How Do Credit Cards Work? (Simple Explanation & Tips)

For just about anything you want to get off your chest about credit cards.
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romaire
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How Do Credit Cards Work? (Simple Explanation & Tips)

Postby romaire » Sat Mar 17, 2012 11:46 pm

Hello to all!

I am new to the forum and I've just been approved for my very first credit card (Discover More Card, credit line: $1,000), and I am 19 years old, a full time student, and a part time worker.

  • Can you guys offer any suggestions for a first-time credit user?
  • Any things I SHOULD look in to? Any thing that I SHOULD avoid?
  • Also, if possible can anyone provide me with a simple explanation of how credit cards work?
Thanks a bunch


randeman
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Postby randeman » Sun Mar 18, 2012 12:18 pm

Congratulations on your first card. Use it judiciously. Pay it off every month. If you can't pay it all off, pay off MOST of it. You probably have a high interest rate, so paying off most of it (if you can't pay all of it) will save you money. Don't max it out. Actually, I have heard that you should never pay with credit if you can't pay with cash, but where is the "fun" in that? If you can't pay it completely off, always pay MORE than the minimum payment.

As far as how they work, Discover has essentially given you an ongoing $1,000.00 loan. Show them that you are responsible and pay it back when you "borrow" on it.
Cards and Credit lines Acquired:

Escape by Discover (7.75K), Barclay Holland America Visa (7K), Macy's store card (7K), Bloomingdale's store card (2.6K), Citi Custom Credit Line (3.5K), PayPal Smart Connect credit line (2.7K), Chase Freedom Visa (5K), Chase United MileagePlus Visa (5K), Chase Sapphire Preferred Visa (6K), Amazon store card (2.2K), Lord & Taylor store card (550), Nordstrom store card (1500), Gold Delta SkyMiles from American Express (3K), Discover It (6.5K), PayPal Credit Line (1K).

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bisbicos
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Postby bisbicos » Sun Mar 18, 2012 2:02 pm

Something I wish people told me when I was new to credit cards was; if your going to carry a balance make sure its no more than 30% of your total limit.

In your case never carry a balance of $300 on your $1000 balance
Credit Cards
American Express: Fidelity Rewards (2% cash back) 9.5k
Zync NPSL
Discover: Discover More (5% rotating categories) 12k
Mastercard: Chase Freedom (5% rotating categories) 4.6k
Visa: Citi Forward (5x pts on restaurants) 15.7k
Citi Dividend (5% rotating categories) 5.6
Capital One Journey (1.25% cash back) 1.25k
BofA AAA (5% on gas) 2.5k
PenFed Platinum Rewards (5% on gas 3% groceries) 7.5k

Future Cards
US Bank Cash +
Chase Ink

romaire
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Postby romaire » Sun Mar 18, 2012 5:28 pm

OK so what should i do in an emergency situation, lets say i need to use $700 would it hurt me to do so? How would you guys recommend I handle a situation like this?

And thanks for the help in explaining how a credit card works!!!

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Josea
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Postby Josea » Sun Mar 18, 2012 5:56 pm

I have recently got a $2000 limit card, does this mean in any one billing period I can charge up to $2000 ? If my period is April 1 - April 30 and by April 15 I am up to $1500, can I pay at that point, then charge another $1500 from April 16 till April 30 ? Thanks I am a total newbie to credit cards. Thanks, J

romaire
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Postby romaire » Sun Mar 18, 2012 7:34 pm

Ok, thanks a lot for the tips..

Another question: lets say I wanted to make a purchase for a fairly large amount, $800 or so, for something like a laptop, how would you guys recommend handling purchases for larger amounts of money? and also would you suggest that I just stay away from large purchsases all together when dealing with credit?

DoingHomework
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Postby DoingHomework » Mon Mar 19, 2012 8:55 am

romaire wrote:Ok, thanks a lot for the tips..

Another question: lets say I wanted to make a purchase for a fairly large amount, $800 or so, for something like a laptop, how would you guys recommend handling purchases for larger amounts of money? and also would you suggest that I just stay away from large purchsases all together when dealing with credit?


Don't make such a large purchase until your credit limit is at least $3000. That should happen within a year or so of using the card responsibly. Use that time to save up.

Always pay the balance in full every month. Use the card only for things you already have the cash for.

Save up an emergency fund for emergencies. Don't rely on the card.

Basically, the card for for convenience. It is not a new source of money.

romaire
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Postby romaire » Mon Mar 19, 2012 9:12 am

OK, thanks everyone! I'll be sure to use it responsibly...

Final question: how long does it take to build solid credit??

irvine801
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Postby irvine801 » Mon Mar 19, 2012 11:00 am

Don't max it. I recommend pay in full so use like a debit card and only buy what you cam afford to help build credit and a positive relationship with discover. They love pif customers and also love usage as well. And if you revolve the account just don't max it. It will hurt all with your score. Especially if its your only card. :)
-American Express Zync.
-Discover IT. 4.5k limit 7.99%
-MC Citi diamond preferred. 1500 limit
-Visa Chase freedom. 2k limit.(23.24%, NOT IN USE)
-Miles by discover 1.5k limit.7.99%
-Best buy store card. 1500 limit
-Mt. America visa 1k limit

irvine801
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Postby irvine801 » Mon Mar 19, 2012 11:04 am

And don't forget to activate your 5% promo for the cash back bonus !!
-American Express Zync.
-Discover IT. 4.5k limit 7.99%
-MC Citi diamond preferred. 1500 limit
-Visa Chase freedom. 2k limit.(23.24%, NOT IN USE)
-Miles by discover 1.5k limit.7.99%
-Best buy store card. 1500 limit
-Mt. America visa 1k limit



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