Entry Level Credit Cards for Someone Who Hates Credit Cards
March 5, 2011 6:11 PM Subscribe
Help me find a credit card for emergencies, even though I'm too young for a real credit history and a little squigged out by the ethics of credit card companies.
I'm a 22 year old recent college graduate who has held down a job since graduation. I've got about two years worth of on-time rent payments and nine months of on-time student loan payments to my name. I'd like to get a credit card that I can keep around for emergency purposes and hopefully establish a small credit history. I don't care much at all about points or rewards.
Here's the complication: having read all of the nasty articles over the years about deceptive practices by credit card companies, I've got a lot of reservations - both out of fear of getting screwed myself and because I don't like how most credit card companies seem to exploit the poor. What's a first-time credit card I can get that's affordable but that won't make me feel that nasty feeling that I and my fellow Americans are getting roundly screwed?
I'm a 22 year old recent college graduate who has held down a job since graduation. I've got about two years worth of on-time rent payments and nine months of on-time student loan payments to my name. I'd like to get a credit card that I can keep around for emergency purposes and hopefully establish a small credit history. I don't care much at all about points or rewards.
Here's the complication: having read all of the nasty articles over the years about deceptive practices by credit card companies, I've got a lot of reservations - both out of fear of getting screwed myself and because I don't like how most credit card companies seem to exploit the poor. What's a first-time credit card I can get that's affordable but that won't make me feel that nasty feeling that I and my fellow Americans are getting roundly screwed?
It's honestly not that hard not to get screwed by credit card companies. Just pay it off every month. Given that you don't have a poor credit history, you will not have to pay tons of fees, and if you don't accumulate any interest on your account, you're not really giving them anything except the fees merchants pay when you use your card at their establishment. Which, if you don't plan to use your card often, is probably not going to be significant revenue for them. I've had credit cards for several years and I don't think I've ever paid a dime of interest.
You are not going to find a "less evil" credit card company, though. I think they are all approximately equal.
When I was in your shoes (granted, I was 19 and still a student), I walked into the bank where my savings account had been since I was 6 and asked them if I could get a credit card. I walked out with a "Student Visa" with a $500 credit limit. This was in the heady days when they were handing out credit cards to potatoes and fictional characters and such, though, so it might not be quite as easy now. I still think your bank is a good place to start.
posted by troublesome at 6:26 PM on March 5, 2011
You are not going to find a "less evil" credit card company, though. I think they are all approximately equal.
When I was in your shoes (granted, I was 19 and still a student), I walked into the bank where my savings account had been since I was 6 and asked them if I could get a credit card. I walked out with a "Student Visa" with a $500 credit limit. This was in the heady days when they were handing out credit cards to potatoes and fictional characters and such, though, so it might not be quite as easy now. I still think your bank is a good place to start.
posted by troublesome at 6:26 PM on March 5, 2011
Bankrate has useful comparison tools, here is their page on credit card basics which has some useful glossaries and advice.
If you are finding it hard to get one, two things to try :
-See if your credit union offers one. (If you don't already have a credit union, it's worth looking around in your area to see if there's one you're eligible to join.) If your credit score is a problem, they may offer a "secured card" which works like a debit card.
-See if your school's alumni association has a credit card company they work with to offer an alumni card; sometimes this will be easier to get for alums.
How to use a credit card:
Use it to buy a very modest amount of stuff each month, and always pay the full balance (not the "minimum payment") a few days before the due date every month. Be sure to get a card with a "grace period", ie where your purchases do not start accruing interest until the next billing cycle. Note the fine print about what happens if you miss a payment. (In some cases missing a payment allows them to raise your interest rate or eliminate the grace period.)
posted by LobsterMitten at 6:28 PM on March 5, 2011 [3 favorites]
If you are finding it hard to get one, two things to try :
-See if your credit union offers one. (If you don't already have a credit union, it's worth looking around in your area to see if there's one you're eligible to join.) If your credit score is a problem, they may offer a "secured card" which works like a debit card.
-See if your school's alumni association has a credit card company they work with to offer an alumni card; sometimes this will be easier to get for alums.
