Any first credit card advice?
October 21, 2006 10:17 AM Subscribe
Applying for my first credit card soon. What should I be looking for?
I'm currently in my last year of college. I have saved up some money and just received a job offer that starts next summer after I graduate. I'd like to start building credit by getting a credit card, buying a few large things that I have need for and paying them off promptly with money I already have.
However, I'm absolutely clueless about credit cards. Can anyone share some information or resources so I can learn about the different rates, limits, and other policies that I need to keep in mind when I choose what to apply for first?
I'm currently in my last year of college. I have saved up some money and just received a job offer that starts next summer after I graduate. I'd like to start building credit by getting a credit card, buying a few large things that I have need for and paying them off promptly with money I already have.
However, I'm absolutely clueless about credit cards. Can anyone share some information or resources so I can learn about the different rates, limits, and other policies that I need to keep in mind when I choose what to apply for first?
Response by poster: I plan to pay most of it off immediately, but if I can get a nicer engagement ring and pay it off over a period of time (but still on time) instead of paying it off immediately, that might be a better decision. At least, I know one person who would think it's a better decision. :P
posted by ckolderup at 10:30 AM on October 21, 2006
posted by ckolderup at 10:30 AM on October 21, 2006
if I can get a nicer engagement ring and pay it off over a period of time (but still on time) instead of paying it off immediately, that might be a better decision
Then what you need to do is to see what rate a bank or credit union would offer for a comparable loan. It's certainly my experience, that aside from the short term enticements, credit card rates are always and substantially higher than bank rates.
posted by Neiltupper at 10:44 AM on October 21, 2006
Then what you need to do is to see what rate a bank or credit union would offer for a comparable loan. It's certainly my experience, that aside from the short term enticements, credit card rates are always and substantially higher than bank rates.
posted by Neiltupper at 10:44 AM on October 21, 2006
Whatever you do, make paying it off in full, every month, non-negotiable. Think of spending on the card the same as spending cash in your pocket. Start as you mean to go on. You're setting a rule that will hugely benefit the remainder of your entire life. Can't afford to do that? Then you can't afford whatever you were going to spend on the card. At times this can seem like a cruel rule, but if you follow it you'll be happier in the long term.
posted by normy at 10:46 AM on October 21, 2006 [1 favorite]
posted by normy at 10:46 AM on October 21, 2006 [1 favorite]
just look at things like annual fees (you want a card without one), interest rates on purchases, any lower starting rates that only apply for six months and then go up to some insane figure.
Also beware of temptation, it is easy to get carried away with these good intriductory offers...Not saying you will but your disposable income may go up significantly when you start your job and it takes time to get used to your new budget, including what repayments you can afford or not as the case may be.
posted by koahiatamadl at 10:48 AM on October 21, 2006
Also beware of temptation, it is easy to get carried away with these good intriductory offers...Not saying you will but your disposable income may go up significantly when you start your job and it takes time to get used to your new budget, including what repayments you can afford or not as the case may be.
posted by koahiatamadl at 10:48 AM on October 21, 2006
Check out CardOffers.com. You can search by feature and get sign-up bonuses for applying through them, and read reviews of each card. I'm not affiliated with them. I found the following cards to be attractive:
amex blue rewards
Citi diamond preferred rewards
Hilton hHonors visa
Citi mtvU
Citi drivers edge
I particularly like the drivers edge card, with 5% cashback on gas. They have student and non-student versions.
Take this info with a grain of salt: Some people say it's a good idea to simultaneously apply for several cards at the same time. This has the advantage of making sure you get approvd for at least one, and all the inquiries drop off your report at the same time. I believe citi only does one inquiry per day, so if you apply for a couple citi cards at the same time, you only get one "hard pull" of your credit for all of them.
posted by Mr. Gunn at 10:51 AM on October 21, 2006
amex blue rewards
Citi diamond preferred rewards
Hilton hHonors visa
Citi mtvU
Citi drivers edge
I particularly like the drivers edge card, with 5% cashback on gas. They have student and non-student versions.
Take this info with a grain of salt: Some people say it's a good idea to simultaneously apply for several cards at the same time. This has the advantage of making sure you get approvd for at least one, and all the inquiries drop off your report at the same time. I believe citi only does one inquiry per day, so if you apply for a couple citi cards at the same time, you only get one "hard pull" of your credit for all of them.
posted by Mr. Gunn at 10:51 AM on October 21, 2006
The ideal credit card has no annual fee (annual fees are for suckers - the credit card industry is the single most profitable one in the USA), a low interest rate (less than 20%), and a lengthy grace period each month to pay off your purchases (you want 25 days, not anything less). Look for one with no late fee or a minimal one. (For instance, I have a card where if you pay off your balance in full one month, there's no late fee if you miss the due date the next month - only if you miss two months in a row is there a late fee.)
