how do credit cards work?

[Arct1k]

A credit rating IS important and something to manage - Most people at some point will need some credit - House purchase etc

Starting early and building it up slowly is sensible. Just don't go overboard - live within your means - credit is just that credit you have to pay it back and why pay interest to a back - This is just part of being an adult and taking responsibility.

[skellyo]

Originally Posted by MTBikerTim

I honestly didn't put much thought into increasing credit rating. Thinking about the credit rating thing I think I am with linc. Stuff it.

Good luck with that. Paying cash for big ticket items isn't always possible, especially when it comes to a house. Most folks looking to buy a home don't have $100's of thousands available to buy outright. For probably 99.9% of people, no credit = no house.

[VintageMA]

Wow - I am amazed at how many people have responded to this thread.

My suggestion is to get the credit card, you may not be able to get a low APR with no past histroy, but that's okay. When you start out just use the credit card to pay for what you know you can pay off every month.

One suggestion is that things you would normally pay cash for (ie: gas, food shopping, etc) you save the cash and pay with CC and then pay off each month. When the bank see you charging and paying off each month they will continue to give you higher credit limits.

I royally f'ed up when I got my first CC and maxed it out when I was in college. My parent started getting calls at 8 in the morning from collectors and it was very shameful for me. My limit was $2000 and I was at $2500 with interest compounding - i couldn't keep up at the time with very little income. Luckily my parents bailed me out - but that was a serious lesson learned - and ever again I said would I hold a CC debt I couldn't afford to pay.

Another thing I learned was that it's very hard to get a loan if you've never had one before either, even with a CC. So getting a car with a loan for part of the purchase (even if the interest is higher) and paying it off on time (or even early) look great on your credit report.

We live in a credit/debt society right now - I've heard that it is almost the norm for people for to have up $20000 in CC debt at most times - and think of the interest being paid out for that.

To build credit over the time (expecially if you are thinking of buying a house and getting a mortgage with a good rate) it is good to work yourself up to having 2 CC's and going through a few loans (car or personal) and paying them off over time to help build your credit.

[MTBikerTim]

Originally Posted by skellyo

Good luck with that. Paying cash for big ticket items isn't always possible, especially when it comes to a house. Most folks looking to buy a home don't have $100's of thousands available to buy outright. For probably 99.9% of people, no credit = no house.

This may sound ignorant and stupid but I know people who have gotten home loans and have never had a loan or CC. They did have to do other things though to show they could repay the loan. The best thing about that is that it showed that they really could repay the loan. Sure things are changing at the moment and it isn't going to be that easy any more but that is probably for a good reason at least for a while. I see and know too many people who get them selves into trouble then someone else has to get them out of trouble.

[skellyo]

Originally Posted by MTBikerTim

This may sound ignorant and stupid but I know people who have gotten home loans and have never had a loan or CC. They did have to do other things though to show they could repay the loan. The best thing about that is that it showed that they really could repay the loan. Sure things are changing at the moment and it isn't going to be that easy any more but that is probably for a good reason at least for a while. I see and know too many people who get them selves into trouble then someone else has to get them out of trouble.

You don't live in America though. If you don't have a good credit score here, you're screwed with trying to buy a home without paying cash in full.

[lincpimp]

Originally Posted by skellyo

You don't live in America though. If you don't have a good credit score here, you're screwed with trying to buy a home without paying cash in full.

This is my situation, I have no credit to speak of, but my wife does have credit, so we should be ok. I am planning a new house, and own the property it will be built on. I also have 100% equity in my current house, so I can sell that and have quite a bit toward the new house. I will still need some sort of loan, but I am trying to save as much as possible to limit the amount I will have to borrow.

[JOEX]

I'm sure being able to pay cash for everything is a great feeling but it's not possible for the vast majority of people. If you want to be able to use credit you have to have viable proof you can handle credit. I pay cash for most small ticket items. House, equity loan for the garage and car are on credit. Use credit card for online purchases but pay it off every month.

Last credit score was over 800

[t-maxxracer32]

Originally Posted by VintageMA

Wow - I am amazed at how many people have responded to this thread.

My suggestion is to get the credit card, you may not be able to get a low APR with no past histroy, but that's okay. When you start out just use the credit card to pay for what you know you can pay off every month.

One suggestion is that things you would normally pay cash for (ie: gas, food shopping, etc) you save the cash and pay with CC and then pay off each month. When the bank see you charging and paying off each month they will continue to give you higher credit limits.

I royally f'ed up when I got my first CC and maxed it out when I was in college. My parent started getting calls at 8 in the morning from collectors and it was very shameful for me. My limit was $2000 and I was at $2500 with interest compounding - i couldn't keep up at the time with very little income. Luckily my parents bailed me out - but that was a serious lesson learned - and ever again I said would I hold a CC debt I couldn't afford to pay.

Another thing I learned was that it's very hard to get a loan if you've never had one before either, even with a CC. So getting a car with a loan for part of the purchase (even if the interest is higher) and paying it off on time (or even early) look great on your credit report.

We live in a credit/debt society right now - I've heard that it is almost the norm for people for to have up $20000 in CC debt at most times - and think of the interest being paid out for that.

To build credit over the time (expecially if you are thinking of buying a house and getting a mortgage with a good rate) it is good to work yourself up to having 2 CC's and going through a few loans (car or personal) and paying them off over time to help build your credit.

im gonna have to say that this was definetly the best/simplest advice ive read through this whole thread.

alot of what you guys said was far too advanced for what i know

recently i had bought a tv and all that stuff from best buy and have 18 months to pay it off with no interest. that would have been a great thing to build my credit... problem is my dad only put his name on it. didnt put me as a join person or however that works.

i think when i finish paying that off i may go and do it again with a laptop and put it in my name. that way i can build credit from that with no interest while using a CC and get credit from that.

soon i will be buying a new car (in the next year i hope) and that will definetly help me alot.

i do know my own limits and i am very good with spending my money, so getting a CC wont hurt me in that area. i wont spend more than i can afford.

right now i do have a steady job. although it is a "shift" job i still get around 30-40 hours a week plus tips.

i probably wont get one untill i finish paying off my debts that way i can start fresh without working about anything.

i appreciate all your help! i didnt realize everyone here was so smart with credit and all that fun stuff.

[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.

[Arct1k]

I think everyone is saying the same thing - A credit card is fine credit card debt is not! Get a low limit and bank on paying the whole thing off at the end of the month...

The credit card company will hate you but thats the game...

[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.

[t-maxxracer32]

ya thats one thing i didnt understand.

for me i would not be stupid with it 100%. i do not NEED anything so its not like i HAVE to charge things.

i always have money in the bank anyways so the CC would be only for building credit.

i think if i do get one my first purchase would be an erevo.

in 1 month i can easily get enough money for it.

but why not get it now if it will help build credit.

i may buy 1 big thing a month with it. then gas and other things like you said.

thats the way to go about it, things you would nornally pay cash for put on a cedit card and than when the bill comes pay it....

[pb4ugo]

Pay the bill before it comes so the balance won't report on your credit!