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Credit Cards?

Discussion in 'The Material World' started by Gentoo, Jun 24, 2015.

  1. Gentoo

    Gentoo The Feisty Penguin

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    I still feel as if I'm new to adulting, for example, I'm 30 years old and have never had a credit card. I'm looking into one now, for frequent flyer miles, but I have no idea what I'm really doing as I'm researching all the different options. I want to make an informed decision before I sign my life away, what are the things I should be looking for/looking out for?
     
  2. StarryNightshade

    StarryNightshade Folk Catholic
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    I'm 24, have never owned a credit card, and I don't ever plan on having one.

    That being said, based on nearly 4 years in retail, I've gathered that:

    1.) You usually have a monthly limit on what you can use on the card ( based on one's income), but sometimes people like to spend more than they can realistically afford.

    2.) If you default on your monthly payments, you have increased interest and late fees; which means you'll usually have to pay back more than what you originally owed.

    3.) Too much credit card debt can severely ruin your credit score.

    4.) Credit card fraud/theft is a very real possibility.

    If one is careful, then having a credit card does have it's perks. Like frequent flyer miles, and it can build your credit instead of ruining it.
     
    #2 StarryNightshade, Jun 24, 2015
    Last edited: Jun 24, 2015
  3. 9-10ths_Penguin

    9-10ths_Penguin 1/10 Subway Stalinist
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    In terms of shopping between cards, watch for differences in fees - many of the cards with fancy points and whatnot will have large annuals fees. Also, check with your bank: often, there will be a package deal where the annual fee will be waived if you have a bank account with them.

    Also be aware that a lot of the perks that get advertised are short-term promotional things. Pay attention to the fine print - one cash back card they're advertising now here pays 5% back... but only for the first 6 months, and then it drops to 1.5% after.

    Probably the most important advice is common to all credit cards: only charge what you can afford, and pay your balance off every month. It's very easy to find yourself in a trap where you get stuck with a balance that you can't pay off.

    The risk of this is high enough that I suggest asking yourself whether you actually need a card. If you do decide that you do, consider making payments immediately as you charge to the card to make sure your balance doesn't get out of hand.
     
  4. Politesse

    Politesse Amor Vincit Omnia

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    I haven't had one for a while; they cancelled my old one with Wells Fargo because of a mysterious "RED FLAG" which upon investigation turned out to be that we hadn't used the card in several months. We'd never missed a payment, never used the card irresponsibly, but because Experian was upset that we hadn't been able to use it for a while (this was in the 2nd year of the recession and my 2nd year of joblessness) we got our card cancelled and our credit score dinged. Apparently being a responsible but poor person makes you a credit risk. So we just haven't bothered with all that nonsense again. If you get a card, use it to buy small items every now and then and pay for them at the end of the month, so as to build rather than dismantle your credit score. I get really annoyed with the constant spam mails the bank sends us to sign up for new credit cards, too. I realize it is probably not the same people as such, but it still really takes the cake to be "preapproved" for cards by the same company that rejected you as a customer previously.
     
  5. Quintessence

    Quintessence Tale Weaver
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    Some important things to remember:
    • In American society, it is important (if not necessary) to have at least one credit card to build your credit. You need a history of credit to obtain certain types of loans, such as mortgages, because they will require evidence of multiple lines of credit and on-time payments to secure a loan.
    • Always pay off your balance. Always, always, always. Live within your means. If you do that, you can pretty much ignore the policies any credit card has about late payments or interest. You'll never have to deal with them.
    • Because you're going to be someone who always pays off your balance, select a card that has some sort of reward bonus, even if it is small. Every little bit helps with personal financing. That said, if there's a fee for having the card for any reason, steer clear.
    • Keep track of your credit card purchases, at least at the beginning. This will help you stay within your means, and can also serve as a record to combat fraud.
    • If you are able to (and I'd suggest going with a card that lets you do this), set a daily purchase limit for the card and/or notifications if your daily purchases exceed a certain amount. This helps you both stay in budget, and can alert you of frauds.
     
  6. 9-10ths_Penguin

    9-10ths_Penguin 1/10 Subway Stalinist
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    I think this point gets oversold. If you have a student loan, you have a credit history.
     
  7. Wirey

    Wirey Fartist

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    Additionally, instead of signing your card, write "ASK FOR IDENTIFICATION" on the back. An imposter won't have your picture on their driver's license.
     