This will be hard to find. Most banks are in the business of gouging you as hard as they can. Cards issued by credit unions are usually better deals.
Look around until you find such a thing. Use it sparingly. Pay it off in full each month, on the day you receive the bill. It is just a convenient way to pay for purchases in the $100-1000 price range, so you don't have to carry that much cash - that's all.
You don't need multiple cards. You don't need rewards. Don't finance any purchases at all on the card - a credit card is NOT a way to borrow money for any longer period than about 2-3 weeks.
As for your fiancee, ask her this: would she rather have a large diamond ring, and you in debt, or a small diamond ring, and the two of you have enough money to get an apartment together, buy a beater car, go out to dinner together, etc.?
posted by jellicle at 11:31 AM on October 21, 2006 [2 favorites]
This will be hard to find. Most banks are in the business of gouging you as hard as they can. Cards issued by credit unions are usually better deals.
Look around until you find such a thing. Use it sparingly. Pay it off in full each month, on the day you receive the bill. It is just a convenient way to pay for purchases in the $100-1000 price range, so you don't have to carry that much cash - that's all.
You don't need multiple cards. You don't need rewards. Don't finance any purchases at all on the card - a credit card is NOT a way to borrow money for any longer period than about 2-3 weeks.
As for your fiancee, ask her this: would she rather have a large diamond ring, and you in debt, or a small diamond ring, and the two of you have enough money to get an apartment together, buy a beater car, go out to dinner together, etc.?
posted by jellicle at 11:31 AM on October 21, 2006 [2 favorites]
Annual fees are for chumps.
Rebates on stuff you buy is good, as long as what you get back is usable. As far as I can tell, most airline miles are not usable. Since this is your first card, don't count on being able to get any kind of rewards.
Pay it off every month. Remember that interest only accrues on balances. So if you pay it off every month without fail and without being late, interest rates are irrelevant.
Debit cards are not credit cards; I don't care if it says "Visa" on the front. If you have to enter a PIN, it isn't a credit card and it isn't helping your credit report.
"Secured" credit cards are often foisted off on people who don't know better. The scam is you put say $500 in a savings account at First Fraudulent Bank, and they issue you a "credit card" with a $500 limit. If you pay, they get to invest your money (you did know that's one big way banks make money, right?). If you don't pay, they get to keep your money. As you can see, it is a no lose situation -- for the bank. This may also say "Visa" on the front, but it will not do a darn thing to help your credit rating.
Don't forget that Discover exists. Not everybody takes it, but that may keep you from spending money you don't need to spend. Oh, and they do give you "cash back". I only mention this because they issued me my first credit card. I honestly didn't think I'd qualify, but the guy at the mall gave me a FREE GIFT for applying so I innocently figured what could I lose?
Good luck, and remember that ZERO BALANCE is a beautiful thing.
posted by ilsa at 12:14 PM on October 21, 2006
Rebates on stuff you buy is good, as long as what you get back is usable. As far as I can tell, most airline miles are not usable. Since this is your first card, don't count on being able to get any kind of rewards.
Pay it off every month. Remember that interest only accrues on balances. So if you pay it off every month without fail and without being late, interest rates are irrelevant.
Debit cards are not credit cards; I don't care if it says "Visa" on the front. If you have to enter a PIN, it isn't a credit card and it isn't helping your credit report.
"Secured" credit cards are often foisted off on people who don't know better. The scam is you put say $500 in a savings account at First Fraudulent Bank, and they issue you a "credit card" with a $500 limit. If you pay, they get to invest your money (you did know that's one big way banks make money, right?). If you don't pay, they get to keep your money. As you can see, it is a no lose situation -- for the bank. This may also say "Visa" on the front, but it will not do a darn thing to help your credit rating.
Don't forget that Discover exists. Not everybody takes it, but that may keep you from spending money you don't need to spend. Oh, and they do give you "cash back". I only mention this because they issued me my first credit card. I honestly didn't think I'd qualify, but the guy at the mall gave me a FREE GIFT for applying so I innocently figured what could I lose?
Good luck, and remember that ZERO BALANCE is a beautiful thing.
posted by ilsa at 12:14 PM on October 21, 2006
Woah - do NOT leave a balance on the card! As someone said up-thread, the interest rate on a Credit card will be WAY higher than what you can get elsewhere. Take out a small short term loan from a bank or credit union, and save yourself some cash.
