Can't Decide What My First Credit Card Should Be

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carlito.bvb09
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Can't Decide What My First Credit Card Should Be

Postby carlito.bvb09 » Sun Feb 14, 2016 9:40 am

Here's the 3 cards I'm most interested in. I'll list my pros and cons with each and perhaps someone here can help me decide

Wells Fargo Secured Card

Pros

It's with my bank. I could always walk in to my local branch if I have any questions and I feel like since it's with my bank, they may offer me the opportunity to upgrade sooner, although that's just a feeling I have so I could be completely wrong.

It's a Visa, which is accepted pretty much everywhere.

Cons

It has a $25 annual fee.

Once I have the opportunity to upgrade, Wells Fargo's unsecured cards aren't the greatest. From what I understand, the rewards only apply for 6 months.

Capital One Secured Card

Pros

No annual fee.

It's a Mastercard, which is accepted pretty much everywhere.

Once upgraded, their unsecured card seems to have pretty good rewards.

Cons

I've heard from a couple reviews of their secured card that Capital One won't review you for upgrade to their unsecured card. I'm not sure how true this actually is.

Discover Secured Card

Pros

No annual fee.

It's the only secured card with rewards and their unsecured card seems to have the best rewards between the 3.

Cons

I've had people tell me to avoid Discover because it's not as widely accepted.


Lastly, I have a question about building credit. I've been receiving a lot of conflicting information about this, so hopefully someone here can clear this up. I've been told by some to use your credit card as much as possible, so long as you have the discipline to pay it off immediately. Others have told me to keep my utilization at or below 30%, even if I pay it off immediately. I have had people tell me they used their card once a month on gas, and they were upgraded within 6 months. Similarly, I've had people tell me they used it all the time and they were also upgraded within 6 months. So it seems to me that perhaps both methods are valid and the 30% rule is just a good rule of thumb to have so you don't get carried away and fall into debt?


Elijahmex
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Re: Can't Decide What My First Credit Card Should Be

Postby Elijahmex » Sun Feb 14, 2016 10:51 am

My first card was a CapOne. Their customer service is great and they've been very generous with CLI. Three times in one year so I highly recommend them. They are good with people who are building credit as long as you keep up with the good behaviour.

Discover is my 2nd card. I wouldnt recommend is as a 1st card simply because its not accepted everywhere & outside the U.S. you can pretty much forget about it.

WellsFargo, never dealt with them.

As for building credit, I went from 580 to 742 in 12 months by keeping my utilization low (under 20%). There were 2 instances where I was nearly at 70% but I paid it off by closing date.

Good luck!
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carlito.bvb09
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Re: Can't Decide What My First Credit Card Should Be

Postby carlito.bvb09 » Sun Feb 14, 2016 11:14 am

Elijahmex wrote:My first card was a CapOne. Their customer service is great and they've been very generous with CLI. Three times in one year so I highly recommend them. They are good with people who are building credit as long as you keep up with the good behaviour.

Discover is my 2nd card. I wouldnt recommend is as a 1st card simply because its not accepted everywhere & outside the U.S. you can pretty much forget about it.

WellsFargo, never dealt with them.

As for building credit, I went from 580 to 742 in 12 months by keeping my utilization low (under 20%). There were 2 instances where I was nearly at 70% but I paid it off by closing date.

Good luck!


Thanks for this information. The low credit utilization rule is what really baffles me though. You would think that the credit companies would consider someone who has a high utilization but always pays off their balance to be more trustworthy, but I must be missing something here.

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Re: Can't Decide What My First Credit Card Should Be

Postby Nixon » Sun Feb 14, 2016 11:42 am

Discover
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thom02099
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Re: Can't Decide What My First Credit Card Should Be

Postby thom02099 » Sun Feb 14, 2016 11:51 am

Would this be your first card, or do you have others? That could make a difference, both in your strategy as well as answers to your questions.

As you've stated, each card has pros and cons. Only you can determine what would fit your needs, both now and in the future.

One intangible that should be mentioned, anecdotal reports indicate that Wells Fargo is more willing to issue cards to folks who have an existing banking relationship with them. You stated you do, so that could be a factor in your favour, or a "pro" perhaps, if you're leaning that direction. That relationship at this early stage for you could be important to your credit future. I've been a Wells Fargo customer for years and can state that, for me, there's been a benefit to having that banking relationship. Their card offerings are somewhat "meh", but one has to start somewhere. This could be an opening for you.

On the other hand, the other cards you've noted, and their pros and cons, should also be considered. Discover has outstanding customer service and again anecdotally their card offerings can grow as your relationship with them grows. My daughter had a student card and was able to upgrade to a regular card rather painlessly. I can't speak to the pros/cons of Capital One, since I don't have their products. Some folks love 'em; others, not so much.

Regarding your question about building credit and the conflicting information you've received, all of that information can be true to some extent, depending on where one is in their building process. Keeping utilisation down below 30% is highly recommended, but for folks with multiple cards, keeping it in a range of 1-9% usually yields optimal results for scores.

http://ficoforums.myfico.com/t5/Rebuilding-Your-Credit/bd-p/rebuildingcredit Here are some informational threads that may be of assistance to you in answering some of your questions. Note the "Helpful Rebuilding Threads" (which are applicable to initial building as well) at the top of the page.
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Re: Can't Decide What My First Credit Card Should Be

Postby Vattené » Mon Feb 15, 2016 9:25 am

Discover would be my first choice (I have been very pleased with Discover, so I may be biased here). Start earning rewards right away! IMO acceptance really shouldn't be an issue. International acceptance is a different story, so if you plan on using this card abroad a lot that might change things, but in the US I really don't think it will be a problem unless you know there are a lot of smaller mom&pop type places you purchase from that already don't take Discover. I used Discover as my sole credit card for a while and I could probably count on one hand the number of places I couldn't use it, in which case it wasn't really a big deal to use my debit card. It comes down to personal preference, but practically speaking having a Discover as your only credit card won't be too limiting.

