OT - First Credit Card

Submitted by MGoBender on June 26th, 2012 at 5:14 PM

Off season.  Ignore if you want.

So, trying to figure out my first credit card.  Been doing some research and have put together some options, but I wanted to get some feedback because I'm sure several people on the board are/were recently in a similar situation as me.

Recent finished grad school - 2011.

Never had a credit card (only check card).

Beginning year 2 of real-person status.

Have steady job, living comfortably.

Paying well over the minimums on student loans, currently, so I think my credit score would be better than a normal person that's never had a card.

Would pay full balance of card monthly.

The only reason I'm getting one is because it's one of those things you have to do.  I'm of the opinion that if I don't have the money to buy something, I have to wait until I do.  I'm just looking to build credit.  Should I look at a credit card through a gas station?  I've read I should ignore the sexy reward programs.  Any anecdotes out there?  Anyone really like their decision?  Anyone really not like their decision?

Comments

pasadenablue

June 26th, 2012 at 5:19 PM ^

If you're exclusively looking to build credit and have little to manage or worry about, I'd suggest signing up for a bank acct at a local credit union, and getting one of their cards.  You'll have almost no fees and things will be simple.

 

If you want more out of your card, given that you'll be paying off the balance, I'd try and find a rewards program you like best.  I tend to go for cashback whenever possible.

 

Credit gets built regardless of what card you get.  Whatever you do, beware of rando fees that get tacked on.  That's how they make the easiest money.

MGoSoftball

June 26th, 2012 at 10:48 PM ^

you cannot build credit just by using your CC.  That is not how the system works.  The key to building a high credit score is to obtain credit and not use it.  I know it sounds crazy but its true.

Ask the CC company when they report to the 3 Credit Agencies.  It will be a few days past your due date.  Find the EXACT date.  Make sure the CC reports 10% of your credit limit is being used.  I could go into the whole formula but it would put people to sleep.

If your credit limit is $500, make sure you have a balance of $50 on your card when they report.  Use the online banking feature at your bank.  Most banks will pay the CC company the next day.  So if your balance is $357, you pay $307 BEFORE the CC reports.  Anything below 10% or over 25% is looked as a negative by FICO formula.

Make your payments on time every time.  Do not miss a month.  If you do, call the company and tell them you will pay extra if they change the reporting.  Trust me, it is worth it. 

Pull your credit report and check it every quarter.  Make sure your brother's, cousin's, aunt's, former boyfriend is not reporting that you forgot to pay $25 rent 5 years ago.

Building credit is easy if and only if you know how the system works.  You have to fight the power and stick it to the man.

Jon06

June 27th, 2012 at 10:06 AM ^

i use less than 10% of my available credit (in fact, 0%) on a monthly basis. i don't even use credit cards any more. but when i did, i missed payments from time to time because i'm lazy. hell, BOA shut off my credit card on the eve of my bachelor party because i forgot i'd used it to buy a chicken plank at long john silver's on a road trip. but my credit score is still excellent. in fact, they didn't report any of that, and i certainly didn't bribe them not to. (AFAIK, nobody--not comcast, not DTE, not banks--does as long as you're not habitually late and you don't carry a balance.)

your job with a credit card is simple: don't get into debt, and don't be a fucktard. you'll be fine. your credit score will track how you deal with your student debt a lot more than it will track what you do with a credit card on which you carry no balance.

your requirements for a credit card are also very simple. you want one with no annual fees, and with a grace period so that no interest is charged if it's paid in full by the due date each month. then you pay it in full all the time.

nothing else really matters. rewards programs are nice but you can buy your own rewards with the useful hours you save by not wasting time looking at which reward program is best for you in some ideal world where you use your credit card a lot, actually want the stuff they'll give you, and bother to redeem your rewards points to get it.

MGoSoftball

June 26th, 2012 at 10:56 PM ^

if your goal is only to strengthen your credit, stay away from the Reward Cards.  I know many people on this board have them, including me.  However, these cards require a fairly high credit score (725 or higher).  If you apply and get denied, that will stay on your credit report for 2 years. 

