Which to preserve/incr score: charge or credit?

American Express forum. Talk about AmEx credit cards like Blue, Gold, Platinum, Centurion, and more.
10 posts
newguy
Green Member
Green Member
 
Posts: 3
Joined: Fri Sep 12, 2014 11:12 am
Location: NYC

Which to preserve/incr score: charge or credit?

Postby newguy » Fri Sep 12, 2014 11:40 am

Hello everyone,

Great forum, digging around I found some great info. I hope I am not repeating topics (and this is in the right place) but wanted to get advice before I apply. Deciding between charge and credit.

My 3 scores are high so I am not too concerned about increasing them, more so I want to preserve them (and obviously bump them up if I can).

The only area I need improvement is the number of accounts I have. I have (apparently) an old department store account from 2008 that I don't use/had forgotten about (which I won't be closing as it is helping my age of credit) and my current bank cash back CC which has been around for a little over a year.

I was offered to apply the PRG 50k point offer. I am also interested in the Blue Cash Preferred card.

1) Can anyone help recommend which would be better with respect to credit utilization - charge or credit card. (I have spent a lot of time researching the forum for this and some people say charge cards only show highest recorded balance as your limit, some say it doesn't factor in at all...I'm a bit confused).

2) Will opening up another account be a double edge sword (increasing # of accounts but in effect skewing down the average age of my open accounts and hurting my score?)

I don't expect to be signing a new lease or applying for loan for at least another 10 months to a year (if that soon) so hopefully any ding I get would have time to recover?

Cash back appeals to me much more than a rewards program and the 100$ higher annual fee of the PRG. But with 50k points that could be 500$ in rewards right?

Thanks for any guidance,
Newguy


User avatar
sicasun
Platinum Member
Platinum Member
 
Posts: 62
Joined: Tue Jan 29, 2013 12:09 am
Location: TX, USA

Postby sicasun » Fri Sep 12, 2014 12:26 pm

It's hard to say what creditors report to the bureaus. All my cards, credit and charge, report balances and then a separate line for my actual credit limit. I've heard stories mentioning opposite experiences, so it's all a bit confusing.
I personally prefer credit cards because in case a disaster happens, I can get away with paying closer to minimum payment for a few months while situation settles down.

Opening one new account will take a hit on your credit score through AAoA and hard inquiries, but your score will probably also increase based on your higher total credit limit which lowers your utilization rate. As long you stick to 1 or 2 hard pulls, your credit score will probably balance out I think. There will be a delay though. Hard inquiries get reported almost instantly, but your new card will take at least until the next month update to show up on your credit reports (Transunion tends to take 2 months for a new card of mine to start reporting). But since you won't be applying for a lease/loan for another 10 months, you should be okay. The higher your credit score, the harder a hit it'll take when you apply for new credit though (I've only heard this so I'm not 100% sure).

Chase Sapphire Preferred | 09/2014 | $10,300
Chase Sapphire | 05/2010 | $5,000
Chase Freedom | 01/2013 | $5,500
CapitalOne Quicksilver | 01/2013 | $2,500
American Express TrueEarnings | 08/2014 | $5,500
Victoria's Secret Angel Card | 04/2011 | $600

FICO | 09/2014 | Experian 738 | Equifax 706 | TransUnion 701

User avatar
CarefulBuilder14
Centurion Member
Centurion Member
 
Posts: 3744
Joined: Thu May 08, 2014 7:42 pm
Location: United States

Postby CarefulBuilder14 » Fri Sep 12, 2014 12:32 pm

I was in a similar situation. I was deciding between a PRG and a BCE. I had the same 50k PRG bonus offer. I ended up getting both.

Regarding utilization, my PRG reports to Transunion with the balance owed, but there is no credit limit mentioned - not even the high balance. I don't know how it affects my utilization, but I was only letting a small balance report. I'm not sure how charge cards appear to other credit bureaus.

I also prefer cash back for earning steady rewards, but even if you don't use them to transfer to travel partners, 50,000 points can still mean $500 in retail gift certificates.

I have a much shorter credit history, so opening up a lot of cards in the last year didn't hurt my AAoA much.

What is your current utilization? With two cards, your limits may be pretty low, so I don't know if your problem is that you have a lot of debt to pay off, or that even a week's everyday purchases end up being a high percentage of a low limit.

The inquiry would have a small effect, as you've only (presumably) applied for the one cash back card in the last year.

If you want cash back on gas and groceries, do look at the Barclaycard Sallie Mae.
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
SD: Arrival BrooksBros BCE ED IHG
Letting new accounts cool off since May
Really not sure what I'll add next or when

User avatar
Vattené
Centurion Member
Centurion Member
 
Posts: 1157
Joined: Sun Jan 26, 2014 3:55 am
Location: US

Postby Vattené » Fri Sep 12, 2014 3:27 pm

The credit game is a very long-term one. Unless you want to apply for a mortgage in a fairly short amount of time, there is really no point in trying to use tricks to position yourself for a certain number. The bottom line is you just need to manage your credit responsibly. Maintain low utilization (which includes trying to get higher limits), pay in full each month, and your score will grow over time. Given that, you just need to decide which cards are best suited for you.