In general, choose a card with no fee and a rewards system that is good for you (cash back, airline miles, whatever). Then, use the card for everything and pay it off each month.
Remember that the moment you leave a balance on the card, they win, though. Credit card companies are in business because they rip people off.
posted by chrisamiller at 12:36 PM on October 21, 2006
In general, choose a card with no fee and a rewards system that is good for you (cash back, airline miles, whatever). Then, use the card for everything and pay it off each month.
Remember that the moment you leave a balance on the card, they win, though. Credit card companies are in business because they rip people off.
posted by chrisamiller at 12:36 PM on October 21, 2006
Take out a small short term loan from a bank or credit union, and save yourself some cash.
I'm not aware of many banks that make unsecured personal loans to people without significant assets (except through credit cards, of course). If you had a brokerage account with a significant amount of investment securities, you could use that as collateral on a personal loan but that is not the case here.
The other alternative to using the credit card to purchase the engagement ring would be to finance it through the jewelry store's finance partner. The APR will be similar to the credit card, or higher, but they sometimes offer zero payments for 6-12 months or 0% APR for a limited amount of time. And I think you might be able to haggle a lower price on the ring if you're going to be financing it (worth a shot anyway).
Though, if the OP is still in school, the cheapest way would be to take out a student loan and use the money for the ring.
posted by mullacc at 1:06 PM on October 21, 2006
I'm not aware of many banks that make unsecured personal loans to people without significant assets (except through credit cards, of course). If you had a brokerage account with a significant amount of investment securities, you could use that as collateral on a personal loan but that is not the case here.
The other alternative to using the credit card to purchase the engagement ring would be to finance it through the jewelry store's finance partner. The APR will be similar to the credit card, or higher, but they sometimes offer zero payments for 6-12 months or 0% APR for a limited amount of time. And I think you might be able to haggle a lower price on the ring if you're going to be financing it (worth a shot anyway).
Though, if the OP is still in school, the cheapest way would be to take out a student loan and use the money for the ring.
posted by mullacc at 1:06 PM on October 21, 2006
What has worked for me is to set up automatic payments for my card. It pulls the entire balance from my credit card every month and there is no way for me to run a balance unless I call them up and stop the payment.
I like the frequent flyer miles I get on my card--I do pay an annual fee but to me it's worth it. I run a lot of my recurring monthly expenses through the card so I'm getting miles for stuff I'd normally pay out of my checking account. I know other people say you don't need rewards, but, especially if you're young and footloose, a free trip every year or two is pretty sweet.
Course now that I do Where's George I rarely use the card anymore... but that's another topic.
posted by bink at 2:41 PM on October 21, 2006
I like the frequent flyer miles I get on my card--I do pay an annual fee but to me it's worth it. I run a lot of my recurring monthly expenses through the card so I'm getting miles for stuff I'd normally pay out of my checking account. I know other people say you don't need rewards, but, especially if you're young and footloose, a free trip every year or two is pretty sweet.
Course now that I do Where's George I rarely use the card anymore... but that's another topic.
posted by bink at 2:41 PM on October 21, 2006
Amex charge cards will give you the first year free. You HAVE to pay in full when your statement comes in for their charge cards, so if you choose that card then you wont be tempted to charge more then you can. After the first year you will have to pay an annual fee, they aren't a waste. The points can be used for various things but I value it more because of how they handle their disputes.
As far as I know american express has the best dispute system. You basically just call and dispute the charge and they give you the temporary credit for the charge while they investigate it, for my providian I had to wait for them to mail me a dispute letter then mail it back. Sometimes, if the charges are low enough, amex will just give you a permanent credit. To me it this justifies the fee (you get other stuff too) since their I've had bad encounters with smaller companies.
Anyway for regular credit cards, I would find one that give you low interest rate, low balance transer rate, check the minimum finance charge if you carry balance, also find one that gives you your credit score free.
posted by spacesbetween at 3:02 PM on October 21, 2006
As far as I know american express has the best dispute system. You basically just call and dispute the charge and they give you the temporary credit for the charge while they investigate it, for my providian I had to wait for them to mail me a dispute letter then mail it back. Sometimes, if the charges are low enough, amex will just give you a permanent credit. To me it this justifies the fee (you get other stuff too) since their I've had bad encounters with smaller companies.
Anyway for regular credit cards, I would find one that give you low interest rate, low balance transer rate, check the minimum finance charge if you carry balance, also find one that gives you your credit score free.
posted by spacesbetween at 3:02 PM on October 21, 2006
I regularly get offers from Chase for Visa cards with 0% introductory APRs for 18 months. If you have no credit at all you might not be able to get those, though. But yeah, look for one with no annual fee and a low introductory rate.