If you know your current score is below 700 dont even try to get the fancy reward cards.  Stick with something simple like Capital One or Orchard Bank.  The interest rate on these cards are very high (about 25%) but with good discipline, you will not pay much interest at all.

Dont apply to many CC all at once.  Apply to one CC and use it for a few months like I describe.  Your score will jump 35-50 points in 3-6 months.  This will get you the opportunity to get another CC with a higher limit.  Always have 2 CC in your wallet.

The old FICO formula used to penalize for over 3 CC.  That is not true anymore.  Get as many as you can every 4-6 months.  Use 10% of the limit and watch your score grow.  You will be 800 before you know it.

BTW: most banks require a 700 score for a mortgage these days.

 

Butterfield

June 26th, 2012 at 5:19 PM ^

Touchy ground.  If you without a doubt will pay your balance in full each month, the card with the best rewards (so long as there is no outrageous annual fee) will be the one you want.  Higher APRs associated with those cards won't affect you if you're responsible.

Don't fill out a bunch of credit apps though, each app requires a credit inquiry that downgrades your credit score further.  Not worth the free t-shirts (says a guy who worked through high school signing people up for Visas at Pistons and Tigers games). 

andrewG

June 26th, 2012 at 5:36 PM ^

Seconded.

Go for the card with the best rewards, APR be damned. If you're for sure going to pay in full every month, then the rewards are just free money. Check into the rewards though. I've had a Citi card where 5,000 points = $40 gift certificate, a Capital One card where 5,000 points  = $50 cash, and a Discover card where 4,000 points = $50 gift certificate or $40 cash. Make sure they don't cap your rewards; that's fairly common. Also the >1% cash back on certain purchases may be capped, so it's never as sweet as it sounds. And avoid anything with an annual fee unless you're certain the better rewards are worth it. Usually you have to spend a lot for that to be the case though.

I kinda hate to do it, since they're an extremely soulless corporation, but Capital One is probably a good card to look into. They also have the bonus of being one of the few (only?) cards that doesn't charge you a transaction fee if you use it abroad.

kb

June 26th, 2012 at 7:05 PM ^

to the rewards points you can accumulate and get stuff with (gas card, Starbucks card, etc) and building up a credit history, you also protect yourself from fraud/identitiy theft of your debit card.  I used to think that credit cards were the spawn of the devil, but have recently come to realize that sometimes it's best to use them instead of your debit card.  If someone at a restaurant skims the card you use or you get your info stolen online, it's much easier to work with the credit card company to get fraudulent charges taken off your credit card (which is essentially electronic money) than have to wait a significant amount of time to get your "hard money" back by using a debit card. 

That said, study after study has shown that people spend more using credit cards than they do cash because you're not psychologically parting with anything concrete, so as long as you manage it carefully you're good to go.

gbdub

June 26th, 2012 at 6:13 PM ^

Regarding the "don't fill out a ton of apps" advice, my understanding is that multiple credit inquiries in a short time span get lumped into one. At least that's true for loans - prevents you from being penalized for shopping around for a mortgage or auto loan. Now, if you actually accept all of those credit offers and run up a bunch of debt, that will obviously ding your score.

jonvalk

June 26th, 2012 at 8:58 PM ^

This is true for installment loans like a mortgage or car loan, but not for unsecured debt.  Lots of inquiries for credit cards and other lines of credit is a red flag and will make a creditor think twice about lending to you.  I like the rule of two CCs max.  I definitely have more from my many years in the banking industry, but I only really have used 2 as a regular card.  The others just collect dust and some I've closed.  The rule of thumb on inquiries is no more than 7 total in a 2-year span.

gbdub

June 26th, 2012 at 11:06 PM ^

Good to know. I was sure about the installment loans, unsure about credit cards. Apologies for posting bad advice. Out of curiosity, since we have some apparent experts, does how much you use your card affect the score? Assuming you pay it off every month? That is, is it better to have a credit line you never use, or use your card frequently?

bluebyyou

June 26th, 2012 at 8:02 PM ^

Multiple credit cards, even with a zero balance, can also negatively impact your credit rating as they look at the maximum amount of credit for each card and sum them and use that as part of your credit rating.