Since your score is your biggest priority, I would recommend going with the BCP. You get a handsome introductory bonus with the PRG but it will be completely eaten by the AF after 4 years (1 year of no fee followed by 3 with annual fees totaling $525). This is assuming you plan on keeping the card for a while, though. You could get it for the MR points and cancel it later, but you will be worse off if your credit score truly is a higher priority than rewards.

Of course, we are all here because we are interested in earning rewards. That said, it is easy to rationalize paying a fee in the name of rewards. You are more interested in cash back, so may I assume you are not a frequent traveler? In my opinion, there is no benefit in getting a charge card if you aren't. You are ultimately paying that AF for the travel perks (well technically for giving up the ability to not PIF, but you can do that on your own with a credit card and some discipline), so if you aren't traveling much it is a waste of money. Instead, get a credit card, PIF like you would otherwise have to anyway, and you don't pay anything!

Are you sure your spending justifies the preferred version of the Blue Cash? It very well may, but it is important to know the answer to this. Best case scenario: you have to spend $2,500 in groceries - $75 AF divided by the marginal benefit of the highest earning category (from merchants cateregotized as grocery stores, too, so no Walmart) - just to break even on the AF and be indifferent between the basic and preferred versions.

Good luck with whatever you choose, though it sounds like you won't have trouble getting what you want. :)
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

newguy
Green Member
Green Member
 
Posts: 3
Joined: Fri Sep 12, 2014 11:12 am
Location: NYC

Postby newguy » Fri Sep 12, 2014 4:45 pm

Thanks everyone for the quick and detailed feedback, I really appreciate it.

I am neurotic about PIF every month, and even make sure I pay off all except for a few bucks right before the closing date to ensure my utilization rate stays as strong as possible (and never keep a balance over 25% at any time just in case - every now and then when needed I'll pay mid month to ensure that).

Good point Vattene on determining whether PRG is worth it if I don't travel frequently, I don't. Maybe 2 international flights a year. I think I was just eager because of 1) the 50k/$500 and 2) it would be pretty cool to have a gold card in the wallet...not a valid reason to make a financial decision. A $500 gift card is good but not as useful as cash back and, as you pointed out, down the line the AF will negate that quickly if I'm not traveling.

I still prefer BCP vs standard because of the 6% vs 3% on groceries. I live in NYC so they are overpriced. While I don't drive/buy gas this city costs enough that everyday purchases will make up for the AF. My current cash back is only 3% on groceries.

Would have been great to have a gold card but at this point probably not the most sensible move. Plus I worked hard to get to a EQ796/802TU/803EX and with a limited number of accounts and short history I am concerned about the effect a charge card would have on my utilization. Probably moving and potentially applying for a mortgage late next year and just want to make sure everything stays as high as possible.

Thanks guys

User avatar
Vattené
Centurion Member
Centurion Member
 
Posts: 1157
Joined: Sun Jan 26, 2014 3:55 am
Location: US

Postby Vattené » Fri Sep 12, 2014 11:54 pm

May I ask what exactly you mean by a short history and limited number of accounts? I would like to know how you got to an 800 FICO. I would describe myself similarly. Maybe we differ on what we consider limited and short, because that is excellent and you can't get there with a very thin profile. Kudos to you, however you did it.

[I have never gotten a mortgage before so I could be wrong, but I think if you are over 800 you will likely qualify for the best terms any given bank will offer. Higher is always better, but I don't think an 815 will get you anything more than an 800 will, where the same difference lower on the scale has better odds of crossing some threshold.]

My history is around 3.5 years old, and I didn't go about it the best way. I had no interest in a major credit card (they had a bad connotation for me and I just associated them with debt), so I would sign up for store cards (partly assuming that was all I could get anyway) to try to build credit and get the discount at checkout that is typical. If only I had gotten wise to the benefits of rewards programs earlier, I would have gotten a lot more money back over the years than a handful of 15-20% discounts.
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now

takeshi
Centurion Member
Centurion Member
 
Posts: 1733
Joined: Wed Jun 05, 2013 3:12 pm
Location: US

Postby takeshi » Mon Sep 15, 2014 9:53 am

newguy wrote:Can anyone help recommend which would be better with respect to credit utilization - charge or credit card. (I have spent a lot of time researching the forum for this and some people say charge cards only show highest recorded balance as your limit, some say it doesn't factor in at all...I'm a bit confused).

