25 years old, are there any better cards for me out there?

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sez
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25 years old, are there any better cards for me out there?

Postby sez » Mon Nov 11, 2013 11:03 am

Hi everyone. I had a quick question about what the next best thing for me to do is regarding credit cards and building my credit and future.

I am a 25 year old Ph.D. student who gets funding from my university and also I work. I have had a credit card and been building my credit since I was 18 and I now basically have that starter card (still), a Chase Freedom, and a Capital One Travel Rewards card. I travel quite a bit and am really looking to capitalize on the money I spend traveling with hotels, airfare, rental cars, and what not and I am just wondering what the next best thing for me to apply for would be or if I should just stay with what I've got and build my rating some more?

The starter card is just that, a starter card, I get no rewards but the APR isn't too bad. The Chase Freedom has a ridiculous APR and the rewards are nothing compared to the Capital One Card so I am gradually going to pay this off and eventually limit its use to some extent. The Capital One Card is going to be my go to card because the rewards are pretty decent.

I am wondering if anyone has any recommendation on a better card to capitalize on my traveling expenses and will also be helpful for my future in terms of building credit and also won't kill me with the APR.

I was also wondering if the fact that since I had that starter card and the Chase Freedom if it would be a problem that I am now looking to add a 4th card, even though my credit is excellent. I have been told not to cancel cards because they affect your credit negatively, so I was just going to gradually pay them off and use them for nominal purchases each month, like a few dinners or just random purchases here and there.

I am not completely opposed to paying an annual fee if it isn't so exorbitant and the rewards are nice (this is what steered me away from the Chase Sapphire).

Thanks everyone


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djrez4
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Postby djrez4 » Mon Nov 11, 2013 2:16 pm

My advice to you is simple:

If you carry a balance, forget rewards. The ONLY way to play the rewards game is to pay off your entire balance every month. If you pay interest, it offsets the rewards.

I suggest you would fare better to look into a balance transfer card to which you can transfer your current balances at 0%. The Citi Simplicity and Chase Slate cards come to mind. Discover may also have good balance transfer offers, although I haven't looked recently. When you've paid everything off, come back and we'll reassess.
[RIGHT][size=100]- Sapphire Preferred - Freedom - Ink - Platinum - Everyday Preferred -[/size]
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MemberSince99
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Postby MemberSince99 » Mon Nov 11, 2013 4:42 pm

Wow that's a first - as in the first time I've seen someone talk about how they want to phase out a Freedom in favor of a Cap One. To me that seems a bit like phasing out a Camry for a Yugo, but different strokes for different folks I guess.

To know a better travel rewards card we'd have to know what you already get with that Cap One card and how you plan to use it.

djrez has a good idea for you, though the slate honestly isn't really a great long term card it's just for transferring a balance to and saving money on the interest - what you do with it once that's done I have no clue, if you think Freedom has poor rewards you won't be delighted with slate. Discover is very smiliar to the Freedom you already have, however it has top notch customer service and no foreign transaction fee if that is important to you.

sez
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Postby sez » Mon Nov 11, 2013 5:08 pm

Thanks for the replies.

First, my Freedom has something like 22.99% APR. And I find unless I use the Freedom a lot I don't accumulate any kind of rewards.

Second, I actually have a Slate. That was the kind of starter card that they changed into a Slate, so I actually have that card and I am getting I think 17.99% APR. The Capital One Rewards I've had for nine months and there is no interest for a year and they determine my interest rate after the first year.

Third, I can probably pay down the balances of these cards within a few months so I don't really think I need a balance transfer. I am not sure if I can to the Cap One card or not but I will find out.

I always thought you should have some credits on the cards and not leave them at a zero balance because that too would negatively affect your rating. My plan was to keep a small balance on these cards, less than $200 and use the Cap One for my travel. Would this work?