Using a credit card is like everything else in life.  It is about discipline and personal responsibility.

farside286

June 26th, 2012 at 5:22 PM ^

look at the Chase Sapphire Preferred.  If you are a new chase customer and spend $3K in the first three months, you get 40K points which is like $400 cash back.  Use the rewards for something and you can cancel in the first year before you pay any fees.  It also feels sweet (its made of metal) and looks black at night at the bars. 

mach42006

June 26th, 2012 at 5:24 PM ^

I have one through my Credit Union and I also have the Chase Amazon card.  I would highly recommend the Chase Amazon card.  There are no annual fees, and what better reward is there than Amazon gift cards?  You get triple points on all Amazon purchases, double points on gas and stuff, and regular points on all other purchases.  I use Amazon a lot, so it's the best option for me personally.  

Edit:  You don't redeem the points for gift cards, you apply the points directly to your Amazon purchases in the checkout at any time.  That means you don't have to accumulate a certain number of points before you can redeem them.  

benAZ

June 26th, 2012 at 5:22 PM ^

You've received good advice to not get a promotion based card i.e. you're in a store and they offer you a card to save a certain percent. I love American express. They have cards that are no annual fee and some that require you to pay it of monthly which is a good way to learn on a credit card. Plus they have an app that makes it easy to look at my account and make payments. Maybe once every 6 months I'm somewhere that doesn't take amx, normaly a mom and pop place. Be wise and check out the interest rates and any attached fees.

BluePants

June 26th, 2012 at 5:23 PM ^

I just went with the standard AMEX, knowing I'd pay the balance monthly. If you already have a Visa check card, having an AMEX covers a lot of your bases for places where credit cards are accepted. I've definitely been to stores/restaurants that only accept AMEX. The rewards aren't great, but, that's probably just because I don't spend a ton.

MGoPietrowski

June 26th, 2012 at 5:24 PM ^

I'm sure there are plenty of horror stories out there for every card company, but if you pay your balance off monthly, which I do, look into capital one. I've had one of their mastercards for a year and never had a single problem.

 

 

Idaho Wolverine

June 26th, 2012 at 5:29 PM ^

Get a card with no annual fee. Also, if you are truely going to pay if off monthly, get a card that offers cash back rewards. I've have a cc for 6 years and I always keep my balance at zero, this way I can maximize my rewards without having to pay any interest. However, the cc company will refer to you as a deadbeat since they are not making any money off of you.

JHendo

June 26th, 2012 at 5:30 PM ^

 I prefer no rewards.  All it is is a temptation to spend just so you can move up the rewards ladder, even if you have plenty of hard cash on hand to just make the purchase straight up.  That being said, credit union CC's are a good way to go.  For the most part, they're no frills, but have low interest rates and little to no annual and/or maintenance fees.  Also,  if you're credit history is non-existent that you don't think you will get a high limit, you could look into a secured CC as well.  They're are a few that will actual pay interest on your initial deposit that you set your credit line with.

One last thing, look into setting up an account with creditkarma.com.  I use it religiously.  It's free and gives you an approximate idea of what your credit score is and among other things, will show you suggested credit cards and your approval odds of getting it based on your score.  Well, good luck and welcome to the dangerous world of the unsecured credit.

BlueMars24

June 26th, 2012 at 5:31 PM ^

I have a discover card and a chase amazon card. I use them both. Discover will run special 5% bonus on certain items certain months. Plus you get extra cash back if you redeem for gift cards instead of directly for cash. Only do it if you're sure you'll spend the gift card though!

Erik_in_Dayton

June 26th, 2012 at 5:36 PM ^

You are already building your credit score by paying on your student loans. 

Don't put more than, say, $50 on the card each month.  That way you can sustain a pretty bad unexpected financial hit and still pay the card off and cancel it. 

As others said, pay close attention to fees and exploding interest rates.

