was constantly making a big payment and wiping out my checking, then needing car repairs or something so it had to go right back on the card. It was as high as 12k, and I've gotten it REALLY close to paid off a few times and then shit hits the fan again. I'm on pace to have it (and the wedding!) paid off by the end of this year.

That said, I still have a credit score north of 750 because I have such a long credit history (opened my first card at 18), don't have any late payments, I pay significantly more than the minimum and carry significantly less than my limit.

I have really good rewards on my Chase card, and FI loves his AmEx. Find a card that gives double points for gas and groceries, and ONLY use it to pay for those things. Don't even keep it in your wallet if you're not running those errands, and you won't be tempted to use it.

SBmini · August 2014

I built my credit up with car loans. Bought a car, sold a car, paid the loan off, rinse and repeat every few years. Credit cards can be helpful. but it is SUPER easy to look to it as a safety blanket. Oh shoot, I need new tires, better put it on the credit card. Oh, these shoes are on sale but I don't get paid until next week- put it on the credit card. So you have to be disciplined. Also, a lot of companies will not allow you to pay your bills with a credit card. That was our plan too, but it didn't work out that way.

We use ours for groceries, gas and travel... and things like tires and shoes every so often. We'll go months where we hardly use it then one month will be $1,000. We're very religious about paying it off and not keeping a balance- which is a mindset you NEED to have otherwise you end up squandering a lot of money in interest.

jenna8984 · August 2014

That's weird that someone else had bad customer service from Capital One Visa. I absolutely love them. I have the double points card (that Alec Baldwin does commercials for) and they have been awesome. When I travel oversees they have no fees for currency conversion which is awesome. I booked a flight and the airline went out of business before my flight. I called Capital One and said I need this money back in order to book another flight asap. They said they'd look into it and refund me within 5 days....it was done in less than 12 hours. I ALWAYS pay the balance in full each month so one month I accidentally paid a day late and they hit me with interest and a late fee. I called and they immediately removed both charges without question.

Treat it like a debit card. Only swipe if you know you already have the money to pay for it sitting in checking. Never swipe with the intent of "well with my next paycheck" because then they stack up and you're always behind.

And if you're able, open two cards. Have one that you just never even touch. Part of your credit score is your debt to available debt ratio. So if you have $5k available on 1 card and you currently have $1k charged, your ratio is 20% which looks bad. But if you open 2 cards for $5k each and you have that same 1k charged, your ratio is 10% of available credit used which is much better on your credit score.

sarahufl · August 2014

I have awesome credit. My parents raised us very well in regards to how to spend money, which I am incredibly fortunate for.

I would suggest a VISA or AMEX if you are only getting one. I had some problems with a Capital One Visa last year when I was in Bangkok. I had a travel alert and they straight up cancelled my card, 2 days into a 2-week trip. Their customer service was an absolute disaster when I was trying to deal with it. Luckily I had other cards, plus was traveling with H and 2 friends or else I could have been in deep shit without a card.

My understanding is that store credit cards can be bad for your credit, but I do have an Old Navy Visa because I get great rewards and spend (ahem, probably TOO MUCH) money at Old Navy/Gap.

My advice is to never charge what you can't afford to pay off at the end of every month. I don't care that my APR is 22% on my cards simply because I do not pay interest on them. Maybe if you are a first-timer, get the one you can have 0% for the first year, just so you can practice making payments.

Credit cards are not evil, you just have to be responsible with them. Good luck!

theartistformerlyknownas · August 2014

sarahufl said:

I have awesome credit. My parents raised us very well in regards to how to spend money, which I am incredibly fortunate for.

I would suggest a VISA or AMEX if you are only getting one. I had some problems with a Capital One Visa last year when I was in Bangkok. I had a travel alert and they straight up cancelled my card, 2 days into a 2-week trip. Their customer service was an absolute disaster when I was trying to deal with it. Luckily I had other cards, plus was traveling with H and 2 friends or else I could have been in deep shit without a card.

My understanding is that store credit cards can be bad for your credit, but I do have an Old Navy Visa because I get great rewards and spend (ahem, probably TOO MUCH) money at Old Navy/Gap.

My advice is to never charge what you can't afford to pay off at the end of every month. I don't care that my APR is 22% on my cards simply because I do not pay interest on them. Maybe if you are a first-timer, get the one you can have 0% for the first year, just so you can practice making payments.

Credit cards are not evil, you just have to be responsible with them. Good luck!