All depends on the specific scoring model as they factor in charge cards differently (why you're seeing differnt answers). I'd suggest selecting a card based on how well the card suits you versus relying on whether or not a card is charge or revolver. If you're worried about utilization you can manage reported utilization by paying down your balances prior to the dates that your accounts report. In a later post you mention you already do this so why are you considering a charge card for utilization?

newguy wrote:Will opening up another account be a double edge sword (increasing # of accounts but in effect skewing down the average age of my open accounts and hurting my score?)

As indicated above you take a hit for the inquiry and you take the hit to AAoA unless there is sufficient backdating to mitigate. If the new account is a revolver it may improve your utilization. There are a number of factors at play and they all matter and are differently weighted.

newguy wrote:I still prefer BCP vs standard because of the 6% vs 3% on groceries.

Don't just look at %. Your spend, the AF, etc also have an impact on rewards. Depending on those factors a Sallie Mae, BCE (though there seem to be few cases where the BCE is a best fit), BCP or the old Blue Cash could be a good fit.

newguy wrote:Cash back appeals to me much more than a rewards program and the 100$ higher annual fee of the PRG. But with 50k points that could be 500$ in rewards right?

I'm not familiar with the details of MR but you can find the info online. If it's anything like UR then points may be worth more when transferred and redeemed through travel partners.

newguy
Green Member
Green Member
 
Posts: 3
Joined: Fri Sep 12, 2014 11:12 am
Location: NYC

Postby newguy » Mon Sep 15, 2014 10:21 am

Thanks for the continued feedback everyone.

Takeshi - thank you for taking the time to break down each area of concern I had and providing your insights.

Vattene - I wanted to answer your question about how I managed that score. To be honest it was a bit of a surprise to me. When I got my bank cash back cc about 14 months ago they gave me a score that said 750 I believe. I have focused hard on keeping my utilization ratio as optimal as possible and can only attribute the bump in score to that behavior. A bit ashamed to admit I was unaware that the dept store cc was still active so I imagine the fact that it has been in good standing since 2008 helps my profile / age of credit.

This is why I am mostly concerned with how to preserve this score vs improve it. I think that my score basically relies on age of accounts and utilization (I have no loans or other factors to play into it).

Getting another cc would increase my utilization by adding additional credit while my spending and habits would not change. However, by having 2 "young" accounts I fear it will skew the average age of my credit (1 account of 6+ years vs 2 very young accounts)

Perhaps that's not how it works...

I feel I have 2 things going for me, utilization and age. And to make sure I don't mess with utilization I am going to opt for a traditional credit card vs a charge card. I imagine over time the average age will be ok and I will benefit from additional credit with respect to utilization ratio.

lexington
Green Member
Green Member
 
Posts: 14
Joined: Tue Sep 09, 2014 4:14 am
Location: orlando fl

Postby lexington » Mon Sep 22, 2014 10:56 pm

I think that'll be the best choice for you. I just recently picked up the AMEX Gold and am having second thoughts but going to stick it out. Basically I wanted the Gold for the travel benefits as I travel quite frequently but the AMEX BCP might have been a better choice for me.

As for your credit, WHO KNOWS! lol...I asked amex and they told me to google it :-/

Good luck
[size=80]Chase Slate CL-$4,000.00 |Chase Freedom CL-$5,000.00 | Discover IT CL$8,000 |Citi Diamond CL $8,000 | Citi Thank you CL $9,000 | AMEX Blue Sky CL- $6,500.00 | AMEX Premier Gold- No CL | B Of A Cash CL- $8,000.00 |
PenFed Promise CL- $12,000.00 |BMW Card CL $1,000 | |PenFed Rewards CL-$11.000.00 | Pen Fed Cash CL-$1,000.00 | Nav Fed Platinum CL $14,000.00 | Navy Federal Cash Rewards CL -$1,000.00| USAA Rate Advantage CL-$14,000.00 | B of A Travel CL-$4,000.00| B of A Cash CL-$8,000 | B of A Travel CL-$4,000|


[size=80]-Scores Experian-- 728 Trans 740 Eqiufax-750
-Credit Established-- Jan 2010[/size]

User avatar
CarefulBuilder14
Centurion Member
Centurion Member
 
Posts: 3744
Joined: Thu May 08, 2014 7:42 pm
Location: United States

Postby CarefulBuilder14 » Mon Sep 22, 2014 11:16 pm

lexington,

Another sign you might have too many cards: when you list each of the BofA Travel and Cash cards twice in your signature...

(Assuming you in fact have only one of each.)
Wallet: Prestige CSP SchwabPlat Freedom It Hyatt SallieMae AAPlat
SD: Arrival BrooksBros BCE ED IHG
Letting new accounts cool off since May
Really not sure what I'll add next or when



Return to “American Express”

Who is online

Users browsing this forum: No registered users and 2 guests