First credit card to establish credit?

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Descension
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First credit card to establish credit?

Postby Descension » Mon Mar 26, 2012 1:37 am

Been trying to avoid these things for as long as possible, but I know I have to establish credit at some point. My bank, Chase, keeps asking me to apply...

Questions I have:

  1. Why a "student" card, instead?
  2. I keep hearing different percentages of the limit that I should keep it at typically: 30, 40, 50, 60, and 75%. Why to each, or only one?
  3. Is there a frequency that it/they should be used? I'm assuming that it shouldn't be a replacement for my debit cards.
  4. How/do you justify purchases by necessity? I hear that "...only what you can immediately afford in cash..." adage all of the time.
  5. What do I do if I have my balance at X dollars with accumulating interest and I lose my job? Find another ASAP?
What card do you recommend? I have a business with PayPal, but their APR and other fees seem really high, so I have decided against that.

Thanx.


Crashem
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Postby Crashem » Mon Mar 26, 2012 8:17 pm

First thing is first and go pull your credit report. I would recommend getting real FICO score from myfico. Once you have an idea what your current credit file looks like, then we can talk. If you have never had any credit (no student loans/car loans/store cards/credit cards), then don't bother pulling it.

In answer to you questions:

1) Student card if you are a student as they take into consideration you have never had any credit and adjust their decision tools accordingly. IE you wouldn't qualify if they didn't

2) Ideally, you shouldn't keep any balance on your credit cards. You should pay in full every month so you incur no interest. As the the percentages people are talking about, they are speaking towards utilization rate (amount owed/total credit available), if your utilization rate goes up, you lose points in your credit score as 30% of your FICO score is made up of utilization. The maxmized utilization rate is somewhere between 0% and 10%.

3) If you think you can handle your credit cards, you should definitely use it as replacement for debit cards. Some people mistakenly think just because they got 10k in credit card means they got 10k. First, in general, you get to keep your money a little longer. 2nd, the better cards offer rewards and incentives such as cash back or points or miles. 3rd, some credit cards offer better consumer protection. For example, AMEX give you some car rental insurance so you can decline coverage from car rental company.

4) Wow this is a personal question. I think credit should be used as a tool. The days of buying a house in all cash are long over. But spending because your card has limit is a road to credit and financial hell. I think the saying you quoted is the right way to handle credit generally. For the larger purchases (auto/house/etc.), that healthly credit attitude will help you as hopefully resulted in high credit scores and lose interest rates.

5) You are responsible for your credit card bills. Banks are in the business of handing money for fun. There are some credit protection insurance that are offered which will cover your minimum payments if you lose your job or full payment if you die, but I consider these a rip off. Just use the credit card like you would your debit card and you will be fine.

As for what card I would recommend, it really depends. If you truly have had no credit, your fight is going to be what card you can even get. The prime cards typically require good credit history. Let us know some details (income/credit score or no credit ever/student or not/etc.) and might be able to help. Your best scenario is to get a higher limit card with no annual fee. That way you can keep that card even if you graduate to better cards. AAoA (average age of accounts) is an important factor in you credit score. Better to have a card you can keep forever even if you hardly use it.
Amex Centurion, Amex Platinum, Amex BCP 8k->24k (5/23/12), Amex TE 15k, Cap One 1.5% 15k->20k (8/7/13), CSP 25k, Chase Palladium 100k, Citibank AA 35k (AU), Firestone 1.8k->2.2k->2.4k (8/20/12), JFCU Jloc 30k, PenFed Plat Rewards 30k, SF Fire 30k, US Bank Cash+ 25k

Descension
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Postby Descension » Mon Mar 26, 2012 9:26 pm

Thanks for the input.

Regarding myself:

● 10-12k, part time
● Full-time student at the moment
● No previous credit history

Money card
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Postby Money card » Mon Mar 26, 2012 10:37 pm

Believe it or not this question is asked in this month's issue of Money Magazine, I think it's the March issue around page 18 or so.

I would suggest first a store charge card. do you have a favorite store to shop at? Sears, Kohls, and you can try gas cards Exxon/Mobil, Shell, BP but not the Visa version.

If this doesn't work try applying for your local bank and I don't mean Chase, capitol1, Bank of America , Wells Fargo or PNC. When I say local a bank I mean something like Hudson Valley, Key Bank, M&T Pacific Bank something along those lines. If these 2 don't work I would look at Chase Slate, a low interest card from an executive bank but not a big card.

You can try Orchard Visa. This card has very low limits and high interest, it's card is for people who are just starting out like you, you may get something like a 500.00 limit.

If all of these don't work I would then suggest asking your dad to go to a bank that you like, have him sit down with an account mgr and ask him if he can co-sign a card that all 3 of you think is appropriate for you.

Crashem
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Postby Crashem » Mon Mar 26, 2012 11:51 pm

I'm not sure if I agree with all of Money Card's advice. I agree with his general advice/tone that you should use credit responsibly and don't get in over your head. But good credit isn't a complete mystery. There are practical steps that involve responsible use of credit and specific steps that will lead to faster availability of credit at lower rates. Of course it is therefore possible to get into more trouble this way, but having access to the better credit products will save you more money and enable better financial progress. I don't agree with the silly advice that do things responsibly and somehow things will work out. Understanding how credit scoring and reports work give you the tools to accomplish your goals faster.

