Clueless Noob Questions

For just about anything you want to get off your chest about credit cards.
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BLR
 
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Clueless Noob Questions

Postby BLR » Wed Apr 29, 2015 9:49 am

i've never had a credit card. i've never actually needed one, and... i still don't need one, except that i need one. supposedly, if i have some type of emergency and i need credit, i need a card to establish that. (i'm currently rated "insufficient credit history.")


okay, so...

first stupid question:
i wanted to get a credit card from amazon that gives me a 70$ gift card balance. if i get that card and never, ever use it again, is that considered credit card fraud or something?


other stupid question:
obviously, they wouldn't give me that credit card ;) so i researched what kind of credit card i CAN get. that's all well and good. but i don't understand what i NEED to do with it. or how to do it.

A: if i get this card, and never ever use it.... that doesn't work, right? like i say, i don't NEED a credit card. (i know, it's so un-american to live within one's means.) except for emergency purposes. if i never have an emergency....

B: so what is the minimum i can use this thing, and how much will it cost me? if i put money in it before i spend money on it... does that work? (here's one for a laugh: if i pay money into it, so that i have a 'negative' balance, will THEY pay ME interest on it? hah!)

and i was reading an agreement on my bank's visa card. it says all that about you can pay off your balance before the whatever date and not get charged interest... but then later it says the MINIMUM monthly payment i can make was 15 dollars. i have to pay 15 dollars a month for that thing?? even without a balance and without using it??



i don't understand what i actually need to do with a credit card, and how much it will end up costing me. is there a plan or outline or something? this is solely to establish a credit history. (that's not fraudulent use, is it?)

thanks a bunch!


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Vattené
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Re: Clueless Noob Questions

Postby Vattené » Wed Apr 29, 2015 3:48 pm

Your approach is perfect. Don't use a credit card to finance your lifestyle. Most of us on the forum don't, or only pay pay interest on rare occasions like emergencies. I have never paid a penny in interest, but I cycle all the spending I would otherwise make through credit cards for the rewards.
BLR wrote:i wanted to get a credit card from amazon that gives me a 70$ gift card balance. if i get that card and never, ever use it again, is that considered credit card fraud or something?


Not at all. I've started plenty of store accounts just for a one-time discount, paid it immediately, and never used it again. It is your card in your name, and you can use it as you see fit - which includes not at all.

BLR wrote:obviously they wouldn't give me that credit card ;) so i researched what kind of credit card i CAN get. that's all well and good. but i don't understand what i NEED to do with it. or how to do it.


With no history your options are pretty much limited to a secured card (you give them money they hold on to while you have the card. You get it back, but it gives them something if you end up not paying what you owe) or a store card. After you've established some history, you can get cards that actually benefit you.

BLR wrote:A: if i get this card, and never ever use it.... that doesn't work, right? like i say, i don't NEED a credit card. (i know, it's so un-american to live within one's means.) except for emergency purposes. if i never have an emergency....

You can have a credit card for emergencies and never touch it. If you read around on the forum at all you'll see people use "sockdrawer" as a verb. It means to not use a card all, as though you put it in a sock drawer and just forgot about it.

BLR wrote:B: so what is the minimum i can use this thing, and how much will it cost me? if i put money in it before i spend money on it... does that work? (here's one for a laugh: if i pay money into it, so that i have a 'negative' balance, will THEY pay ME interest on it? hah!

You can use it as little as you want or not at all. You won't have the option of putting money on it that you don't owe. That describes a prepaid card or debit card.

You can barely get any interest out of a savings account, so if you find a way for a bank to give you 20% in interest let us know ;)

BLR wrote:and i was reading an agreement on my bank's visa card. it says all that about you can pay off your balance before the whatever date and not get charged interest... but then later it says the MINIMUM monthly payment i can make was 15 dollars. i have to pay 15 dollars a month for that thing?? even without a balance and without using it??

The period between the statement cutoff and payment due date is commonly referred to as the "grace period" because it is the window you have to pay off without being charged interest. ALWAYS pay off the ENTIRE statement balance within this grace period and you'll never pay interest.

If you don't use it, the minimum payment will just be $0. If you buy a pack of gum and that is it, the minimum payment will be that little charge. It is only if you charge $15+ that the $15 minimum payment comes into play. It is the minimum you must pay by the due date to avoid penalty fees. If you owe more than $15 but just make the $15 minimum payment, you will be charged interest on whatever is outstanding.

BLR wrote:i don't understand what i actually need to do with a credit card, and how much it will end up costing me. is there a plan or outline or something? this is solely to establish a credit history. (that's not fraudulent use, is it?)