How to use a credit card:
Use it to buy a very modest amount of stuff each month, and always pay the full balance (not the "minimum payment") a few days before the due date every month. Be sure to get a card with a "grace period", ie where your purchases do not start accruing interest until the next billing cycle. Note the fine print about what happens if you miss a payment. (In some cases missing a payment allows them to raise your interest rate or eliminate the grace period.)
posted by LobsterMitten at 6:28 PM on March 5, 2011 [3 favorites]
Actually, here's their purpose-built guide: Getting your first credit card with no credit history
posted by LobsterMitten at 6:39 PM on March 5, 2011 [1 favorite]
posted by LobsterMitten at 6:39 PM on March 5, 2011 [1 favorite]
Best answer: I was once like you, but decided to give it a shot. Discover had foisted an account on me from back during open season on college students. It's been good to me, but the interest rate isn't great. But step one of not getting screwed is to Always Pay In Full On Time. Where people go wrong is writing checks for the minimum payment. Either because of ignorance or because it's easier than calling a bankruptcy lawyer or make changes in lifestyle after an economic loss.
I don't have experience with other banks, but I do like Discover. Reasons you might consider them:
1. No annual fee.
2. No over the limit crap anymore (yay consumer protections bill).
3. Rewards are in dollars, not bogopoints, which you can use to pay down your balance. Or if you must, you can tithe your reward away to one of many charities.
4. Retailers are free to not accept it. Many don't, because of the higher merchant fees. This is where your rewards come from, not poor people.
5. Free 30 day loan, if you set up automatic pay in full. You could invest the float in their FDIC insured deposits, if it helps you feel like you're screwing The Man.
6. They report to the credit agencies regularly, since you want to build credit history.
I think your first step is to see if you truly have no credit history by pulling an annual credit report from one of the big three; try to space these out one every four months unless you've got a major purchase coming up. If you've got income you'll probably qualify for a card, given you've been paying student loans on time. I'd really recommend staying away from anything "secured" as horror stories about closing such accounts when times are better.
posted by pwnguin at 7:07 PM on March 5, 2011
I don't have experience with other banks, but I do like Discover. Reasons you might consider them:
1. No annual fee.
2. No over the limit crap anymore (yay consumer protections bill).
3. Rewards are in dollars, not bogopoints, which you can use to pay down your balance. Or if you must, you can tithe your reward away to one of many charities.
4. Retailers are free to not accept it. Many don't, because of the higher merchant fees. This is where your rewards come from, not poor people.
5. Free 30 day loan, if you set up automatic pay in full. You could invest the float in their FDIC insured deposits, if it helps you feel like you're screwing The Man.
6. They report to the credit agencies regularly, since you want to build credit history.
I think your first step is to see if you truly have no credit history by pulling an annual credit report from one of the big three; try to space these out one every four months unless you've got a major purchase coming up. If you've got income you'll probably qualify for a card, given you've been paying student loans on time. I'd really recommend staying away from anything "secured" as horror stories about closing such accounts when times are better.
posted by pwnguin at 7:07 PM on March 5, 2011
Response by poster: Thanks everybody for your first responses.
Obviously, I'm a big fan of the "pay in full on time" advice, and will whenever I have the chance. Still, my primary motivation here is the kind of emergency spending - the need a plane ticket or lost a major whatever stuff that I may not be able to pay back right away. Any help with keeping interest rates as low as they can be for those times is, thus, appreciated.
posted by l33tpolicywonk at 7:12 PM on March 5, 2011
Obviously, I'm a big fan of the "pay in full on time" advice, and will whenever I have the chance. Still, my primary motivation here is the kind of emergency spending - the need a plane ticket or lost a major whatever stuff that I may not be able to pay back right away. Any help with keeping interest rates as low as they can be for those times is, thus, appreciated.
posted by l33tpolicywonk at 7:12 PM on March 5, 2011
Response by poster: pwnguin: "I think your first step is to see if you truly have no credit history by pulling an annual credit report from one of the big three"
Checked all three. As I suspected, student loans are my only credit history. All are marked okay, with no delinquent payments. All the institutions that have checked aren't visible to others looking at my credit report and are all pretty run of the mill stuff: banks and a rental car company.
posted by l33tpolicywonk at 7:27 PM on March 5, 2011
Checked all three. As I suspected, student loans are my only credit history. All are marked okay, with no delinquent payments. All the institutions that have checked aren't visible to others looking at my credit report and are all pretty run of the mill stuff: banks and a rental car company.
posted by l33tpolicywonk at 7:27 PM on March 5, 2011
Best answer: ??
22 and employed; go to your local credit union (or hell, any old bank - although my experience is Canadian, rather than USA) and ask about their different credit card offerings.
