how do credit cards work?

[Finnster]

Before you do anything, watch this program online by Frontline on PBS. Secret History of the Credit Card. Frontline is awesome and has great documentaries. Interesting program, but also illuminates a lot of the traps and pitfalls CC setup to get the most $$ out of you through fees and interest. As said, CC's are very dangerous if you use them carelessly and stupidly.

Also, never ever pay the min amt. 1st off, between the low min and high int rates, you will take years to pay off the balance, and that's if you don't ever buy more on the CC. 2nd, making a min actually goes on your credit rating as a ding. At worst pay a few $$ more. People who have to make min payments are in financial trouble, so assumes the credit raters.

CC help build credit, but only a bit. They are a good 1st step if you are careful, but having an auto loan and paying it on-time is much better. Anyone can get a CC, and credit raters know this.

Lastly, don't get a BoA card. They suck. They make payments online tough, meaning you have to pay several days in advance of the due date. Even to pay the day before, you have to pay a $12 "express payment" fee to be counted before the due date. Late charge is like $45. BS. I've heard Citi is not that great either, but IDK first hand. I hated my BoA card and will never get one again.

I now have a card from Barclay's. They don't do the stupid crap BoA does, and you can make payments upto 7pm that will count the next day w/o fees. They also send out email reminders for payments. Also they are not constantly raising credit limit like BoA does (which can hurt credit as well... you can only have so much credit to your name, and if CC take up a large portion, other loans factor those amts in.)

[JERRY2KONE]

Well I have BoA as my main bank of choice, and we have a few credit cards in use right now. All of our pay goes into BoA accounts, and transfering money around to pay things off is the easiest thing in the world. I never have to write a check for anything, because the bank sends checks to anyone I tell them to within 24hours, or if the establishment is in thier circle of associates they do a wire transfer instantly, and most importantly it is absolutely free as long as you never go over limits or are never late. When I have a credit card payment due I can either have it paid automatically by the bank, or I do a wire transfer (FREE). Either way I never pay any fees, or interest payments on anything as they are paid before any interest is applied. LIke it has been stated the safest way to deal with CC's is not to make purchases that you cannot pay for within 30 days. Yes a home or a car may be the exception, but anything else is purely a luxury. It may take a person some time to get to this point in life, but anything else will cost you dearly in the long run.

I used to have 800 scores as well, until I got married the 2nd time around, and she drove me to the poor house in credit debt. It took me a few years to clean all of that up, but I am back on top of the world again, and finally paying balances off every month. Any other way is just dangerous. Seeing people out there with CC debt of tens of thousands of dolllars is just rediculous. We have become greedy as a society, and want everything NOW instead of being smart about spending our money. If you cannot afford it, then don't buy it. This is a simple stratagy that has been around for 100 years. You need a CC to gain credit, but you also need to save money so you can pay for the things you wish to charge and pay them off every month plain and simple. That is the only way to avoid the demons of credit card debt. Good luck with that.

[pb4ugo]

Originally Posted by Finnster

Before you do anything, watch this program online by Frontline on PBS. Secret History of the Credit Card. Frontline is awesome and has great documentaries. Interesting program, but also illuminates a lot of the traps and pitfalls CC setup to get the most $$ out of you through fees and interest. As said, CC's are very dangerous if you use them carelessly and stupidly.

Also, never ever pay the min amt. 1st off, between the low min and high int rates, you will take years to pay off the balance, and that's if you don't ever buy more on the CC. 2nd, making a min actually goes on your credit rating as a ding. At worst pay a few $$ more. People who have to make min payments are in financial trouble, so assumes the credit raters.

CC help build credit, but only a bit. They are a good 1st step if you are careful, but having an auto loan and paying it on-time is much better. Anyone can get a CC, and credit raters know this.

Lastly, don't get a BoA card. They suck. They make payments online tough, meaning you have to pay several days in advance of the due date. Even to pay the day before, you have to pay a $12 "express payment" fee to be counted before the due date. Late charge is like $45. BS. I've heard Citi is not that great either, but IDK first hand. I hated my BoA card and will never get one again.

I now have a card from Barclay's. They don't do the stupid crap BoA does, and you can make payments upto 7pm that will count the next day w/o fees. They also send out email reminders for payments. Also they are not constantly raising credit limit like BoA does (which can hurt credit as well... you can only have so much credit to your name, and if CC take up a large portion, other loans factor those amts in.)

All true, but you're not going to get that car loan at anything less than 18% without prior comparable high limits. That's where the CC comes in.

I honestly almost never check the interest rate of a credit card I want, because I don't pay them interest. ONLY PAY IN FULL.

[Finnster]

Originally Posted by pb4ugo

All true, but you're not going to get that car loan at anything less than 18% without prior comparable high limits. That's where the CC comes in.

I honestly almost never check the interest rate of a credit card I want, because I don't pay them interest. ONLY PAY IN FULL.

That is true, but that why you get someone to co sign a loan, like a parent. When you make ontime payments, that will really build the credit. Even after a couple years you could refinance w/o cosigner.

I had a CC for a while, but my 1st auto I had to get a cosigner. CC credit helps only a little.

[pb4ugo]

Even with a co-signer (if one is available) you will face rates and terms not as favorable as just having good credit to begin with. This is approx. 7500 car deals' worth of experience talking.

As a F&I manager, I could get a first time buyer bought all day long at top tier rates as long as they had a year of responsible credit repayment and equivalent high dollar amounts. A kid buying a 12k car with a 10k credit card limit as comparable amount was golden. When buyers got stars in their eyes looking at the 40k truck is when re-enforcement was required.

[Finnster]

Originally Posted by pb4ugo

Even with a co-signer (if one is available) you will face rates and terms not as favorable as just having good credit to begin with. This is approx. 7500 car deals' worth of experience talking.

As a F&I manager, I could get a first time buyer bought all day long at top tier rates as long as they had a year of responsible credit repayment and equivalent high dollar amounts. A kid buying a 12k car with a 10k credit card limit as comparable amount was golden. When buyers got stars in their eyes looking at the 40k truck is when re-enforcement was required.

Wow, that's good to hear. When I went to get my first car i couldn't get great rates (not bad, but at least 4-5% above the best rates) w/o a co-signer. This was a cheap new car and having good credit, a fulltime good job for two years, and a CC for 5 something years always paid on time and in full. OTOH, my wife (but still not married at the time, so GF) had our mortgage in her name and she had no problem getting the best market rate by herself. Even though I had been paying half the mortgage for a couple years, the bank didn't know that and my credit was still fairly weak as it was just CC debt, etc. The rate she was quoted was 5% less for no other diff than the loan history really. Once I had established good credit w/ the car loan, I had no trouble getting other loans later on, like mortgages etc.