MemberSince99
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Postby MemberSince99 » Tue Nov 12, 2013 6:49 am

Yes but if you are worried about every single last point, just let a small balance (1-5%) report on ONE card. Some scoring models, such as the TU I have seen on FICO, punish you for carrying small balances on multiple cards like you are doing.
Just check my scores below to see the effect - that was the only difference and the only reason TU is lower for me as I had a small balance post on 3 or 4 cards that month - the total was a couple of hundred dollars which I'd already paid when I got the scores, but that TU model does not like that even if it's a small amount.

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Postby takeshi » Tue Nov 12, 2013 8:28 am

djrez4 wrote:If you carry a balance, forget rewards. The ONLY way to play the rewards game is to pay off your entire balance every month. If you pay interest, it offsets the rewards.

+1 on this.

sez wrote:And I find unless I use the Freedom a lot I don't accumulate any kind of rewards.

That's true of any rewards card. They don't just hand out the rewards. Are you making use of the 5% quarterly categories? The Freedom only gets 1% on everything else.

Is travel actually your biggest spend category? Which specific Capital One card do you have?

sez wrote:I always thought you should have some credits on the cards and not leave them at a zero balance because that too would negatively affect your rating. My plan was to keep a small balance on these cards, less than $200 and use the Cap One for my travel. Would this work?

You probably need to get your balances down before you start worrying over details like this. What's your utilization like?

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Postby DavidNY » Tue Nov 12, 2013 10:20 am

sez wrote:My plan was to keep a small balance on these cards


Always pay off your cards monthly if possible.

MemberSince99
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Postby MemberSince99 » Tue Nov 12, 2013 10:50 am

DavidNY wrote:Always pay off your cards monthly if possible.


Yes, AFTER allowing 1-5% to report as the balanece IF you want the maximum score, I agree.

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djrez4
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Postby djrez4 » Tue Nov 12, 2013 11:02 am

I don't think we've cleared it up, entirely. What everyone is saying is this:

There's a difference between the date your credit cards report to the credit reporting agencies, the date your account closes every month, and the date your payment is due. For example, my Sapphire Preferred closes on the 18th every month and reports on the 19th or so. My payment for that month's charges is due on the 15th of the next month. For an ideal FICO, I would make a payment to the card before the month closes, but not for the full balance. I'd leave between 1-5% of the overall limit of the card.

Let's say I have a $1000 limit on the card. If I charged $500 (50% utilization) that month, I'd pay down $475 of it and leave a $25 balance - 2.5% utilization. I would let the month close with that balance remaining. That balance then reports to the agencies. Once the month has closed, I can pay off the remaining balance, leaving a balance of $0, and start over for the next month.

But, here's the kicker - none of this matters. Unless you're borderline on a mortgage or car loan and need to maximize your FICO, there is absolutely no reason to even worry about it. As long as you pay your full balance by the payment due date, the bank doesn't charge you interest and your credit report is clean as a whistle.

So, if you're interested in maximizing your rewards, pay all of your balances down to zero, let 1-5% report on one card, and apply for the rewards card you want. Once you get that card, you don't have to worry about your score again until it's mortgage/auto loan time. Charge everything from soup to nuts (assuming you're not allergic to nuts) and pay it off every month before the payment due date. Voila! Rewards maximized.
[RIGHT][size=100]- Sapphire Preferred - Freedom - Ink - Platinum - Everyday Preferred -[/size]

[/RIGHT]

sez
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Postby sez » Tue Nov 12, 2013 11:21 am

Thank you all for the replies and suggestions. Very helpful. I do have a few follow up things:

djrez4, so basically, if I understand you correctly, it is best to make two payments in one month? So for example my Freedom payment is due the 4th. So with a $2000 limit, I should pay it down to about $350 or so on the 1st, then after the 4th, pay the $350 off as well?

Also, another question I have is regarding activity/inactivity. Lets say I have that same Freedom paid down. I should still, each month try to put about $200 worth of charges on it and then pay it off correct? Rather than just leaving it inactive?

Membersince99, you were suggesting to not be carrying say a $200 balance on my Freedom and Slate and therefore I should pay it off entirely and do the above to avoid such problems correct?

Thank you all for the advice.



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