This is kind of offensive... just because people get into credit card debt doesn't mean they weren't raised well. It doesn't even mean they don't know better. Sometimes shit just happens.

Peaseblossom55 · August 2014

I am older so my credit is well established, but the first thing my dad made me do when I got my first full time job out of college was to get a credit card to establish credit. My dad was always awesome with me growing up teaching me about money and financial responsibility.

I pretty much only use the one main credit card I have to accumulate points on it and I pay it off in full the next month. I think there is only one time in my life I never paid my balance off in full. Although H & I have a Home Depot credit card too, we used it to pay for the new counters we are having installed, and the purchase qualified for 24 months of free financing, so we used the card versus paying it off in one lump sum.

pinkcow13 · August 2014

lolo883 said:

JCbride2015 said:

I have gotten into trouble with credit cards before, so I'm not the greatest example. I have been carrying around $8,000 of credit card debt since I graduated college five years ago. It's gone up and down over the years. I had it down to $3,000 before Hurricane Sandy happened. I put a bunch of stuff on a credit card thinking we'd pay it later, then of course we had to move and it just never happened.

Last year I opened a new card at my bank which allowed me to transfer the balance for a 3% fee and it's zero interest until this October. That has really helped.

But interestingly enough, I still have quite a good credit score. Why? I am never late. Plus I have a lot of available credit that I'm not using, so my total credit limit usage is right around 25%. That looks good because it shows companies you won't just max out your card.

I try not to stress about it too much. We have a plan in place to start paying it off quickly once I begin my job, and it's not costing me anything in interest right now. I don't feel great about it, but it is what it is, and once I'm out of the CC debt I really will not go back.

Ha, exactly this. I relied a lot upon credit cards for living expenses in college, and it got a little out of hand for a few years after that - I was constantly making a big payment and wiping out my checking, then needing car repairs or something so it had to go right back on the card. It was as high as 12k, and I've gotten it REALLY close to paid off a few times and then shit hits the fan again. I'm on pace to have it (and the wedding!) paid off by the end of this year.

That said, I still have a credit score north of 750 because I have such a long credit history (opened my first card at 18), don't have any late payments, I pay significantly more than the minimum and carry significantly less than my limit.

I have really good rewards on my Chase card, and FI loves his AmEx. Find a card that gives double points for gas and groceries, and ONLY use it to pay for those things. Don't even keep it in your wallet if you're not running those errands, and you won't be tempted to use it.

STUCK

I'm in the same boat. Right now I am trying to pay off my credit card debt. At one point, I completely paid off my debt and didn't have any for a few years. Then, I moved out, started school, etc. My credit score is excellent, though. I hate having the debt especially with the wedding coming up, but I've been extremely responsible and I'm aiming to have it paid off by the end of they year. I too have had a card since I was 18, so I have a very long credit card history.

blabla89 · August 2014

I've been pretty happy with my Chase Freedom card, which I was able to get when I was just out of school and had limited credit. You can expect to have a pretty low spending limit on your first card, but that's okay if you don't intend to carry a balance. Try shopping around for a card with a great introductory offer.

Credit cards are good for building your credit, but certainly not the only way. I think it's fine as long as you only spend what you are absolutely sure you can pay off each month. For me, I only used my Chase card for purchases in the cash back categories (like groceries and gas) so that I knew I wasn't going to run up a huge balance. Just watch out for the little voice in your head that says "you can buy it now and pay for it later" - if that crosses your mind, tell yourself NO NO NO. That's the trap that anyone can fall into, no matter how well-raised or responsible they are.

sarahufl · August 2014

lolo883 said:

sarahufl said:

I have awesome credit. My parents raised us very well in regards to how to spend money, which I am incredibly fortunate for.

I would suggest a VISA or AMEX if you are only getting one. I had some problems with a Capital One Visa last year when I was in Bangkok. I had a travel alert and they straight up cancelled my card, 2 days into a 2-week trip. Their customer service was an absolute disaster when I was trying to deal with it. Luckily I had other cards, plus was traveling with H and 2 friends or else I could have been in deep shit without a card.

My understanding is that store credit cards can be bad for your credit, but I do have an Old Navy Visa because I get great rewards and spend (ahem, probably TOO MUCH) money at Old Navy/Gap.

My advice is to never charge what you can't afford to pay off at the end of every month. I don't care that my APR is 22% on my cards simply because I do not pay interest on them. Maybe if you are a first-timer, get the one you can have 0% for the first year, just so you can practice making payments.

Credit cards are not evil, you just have to be responsible with them. Good luck!