With a student loan credit history and no negative marks (late utilities payment, whatever), you're safe-safe-safe to lenders. You probably have a credit rating really really close to 800. Strangely, every time you get credit checked, your credit rating goes down a point or two.
Some plans have no annual fee. They might have higher annual interest rates or less "perks" but it can be a regular old "emergency credit card." I still have a valid visa card from CIBC from when I was 18 (oh man, 14 years ago) with $5k credit that I've never used, never paid a fee on. I get a statement from them once a year. I really should cancel the damned thing due to identity theft concerns.
My visa card from my local credit union which I've paid balance in full (mostly), on time (mostly), and haven't paid any annual fees since I got it when I was 22 has now accrued something like a $30k limit - which will be more than my annual income in a couple of months.
--
If you're looking into an emergency fund with minimal interest rates for *really* real emergencies... talk to your local credit union loans agent about "lines of credit." As a grad student on very limited income I was still able to qualify for an unsecured $5k line of credit. The interest rates are something in the mid-single digits, providing I pay into the line at least once every month (doesn't matter if it's $1 or the full amount to bring my balance back to >$0) which is much better than any credit card can offer (credit cards are typically in the mid-/high-teens).
If you're employed, you're likely making a lot more money than I am per month, you're most likely able to qualify for a much larger line of credit. My sister is self-employed with a reported earnings of <>
A friend of mine got accepted into med school; his bank gave him a $250k line without blinking an eye.
Much better than credit cards.
posted by porpoise at 7:47 PM on March 5, 2011
22 and employed; go to your local credit union (or hell, any old bank - although my experience is Canadian, rather than USA) and ask about their different credit card offerings.
With a student loan credit history and no negative marks (late utilities payment, whatever), you're safe-safe-safe to lenders. You probably have a credit rating really really close to 800. Strangely, every time you get credit checked, your credit rating goes down a point or two.
Some plans have no annual fee. They might have higher annual interest rates or less "perks" but it can be a regular old "emergency credit card." I still have a valid visa card from CIBC from when I was 18 (oh man, 14 years ago) with $5k credit that I've never used, never paid a fee on. I get a statement from them once a year. I really should cancel the damned thing due to identity theft concerns.
My visa card from my local credit union which I've paid balance in full (mostly), on time (mostly), and haven't paid any annual fees since I got it when I was 22 has now accrued something like a $30k limit - which will be more than my annual income in a couple of months.
--
If you're looking into an emergency fund with minimal interest rates for *really* real emergencies... talk to your local credit union loans agent about "lines of credit." As a grad student on very limited income I was still able to qualify for an unsecured $5k line of credit. The interest rates are something in the mid-single digits, providing I pay into the line at least once every month (doesn't matter if it's $1 or the full amount to bring my balance back to >$0) which is much better than any credit card can offer (credit cards are typically in the mid-/high-teens).
If you're employed, you're likely making a lot more money than I am per month, you're most likely able to qualify for a much larger line of credit. My sister is self-employed with a reported earnings of <>
A friend of mine got accepted into med school; his bank gave him a $250k line without blinking an eye.
Much better than credit cards.
posted by porpoise at 7:47 PM on March 5, 2011
Like everybody says here, it's nearly impossible to find a credit card that doesn't screw people. If you want to know more about the deceptive and unfair practices of credit cards, watch the PBS frontline documentary about credit cards. You can get it for free on their website. First I'd like to congratulate you for being so responsible. I wasn't nearly so together at 22. Two ideas- Get the credit card, but also start building an emergency fund of 3 to 6 months of living expenses. It will take you a while to build that up, but once you do, you won't need to rely on your credit card for emergencies (which isn't such a great idea because in a true emergency like your losing your job, they'll cut your credit limit). The other thing is that my rewards card (chase sapphire) allows me to donate my points to charities. So you could get a rewards card, but then if you are forced to use it, plan on giving the rewards to a charity that helps lowincome people.
posted by bananafish at 7:21 AM on March 6, 2011
posted by bananafish at 7:21 AM on March 6, 2011
If you seen my other posts, you've seen my disdain for big banks but I'm going to actually defend the credit card companies. If you are NOT a deadbeat, credit card companies are wonderful. A credit card allows you track expenses, hold money for 25-30 days longer than cash allows, and often gives you cash or other rewards in return.
I'm a huge fan of Discover, mainly because of the cash rewards program. We get several hundred dollars a year back. We charge everything (seriously- I'll put fast food purchases on a card), pay it all back when the bill comes in and do the same the next month. The occasionally run gimmicks where you might get 5% back on specific purchases, it's nice getting $25.00 just for staying a hotel for a business trip.