I've never had a Capital One and I don't think it would be a bad choice, but I would rather go for something that would be more useful to me now. Discover is also good about growing with you. Anecdotes aside, Discover's customer service is clearly rated higher than Capital One's, if that's important to you.

I'd avoid Wells Fargo primarily because of the Annual Fee. With responsible use, your credit will soon place you in a position of having your pick of any prime card you want, and you won't want to be saddled with an account you have to pay for and that doesn't do anything for you. You can get better products now, so I don't see any value in settling for something worse just in the hopes that a banking relationship will do something for you later on.

Regarding utilization, for scoring purposes having a high utilization means you are using a lot of the credit that's been extended to you, which translates to risk for lenders. Even if you are paying in full it still looks like you are nearly maxed out, just because it is the mathematical result of the formula that determines your credit scores. This is why people recommend 30% utilization (and as mentioned 10% is even better, so long as it's not 0 lower is better). You don't need to, but if you want to you can manipulate the utilization that's reported on you by making a payment before the outstanding balance gets reported to the CRAs. The statement date is usually, though not necessarily, when balances are reported. So if you start out with a $500 secured card and have made $450 in purchases coming up on the close of your billing cycle, rather than let that $450 report (showing 90% utilization), you could make a payment of $400 and let $50 report (showing 10% utilization).

Making a small purchase once a month will build your credit just as fast. You'll still have payment history building up and account aging. There's no downside of doing this credit-wise, but many (around here, at least) like to use credit for nearly everything for rewards and for fraud protection reasons.
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carlito.bvb09
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Re: Can't Decide What My First Credit Card Should Be

Postby carlito.bvb09 » Mon Feb 15, 2016 1:02 pm

Vattené wrote:You don't need to, but if you want to you can manipulate the utilization that's reported on you by making a payment before the outstanding balance gets reported to the CRAs. The statement date is usually, though not necessarily, when balances are reported. So if you start out with a $500 secured card and have made $450 in purchases coming up on the close of your billing cycle, rather than let that $450 report (showing 90% utilization), you could make a payment of $400 and let $50 report (showing 10% utilization).


This is what had me confused. I was under the impression that utilization was what percent of credit was used between two billing cycles, and that paying off your balance before it gets reported has no effect on utilization. Thanks for clearing this up.

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CarefulBuilder14
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Re: Can't Decide What My First Credit Card Should Be

Postby CarefulBuilder14 » Mon Feb 15, 2016 2:22 pm

I'd go with Discover.

Good customer service, no AF ever, and I find the rewards program makes the card still occasionally useful even when I have 12 cards.

Sure, you could probably eventually PC a secured Cap1 card into a Venture, but you'd be unlikely to get the $400 bonus.

I'd get the secured Discover, build some history with it, and then go for an unsecured Visa or MC with decent rewards (a V/MC card you actually want) later.
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Re: Can't Decide What My First Credit Card Should Be

Postby Elijahmex » Mon Feb 15, 2016 3:26 pm

carlito.bvb09 wrote:
Elijahmex wrote:My first card was a CapOne. Their customer service is great and they've been very generous with CLI. Three times in one year so I highly recommend them. They are good with people who are building credit as long as you keep up with the good behaviour.

Discover is my 2nd card. I wouldnt recommend is as a 1st card simply because its not accepted everywhere & outside the U.S. you can pretty much forget about it.

WellsFargo, never dealt with them.

As for building credit, I went from 580 to 742 in 12 months by keeping my utilization low (under 20%). There were 2 instances where I was nearly at 70% but I paid it off by closing date.

Good luck!


Thanks for this information. The low credit utilization rule is what really baffles me though. You would think that the credit companies would consider someone who has a high utilization but always pays off their balance to be more trustworthy, but I must be missing something here.


I know what you mean, One of my relatives who had just moved to the US had the same mentality which was to get a card, pay all purchases with the card which resulted in maxing it out (limit was 7-10k), PIF to show that he/she is a trustworthy human, and build a relationship with the bank but that did not work in their favor, That person learned the hard way.
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Vattené
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Re: Can't Decide What My First Credit Card Should Be

Postby Vattené » Mon Feb 15, 2016 4:59 pm

carlito.bvb09 wrote:This is what had me confused. I was under the impression that utilization was what percent of credit was used between two billing cycles, and that paying off your balance before it gets reported has no effect on utilization. Thanks for clearing this up.

You are welcome. You were correct in that it's the percentage of credit used, but that's calculated by dividing the outstanding balance by the total credit limit. The outstanding balance is just what the lender will report to the CRAs monthly (again, most commonly the amount shown on your statement).

Utilization on individual accounts as well as overall utilization are factored, too. So down the road you may have a few accounts, but only be using one card. Your overall utilization (total balances divided by total credit limits) may be good, but a high utilization on one card could still be bad. It's not worth worrying too much over utilization IMO because it's a factor with no "memory." Once your outstanding balances are updated the next month, your credit scores will be updated based on those amounts. Unlike having a 30-day late payment, which will drag you down for years as it stays on your reports, utilization is just a snapshot in time. Since you are building and will likely get a low credit limit starting out, you may find it is worthwhile to manipulate your utilization (it's easy to look like you're near maxed out even if you pay in full if you only have a $1000 CL), but honestly if you won't be making any credit applications for the next month it won't have any real impact on you.

Good luck with the app! Let us know how it goes once you decide.
-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



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