This is kind of offensive... just because people get into credit card debt doesn't mean they weren't raised well. It doesn't even mean they don't know better. Sometimes shit just happens.

Sorry you find it offensive. I didn't mean it to be at all. It was more of a comment.

WinstonsGirl · August 2014

I have a Visa and MC, though I never use my MC. I prefer debit over credit. That way if the money isn't in my account, I can't buy it. I use my Visa though with online purchases (Amazon books, flights, etc.), so it's easier to pay off versus having a huge bill at the end of the month from putting everything on the Visa.

Look for one with lower overall interest rates. My bank offered one at 11% all the time. The one I have now is higher, but gives me cash back with no annual rate, and since I never carry a balance, the interest rate doesn't really matter to me at this point.

Start with 1 card and work just with that one. Try to stay away from Department store CC's, as they carry a much higher interest rate (normally) than other CC's.

Jells2dot0 · August 2014

There are some people that should just not be allowed near credit cards EVER. Most use them properly and with control. Some may carry balances and some may not. But, as others have said, if you use them properly, they are excellent tools. I have a few and primarily just use three- Starwood AmEx, United Airlines Visa, American Airlines Mastercard. Obviously, there is a travel theme there. I use my cards to aid in my travel benefits. I got my first credit card at 21 and I'm now 34 and have not had any issues. I pay them off every month and I use about 3-5% of my credit card limit. I was especially thankful for them in emergency situations, where pulling a large amount out of the bank was not feasible or possible in the situation. I also have had good results when fraudulent charges were made.

Maggie0829 · August 2014

Jells2dot0 said:

There are some people that should just not be allowed near credit cards EVER. Most use them properly and with control. Some may carry balances and some may not. But, as others have said, if you use them properly, they are excellent tools. I have a few and primarily just use three- Starwood AmEx, United Airlines Visa, American Airlines Mastercard. Obviously, there is a travel theme there. I use my cards to aid in my travel benefits. I got my first credit card at 21 and I'm now 34 and have not had any issues. I pay them off every month and I use about 3-5% of my credit card limit. I was especially thankful for them in emergency situations, where pulling a large amount out of the bank was not feasible or possible in the situation. I also have had good results when fraudulent charges were made.

That group would include my H.

I have quite a few credit cards that are store to store focused. I also have a Visa and a Amex. The Visa is for my personal use and the Amex is for household use. I have never had any issues with my cards and always pay them off each month.

I would only recommend a person to use credit cards if they know that they can cover their expenses each month. There is just no point in carrying a balance and thus paying even more due to interest for things that you have bought.

Cookie Pusher · August 2014

I got my first credit card when I was 18 and haven't carried a balance since shortly after graduating college. I used my cards to pay my tuition and living expenses when I was in college (I had minimal help from my parents, which was okay by me since they still had my sisters to take care of at home), but I worked a lot in the summers to pay down the balances between each new school year. I've only ever paid cash for cars, so I didn't have loans to help establish my credit history, so it was important to use my credit cards responsibly.

As PPs have said, the important thing with using credit cards is to not spend more than you can pay off each month. I charge almost everything I buy, but my bill almost the same each month (+/- about $100). Discipline in purchasing is super important. I'm always asking myself if what I'm considering buying is worth the interest rate if I couldn't pay it off right away. The answer is usually no. DH has had some issues with his credit in the past, so we consult each other before making large purchases or if we're buying things that are outside of our normal spending habits to keep each other on track.

Senecaf · August 2014

I just want to throw out that a credit card is not the only way to build credit. I purchased a home at 23 with no credit history from a card. Student loan payments and car loans got me. I need to get one but I'm afraid. I've seen both of my parents struggle through debt and have been overly cautious.

emmaaa · August 2014

Since many of you have mentioned alternatives to credit cards to build credit, what are some of the best ways to do that?

scrunchythief · August 2014

l If you're worried about over spending, then my advice is to you, and everyone, to treat it like cash. Do what PP's have suggested and find one with cash back, no fees and then pay it off every month. Also, something my mom told me is if you want a higher limit, which is normally better for your credit score, you can call up and ask them if they'll raise it, and many times they will.

Also, if you ever have an emergency and absolutely must carry a balance, pay it off as quickly as possible. Interest sucks:(

AprilH81 · August 2014

emmaaa said:

Since many of you have mentioned alternatives to credit cards to build credit, what are some of the best ways to do that?

Any monthly installment payment (house payment, car payment etc.) would help, but they all involve actual debt for some period of time.