You should still get a Visa or Mastercard as well. Not everyplace takes Discover and if you ever travel overseas you might want an Amex as well. There are tons of good credit card deals out there. You want no fees and 25+ day grace periods. Check with your local bank or credit union for good deals.
If you don't have a credit card, your credit score is probably as not as high as it should be. Time and payment history are a good chunk of your score. With a card and a good payment history, you'll have access to the best rates for everything else in a couple of years. 1-2% off a car loan is great, and even better when you get a mortgage.
Finally- pay your balance 100% each month every month. Again, this world wide recession was caused by a bunch of people, businesses, and government who wanted something for nothing. Now we're all paying for their irresponsibility. Damn them all!
posted by JohntheContrarian at 9:13 AM on March 6, 2011
I'm a huge fan of Discover, mainly because of the cash rewards program. We get several hundred dollars a year back. We charge everything (seriously- I'll put fast food purchases on a card), pay it all back when the bill comes in and do the same the next month. The occasionally run gimmicks where you might get 5% back on specific purchases, it's nice getting $25.00 just for staying a hotel for a business trip.
You should still get a Visa or Mastercard as well. Not everyplace takes Discover and if you ever travel overseas you might want an Amex as well. There are tons of good credit card deals out there. You want no fees and 25+ day grace periods. Check with your local bank or credit union for good deals.
If you don't have a credit card, your credit score is probably as not as high as it should be. Time and payment history are a good chunk of your score. With a card and a good payment history, you'll have access to the best rates for everything else in a couple of years. 1-2% off a car loan is great, and even better when you get a mortgage.
Finally- pay your balance 100% each month every month. Again, this world wide recession was caused by a bunch of people, businesses, and government who wanted something for nothing. Now we're all paying for their irresponsibility. Damn them all!
posted by JohntheContrarian at 9:13 AM on March 6, 2011
Since you said you're looking to build your credit history, this site might be helpful since there is so much conflicting information and advice out there about credit scores and how you build a good credit history:
Five tips for improving your credit score
Credit reports and credit scores
General info about credit cards, which includes a nice feature that breaks down the terms of a credit card offer
I'm going to say that a Visa or Mastercard would be best, because I've been plenty of places that don't accept AMEX or Discover and if you need a card "for emergencies" that might be something to consider. A credit union would be worth a visit because they generally focus on customer service, although it's been a while since I've had an account with one.
Also, I'm sure you've already got this covered, but definitely remember that an emergency savings account is the best thing to have for emergencies (car breaks down and is more expensive than you think, dental work not covered completely by insurance, you get an new job that requires more formal clothing than anything you have in your closet, etc.)
posted by belau at 9:46 AM on March 6, 2011
Five tips for improving your credit score
Credit reports and credit scores
General info about credit cards, which includes a nice feature that breaks down the terms of a credit card offer
I'm going to say that a Visa or Mastercard would be best, because I've been plenty of places that don't accept AMEX or Discover and if you need a card "for emergencies" that might be something to consider. A credit union would be worth a visit because they generally focus on customer service, although it's been a while since I've had an account with one.
Also, I'm sure you've already got this covered, but definitely remember that an emergency savings account is the best thing to have for emergencies (car breaks down and is more expensive than you think, dental work not covered completely by insurance, you get an new job that requires more formal clothing than anything you have in your closet, etc.)
posted by belau at 9:46 AM on March 6, 2011
In addition to all the good advice above, especially about building an emergency fund, I've told my newly graduated daughter this: When you get a credit card, you must absolutely commit to paying it off every single month with one exception: if there is ONE thing that you need (plane ticket, one-time furniture for new apartment, etc) then you are allowed to charge it IF you will be able to pay it off within 3 months. Yes, you'll pay interest, but it won't be that much for 3 months.
You must NOT get into a habit of this - it's a one-time-only deal, but just keeping it in the back of your mind in case you NEED it could take a lot of stress off. And knowing that it's a one-time deal will help you determine whether you absolutely NEED that thing.
posted by CathyG at 11:25 AM on March 6, 2011
You must NOT get into a habit of this - it's a one-time-only deal, but just keeping it in the back of your mind in case you NEED it could take a lot of stress off. And knowing that it's a one-time deal will help you determine whether you absolutely NEED that thing.
posted by CathyG at 11:25 AM on March 6, 2011
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posted by elpea at 6:25 PM on March 5, 2011