If you get a card with no annual fee and ALWAYS pay the full statement balance before the payment due date, it will cost you nothing. Other than that, again, use it however you want. Having one at all will show up on your credit reports, and using it even now and then will cause positive payment histories to be reported on you. THAT is how you build credit without taking on unnecessary debt and paying unnecessary interest, which will in turn allow you to get favorable terms when you actually do need to take on debt (such as a lower interest rate on a mortgage). Credit cards can be a wonderful tool, but like any tool it can cause a lot of harm if you don't know how to properly use it.
-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
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Re: Clueless Noob Questions

Postby takeshi » Thu Apr 30, 2015 12:55 pm

BLR wrote:i've never had a credit card. i've never actually needed one, and... i still don't need one, except that i need one. supposedly, if i have some type of emergency and i need credit, i need a card to establish that. (i'm currently rated "insufficient credit history.")

Credit isn't just for emergencies. Ideally, you should have an emergency fund aside from credit.

BLR wrote:i wanted to get a credit card from amazon that gives me a 70$ gift card balance. if i get that card and never, ever use it again, is that considered credit card fraud or something?

No, it's not fraud. However, some creditors aren't very friendly to consumers who have a pattern of opening and closing accounts just for sign on bonuses and have policies to discourage this.

BLR wrote:obviously, they wouldn't give me that credit card ;) so i researched what kind of credit card i CAN get. that's all well and good. but i don't understand what i NEED to do with it. or how to do it.

I'd suggest starting off not with looking at cards but looking at the standard factors used to score and assess credit if you want to understand the how and why.
http://www.myfico.com/crediteducation/w ... score.aspx

That's just a starting point and it doesn't quite cover everything. Once you are ready to consider cards, given your credit profile you probably won't be going after rewards and sign on bonuses to begin with. You'll be looking at gradually obtaining 2-3 starter cards and one or more may be secured. If those starter cards can grow with your credit, great. If not, you'll gradually replace them as your credit improves.

BLR wrote:so what is the minimum i can use this thing, and how much will it cost me?

Treat it as cash and it won't cost you anything. A lot of people tend to conflate credit and debt. They're related but not the same thing, You can build credit with credit cards without incurring debt.

I use my cards for everything where cards are accepted. My cards are rewards cards so placing spend that I already spend on them earns rewards on what I would spend anyway. Cards also offer protections that cash and checks do not. I find spend tracking much easier with cards. Don't just look at cards as evil. They're just a tool. Like any other tool it's all about using the tool correctly.

As for minimum activity, that can and does vary by product and creditor. You'd have to verify with each card you're considering. I recommend not looking at what the least you can do is. It sounds like you're terrified of credit cards but you really just have to learn about using them. It's really not a big deal and they're not the devil as people like Dave Ramsey make them out to be. You can't treat them as income and you have make and stick with a budget even if you have and use credit cards. The issue many have with them is due to irresponsible and improper usage leading to spiraling debt.

BLR wrote:and i was reading an agreement on my bank's visa card. it says all that about you can pay off your balance before the whatever date and not get charged interest... but then later it says the MINIMUM monthly payment i can make was 15 dollars. i have to pay 15 dollars a month for that thing?? even without a balance and without using it??

The minimum payment is what is required to keep your account current with a balance. Disregard the minimum payment. Paying the only the minimum will just get you in debt. Pay in full by the due date at the latest.

As stated above, if you pay in full within the grace period (by the due date) you won't pay any interest and you won't incur any debt.

BLR wrote:i don't understand what i actually need to do with a credit card, and how much it will end up costing me. is there a plan or outline or something? this is solely to establish a credit history. (that's not fraudulent use, is it?)

There isn't a fixed recipe like what you're looking for. There isn't a fixed set of steps that everyone should follow. Like many other things in life it's a matter of finding the solutions that suit the specific individual's needs. You're just at a point where you need to educate yourself a bit before jumping into it. That's what this and other credit sites and credit discussion sites are for.

None of use started out knowing everything. We all started off knowing nothing or very little or not understanding things correctly. You're not going to get it all by reading just this thread. You'll need to invest some time and effort but it's not really all that difficult even though it may seem overwhelming from where you're standing. Like learning anything else, take it one step at a time, one piece at a time.
Last edited by takeshi on Thu Apr 30, 2015 1:29 pm, edited 9 times in total.

takeshi
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Re: Clueless Noob Questions

Postby takeshi » Thu Apr 30, 2015 1:03 pm

(nm -- dupe post)



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