If used responsibly, you can use credit cards to build your credit history and credit score WITHOUT accumulating debt.

Maggie0829 · August 2014

AprilH81 said:

emmaaa said:

Since many of you have mentioned alternatives to credit cards to build credit, what are some of the best ways to do that?

Any monthly installment payment (house payment, car payment etc.) would help, but they all involve actual debt for some period of time.

If used responsibly, you can use credit cards to build your credit history and credit score WITHOUT accumulating debt.

But I consider this good debt (especially a house payment or school loans) because you are building credit but you are also owning a home which you could potentially sell for more then you bought it for (or that is the hope of many home owners) and get tax credit because of owning it. And with school loans you are bettering yourself and setting yourself up for a better job in the future.

There is good debt and bad debt. Credit card debt is bad debt because the only thing that comes out of it is high interest, more out of your pocket and hurting your credit score if you can't make the payments.

mysticl · August 2014

AprilH81 said:

emmaaa said:

Since many of you have mentioned alternatives to credit cards to build credit, what are some of the best ways to do that?

Any monthly installment payment (house payment, car payment etc.) would help, but they all involve actual debt for some period of time.

If used responsibly, you can use credit cards to build your credit history and credit score WITHOUT accumulating debt.

And resist the urge to pay them off extremely early. A friend of mine didn't have credit cards. She did have a car loan but when she looked at how much extra she was paying in interest she decided to pay it off way early since she had the money. She was turned down for a mortgage because of this. She didn't have enough credit history to show that she could maintain payments over an extended period of time.

AprilH81 · August 2014

Maggie0829 said:

AprilH81 said:

emmaaa said:

Since many of you have mentioned alternatives to credit cards to build credit, what are some of the best ways to do that?

Any monthly installment payment (house payment, car payment etc.) would help, but they all involve actual debt for some period of time.

If used responsibly, you can use credit cards to build your credit history and credit score WITHOUT accumulating debt.

But I consider this good debt (especially a house payment or school loans) because you are building credit but you are also owning a home which you could potentially sell for more then you bought it for (or that is the hope of many home owners) and get tax credit because of owning it. And with school loans you are bettering yourself and setting yourself up for a better job in the future.

There is good debt and bad debt. Credit card debt is bad debt because the only thing that comes out of it is high interest, more out of your pocket and hurting your credit score if you can't make the payments.

If OP is in the market for a new(er) car or a house and a side benefit of the loan is a better credit score then I personally don't have a problem with it.

I just don't think the OP should go buy a car in order to get a higher credit score.

Since the OP and her BF/FI want to improve their credit so they can get a house in a year or so I think the best method is a credit card (used responsibly of course) instead of using money that could be saved for a down payment on a car payment.

Maggie0829 · August 2014

AprilH81 said:

Maggie0829 said:

AprilH81 said:

emmaaa said:

Since many of you have mentioned alternatives to credit cards to build credit, what are some of the best ways to do that?

Any monthly installment payment (house payment, car payment etc.) would help, but they all involve actual debt for some period of time.

If used responsibly, you can use credit cards to build your credit history and credit score WITHOUT accumulating debt.

But I consider this good debt (especially a house payment or school loans) because you are building credit but you are also owning a home which you could potentially sell for more then you bought it for (or that is the hope of many home owners) and get tax credit because of owning it. And with school loans you are bettering yourself and setting yourself up for a better job in the future.

There is good debt and bad debt. Credit card debt is bad debt because the only thing that comes out of it is high interest, more out of your pocket and hurting your credit score if you can't make the payments.

If OP is in the market for a new(er) car or a house and a side benefit of the loan is a better credit score then I personally don't have a problem with it.

I just don't think the OP should go buy a car in order to get a higher credit score.

Since the OP and her BF/FI want to improve their credit so they can get a house in a year or so I think the best method is a credit card (used responsibly of course) instead of using money that could be saved for a down payment on a car payment.

I agree with you completely. I was just pointing out that not all debt is bad. Some debt is actually good, while credit card debit is never good to have.

goldchocobo.defunct635829490514903826 · August 2014

I have 2 credit cards. They are quite useful. I ALWAYS pay my balance off at the end of the month. I have promised myself to never carry a balance over to the next month. I have kept my own promise for 7 years.

Showing you can pay off the balance regularly helps with credit.

If you are responsible in all other financial areas, a credit card is a nice way to build history.

Do not apply for a huge limit. You don't need it and credit companies frown on why you needed an increase all of a sudden.

Thoughts on Credit Cards

Re: Thoughts on Credit Cards

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