  8. 9-10ths_Penguin

    9-10ths_Penguin 1/10 Subway Stalinist
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    I didn't realize that this was a thing.

    Honestly, I'm not sure why the US doesn't join most of the rest of the world and switch to chip-and-PIN for credit card transactions.
     
  9. Wirey

    Wirey Fartist

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    I saw the guy in line in front of me do it once, and now I do.
     
  10. Politesse

    Politesse Amor Vincit Omnia

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    We are, though it hasn't entirely caught on yet. My bank card is chipped now, but not very many retailers have a chip reader.
     
  11. GoodbyeDave

    GoodbyeDave Well-Known Member

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    In Britain, it would be very difficult to do without a card. Imagine having to get a bundle of bank notes to buy a bed or a TV - few shops will take cheques. For that matter, in many places the only way to get that bundle of cash would be from a dispenser - using your card!
     
  12. Twilight Hue

    Twilight Hue Twilight, not bright nor dark, good nor bad.

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    I second reading the fine print. Not to mention researching people's experiences with a givin card.
     
  13. lewisnotmiller

    lewisnotmiller Grand Hat
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    Not quite true I think.
    I travel a lot for work so I get your point, but I now use debit cards exclusively. Still a Visa/Mastercard, but accesses my money, rather than credit line.
     
  14. Gentoo

    Gentoo The Feisty Penguin

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    This is what I've been doing, using a debit card. I also hear it's easier to disbute credit card fraud than debit card fraud.
     
  15. GoodbyeDave

    GoodbyeDave Well-Known Member

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    Of course, I wasn't distinguishing debit and credit cards: the point I was making was the need for some sort of plastic. In Denmark, it's now legal for shops to refuse cash!
     
  16. Peace48

    Peace48 Member

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    Look at what you usually spend the most on and get CC that offer the corresponding rewards like restaurants, gas, amazon, etc.
     
  17. Penumbra

    Penumbra Veteran Member
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    I've had credit cards since my teen years. They provide purchase protection, they make it easy to pay for things, they give rewards, and I've never paid a penny in interest.

    -For you, probably avoid a card with an annual fee. Not all credit cards with annual fees are bad for all people (I have one and it makes sense for my situation due to the benefits it provides), but as a first/only credit card, you'd almost certainly want to stick with one that has no fee.

    -Look for a card that gives higher reward percentages for things you personally buy a lot. A cool example is the Chase Freedom card; you get 1% back on everything and then there are rotating categories that last 3 months each where you get 5% cash back on certain things like groceries, Amazon, gas stations, and certain major stores. Other decent cards can give 1.5% back on everything, period. Spend a bit of time comparing rewards to see what card matches your spending profile the best. It's probably not worth it to go overboard on searching though; if you put $12k/year on your credit card ($1k/month), and get a solid 2% back, that's still only $240 a year. Plus if you find a better one later, it's not a big deal to get another card, within reason.

    -Visa and Mastercard are more widely accepted than Amex and Discover because they have lower merchant fees.

    -Interest rates aren't the important variable to compare between cards if you are sure you will be paying off the debt every single month, as anyone should be doing. If you don't plan to pay it off every single month without fail, don't get one.

    -Check your credit history before applying to make sure you don't have anything that would push down your credit score a lot.

    -A low credit limit is usually given for people without much credit history. One thing to look out for is to keep your credit utilization low. If you have a card with a $1,500 limit, then constantly putting $1,200 on it each month doesn't look great even if you pay it off. That would be 80% credit utilization. It shows that you're using most of your available credit. It's best to keep credit utilization fairly low if you want to optimize your score, either by using it little or by eventually getting a higher limit. My credit utilization on my main card is under 10% and my credit utilization when all my cards are considered together, is less than 5%. It doesn't need to be that low, but the lower the better.

    Credit mix is a variable too, though, when it comes to optimizing a credit score. Having installment credit (like a student loan or a mortgage) as well as a revolving credit (like a credit card) gives a slight advantage compared to having just one type of credit.

    Length of credit history matters too. Student loans eventually get paid off. But having a permanent credit card account that can eventually last decades, can stay around as long as you want and builds a really long continuous credit history.
     
  18. Jayhawker Soule

    Jayhawker Soule <yawn> ignore </yawn>
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    You should be looking out for ways to maintain a zero balance.
     
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