Remember that the credit industry (speaking very broadly) wants to get you in a hole and then have your balance mushroom due to fees and interest.

Side note:  You can get a copy of your credit scores with the three major agencies at AnnualCreditReport.com once per year without dinging your score (and for free). 

Another side note:  Review your statement each month and immediately dispute anything that you think is wrong in writing.  Keep a copy of your letter of dispute. 

thisisme08

June 26th, 2012 at 5:31 PM ^

Lots of good advice here (when is there not)

I've went with a two fold approach to the CC quandry. 

1 CC with my bank whom I have my checking/savings with.  This card has a low interest rate for those times when you just can not pay off the full balance. 

Chase Freedom card (though that Preferred above looks awesome) that I only applied for because I recieved $300 cash back on a $500 purchase so like Economics minor man gotta get that deal.  I've kept it around because their rewards program is actually pretty good but the kicker is the interest rate is higher than I would like.  

 

Best advice:

Dont get a store branded card

Pay off your balance every month

You do this and you will have no problems but once you start saying "Oh I'll pay this off next month" cut that card up man'o.  

Mr. Rager

June 26th, 2012 at 5:32 PM ^

Chase Freedom is what I have and I love it.

People who don't use credit cards in this day and age are stupid.  Very stupid.  I use my credit card at a business, and that business pays a processing fee.  That processing fee is how I get my "cash back rewards".  As long as I always make my (full) payment on time, I get 1%+ back on everything I buy.  

LSCrepair

June 26th, 2012 at 5:34 PM ^

My first credit card was a secured credit card. Put a few hundred deposit on it and use it like a normal credit card and pay off the balance and build your credit. Easy peasy.

MGoJeff

June 26th, 2012 at 5:34 PM ^

I get great cash back and pay my card off every month. I am 29 and have had it since I was 25. I've never paid a fee or a dime in interest and I've gotten over $1100 in cash back. I put everything on that card.

gopoohgo

June 26th, 2012 at 5:52 PM ^

plus $7500 one-time initiation fee.  Plus, unless you are a NBA lottery pick/actor/actress/internet bazillionaire with a wealth management team at Ameriprise, you have to spend a rumored $250K/yr, mostly on travel, dining, and high-end luxury items.

French West Indian

June 27th, 2012 at 9:45 AM ^

...dropping $250K/year is much easier than you'd think (and no, you don't have to be an actor or NBA baller, a modest business owner with a bit of international travel involved will work nicely).

The real problem with the black card is that it's by invitation and the OP clearly is not qualified.  That pretty much makes it pointless to bring up in this discussion.

Butterfield

June 26th, 2012 at 5:48 PM ^

Typically the kids that have credit cards in high school are getting co-signed by mommy and daddy, otherwise your paper route is only going to give you a 50 dollar credit limit.   So I'll ask you the same obnoxious question you asked of the OP, have YOU ever been out on your own?

JeanClaudeVanD…

June 26th, 2012 at 5:42 PM ^

Me a MasterCard platinum from 5/3 bank. I'm in the same boat, never had a credit card but rather used a debit card (why buy something I'd you don't have the cash for it, right?)

Anyway, because I had no credit history I basically didn't qualify for anything. This card is only a $300 limit that I use for all the smaller things. I pay it off monthly. It will eventually allow me a card with better perks once I establish a good history. Just thought you may be interested

Blerg

June 26th, 2012 at 5:42 PM ^

These older gents probably know more about finaces, credit cards, and the like more so than myself.  But as a fellow young person new to the "real" world such as yourself I have one piece of advice. For the love of god leave that credit card home if possible when you go out drinking.  Nothing worse than waking up to an outrageous bill because you had the means of buying more in attempt to get laid.  However, if you don't wake up alone...

Butterfield

June 26th, 2012 at 5:54 PM ^

Great advice.  To go even further, DO NOT TAKE IT IN THE VICINITY OF A CASINO.  Cash advances are so easy, and they always seemed like such a good way to win back what you lost out of your checking account.....HAH.  And then you realize its leagalize usary.  Yikes.  Seriously, speaking from experience here!