There are cards that are designed for rebuild or building credit. It is important to select the best one for you. Money Card recommends Orchard Bank. It isn't a bad card, but know its limits. They hardly ever give CLI's and probably won't grow with you. The annual fee means at some point, it wouldn't make sense to keep it, but that would harm your AAoA. The better bet would be to see where your credit is at and select the best card given your needs and not put artifical limitations on yourself.
Amex Centurion, Amex Platinum, Amex BCP 8k->24k (5/23/12), Amex TE 15k, Cap One 1.5% 15k->20k (8/7/13), CSP 25k, Chase Palladium 100k, Citibank AA 35k (AU), Firestone 1.8k->2.2k->2.4k (8/20/12), JFCU Jloc 30k, PenFed Plat Rewards 30k, SF Fire 30k, US Bank Cash+ 25k

Descension
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Postby Descension » Tue Mar 27, 2012 5:33 pm

Ahhh, I so see.

After researching a bit on CreditKarma, I liked the reviews for the Citi Forward Student card. I was offered the CHASE Slate card at my bank, but I read rather horrid stories on that website about it. Thoughtts?

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Postby Money card » Tue Mar 27, 2012 9:41 pm

ok Crashem what card would you recommend for the original poster? remember this is their first credit card. if you don't think Orchard is good then let's hear what you have to say.

all of my suggestions are perfect.

Celestine
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Postby Celestine » Tue Mar 27, 2012 10:06 pm

Descension wrote: What card do you recommend? I have a business with PayPal, but their APR and other fees seem really high, so I have decided against that.

Thanx.


Just as Money Card's response is, if you really are a student, then apply for a student credit card.

Either get an Orchard credit card, HSBC Household credit card, or Capital One Journey Student Rewards credit card. If you bank locally, then get a secured credit card from your bank provided they offer that kind of credit card.

I still have my Household credit card with credit limit of $400.00 with $35.00 annual fee (not sure how much the AF is) just in case where my credit history, God forbid, goes bad and rebuild my credit.

Those cards mentioned are for those people who have no to little credit history and or bad credit history. But I would steer clear from store branded charge and credit cards.

Right now, your primary objective is building a credit history so credit limits and APR plays little for now. Even if you do have a credit card with $300.00 credit limit, you can just pay whatever balance you may have on that credit before the billing cycle closes. As pointed out by others here at CreditCard forum, the reported credit utilization is based on the balance of the credit on the end of the billing cycle. So if you have $150.00 balance on that credit card, and then pay your card $100.00 before the billing cycle closes; your reported credit utilization will only be around 15%-20%. I hope I got that calculation correctly :p

Just pay in full the balance that is incurred in each billing cycle to avoid paying interest.
"Nearly all men can handle adversity, but if you really want to test a man's character - give him power." - Abraham Lincoln

bmw1990Z
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Postby bmw1990Z » Tue Mar 27, 2012 10:14 pm

Descension wrote:Been trying to avoid these things for as long as possible, but I know I have to establish credit at some point. My bank, Chase, keeps asking me to apply...

Questions I have:

  1. Why a "student" card, instead?
  2. I keep hearing different percentages of the limit that I should keep it at typically: 30, 40, 50, 60, and 75%. Why to each, or only one?
  3. Is there a frequency that it/they should be used? I'm assuming that it shouldn't be a replacement for my debit cards.
  4. How/do you justify purchases by necessity? I hear that "...only what you can immediately afford in cash..." adage all of the time.
  5. What do I do if I have my balance at X dollars with accumulating interest and I lose my job? Find another ASAP?
What card do you recommend? I have a business with PayPal, but their APR and other fees seem really high, so I have decided against that.

Thanx.


I am a 20 year old student whom a year ago had no credit history and made 6k a year part time (parents help out...) but I applied for a citi forward for college students and was instantly approved with a 2000 limit. Rewards add up fast too.
Cards in my wallet:
-Citi Forward Card for College Students-July 2011
-American Express Platinum Delta Skymiles--July 2013

Crashem
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Postby Crashem » Wed Mar 28, 2012 1:53 am

Money card wrote:ok Crashem what card would you recommend for the original poster? remember this is their first credit card. if you don't think Orchard is good then let's hear what you have to say.

all of my suggestions are perfect.


Actually given that Descension has income, he should qualify for some student credit cards. If he can get a parent with good credit history, he can even skip the student cards. He should skip some crappy secured card that will offer no credit line increases and annual fees. Ideally he should get 2 cards. Get ones with good rewards (whatever kind he wants). And/Or card with low APR if he is planning to keep balance (which he shouldn't be). By the time he graduates he will have a solid credit history with 2-3 cards to build on. Student cards, given the Card Act 2009, isn't as easy to get as they used to be. Now if Descension doesn't trust himself with credit..., he should do scenario 2.

1) Scenario 1 Trust himself:
Consider the following: Citi Forward Card for Student (Reward card), Capital One Journey Card for Students (cash back with credit montioring features), Go to local Credit Union and see if they have card for student, if you have bank account go talk to them. Remember NO ANNUAL FEE and some kind of reward. Don't carry both cards. Pay in Full and treat your credit not credit but spend as you would if it was a debit card.

2) Scenario 2: Don't Trust himself with credit:
Still go and get VISA/MC student card but go ahead and leave card at home/hide it. Whatever. Just use it once it a while. Remember bad credit history is worse than no credit history. Instead of a debit card, go get a PASS card from AMEX. While the pass card won't build history with credit bureaus, AMEX will track it and has some program to invite you to convert to regular AMEX if you use the pass card regularly.
Amex Centurion, Amex Platinum, Amex BCP 8k->24k (5/23/12), Amex TE 15k, Cap One 1.5% 15k->20k (8/7/13), CSP 25k, Chase Palladium 100k, Citibank AA 35k (AU), Firestone 1.8k->2.2k->2.4k (8/20/12), JFCU Jloc 30k, PenFed Plat Rewards 30k, SF Fire 30k, US Bank Cash+ 25k



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