Annual fees are not always for suckers -- I got a Bank of America US Airways Visa with a $90 annual fee, but it came with enough miles to upgrade myself to first class on my trip home at Christmas, which usually costs $150, and that assumes there are seats available on the day of the flight. (With the miles, I can upgrade well in advance.) But it's the only card I have with an annual fee, and I'll cancel it before I get dinged for a second year.
(US Airways, oddly, has affinity cards with two separate banks, and I have both of them -- the other one had no annual fee for the first year. With the bonus miles from opening these two cards, I can upgrade to first class both ways for a total of $90, or a $210 savings. Sure beats paying $1000+ for a ticket as I did last year.)
posted by kindall at 3:07 PM on October 21, 2006
Annual fees are not always for suckers -- I got a Bank of America US Airways Visa with a $90 annual fee, but it came with enough miles to upgrade myself to first class on my trip home at Christmas, which usually costs $150, and that assumes there are seats available on the day of the flight. (With the miles, I can upgrade well in advance.) But it's the only card I have with an annual fee, and I'll cancel it before I get dinged for a second year.
(US Airways, oddly, has affinity cards with two separate banks, and I have both of them -- the other one had no annual fee for the first year. With the bonus miles from opening these two cards, I can upgrade to first class both ways for a total of $90, or a $210 savings. Sure beats paying $1000+ for a ticket as I did last year.)
posted by kindall at 3:07 PM on October 21, 2006
American Express is a joke. Annual fee? Fuck off.
Here's what you do:
* Every newspaper's business section will print a list of the best card offers available. They'll include the 1-800 numbers.
* Spend a Saturday calling every single one of these numbers and ask to apply by phone. Apply for them all. If accepted, accept them all.
* Cancel the ones with the highest interest rates.
Voila. You have credit.
posted by frogan at 5:05 PM on October 21, 2006
Here's what you do:
* Every newspaper's business section will print a list of the best card offers available. They'll include the 1-800 numbers.
* Spend a Saturday calling every single one of these numbers and ask to apply by phone. Apply for them all. If accepted, accept them all.
* Cancel the ones with the highest interest rates.
Voila. You have credit.
posted by frogan at 5:05 PM on October 21, 2006
If your are going to purchase a diamond, at least read this
so you know what you are getting into.
http://www.fguide.org/Bulletin/conflictdiamonds.htm
As far as credit cards are concerned, you are better off starting a savings account to aquire the things you want
posted by govtrust at 11:25 PM on October 21, 2006
so you know what you are getting into.
http://www.fguide.org/Bulletin/conflictdiamonds.htm
As far as credit cards are concerned, you are better off starting a savings account to aquire the things you want
posted by govtrust at 11:25 PM on October 21, 2006
As far as credit cards are concerned, you are better off starting a savings account to aquire the things you want
A savings account, after taxes, will, if you're very lucky, keep up with inflation, whereas a credit card at 0% APR makes inflation work to your advantage (you buy stuff priced in 2006 dollars, but pay it back in 2007 dollars, which are worth a few percentage points less than 2006 dollars). If you have a rewards card, you get even more of a bonus.
Plus, of course, credit allows you to buy stuff now instead of waiting until you've saved up. There's value in having, say, a couch to sit on now, instead of waiting a year to get it.
posted by kindall at 3:15 AM on October 22, 2006
A savings account, after taxes, will, if you're very lucky, keep up with inflation, whereas a credit card at 0% APR makes inflation work to your advantage (you buy stuff priced in 2006 dollars, but pay it back in 2007 dollars, which are worth a few percentage points less than 2006 dollars). If you have a rewards card, you get even more of a bonus.
Plus, of course, credit allows you to buy stuff now instead of waiting until you've saved up. There's value in having, say, a couch to sit on now, instead of waiting a year to get it.
posted by kindall at 3:15 AM on October 22, 2006
Just get one card for now. (Or two if you must, but no more.) Pay your full balance on time every month. Two tricks to be aware of once you have the card:
- On your payment slip, they may list "balance" (say $200) and "your payment for this month" (say $15). Online, they may automatically fill in the lower amount. Don't fall for this. Be sure you're always paying off the full balance, NOT just the minimum payment. But if you do get in truly bad trouble, be sure you at least pay the minimum -- if you miss one minimum payment, usually the interest rates go way up and there can be huge fees.
- Some companies will move your payment date around unpredictably from month to month -- it can move by as much as 15 days. Check your bill online once a week and you won't get caught by this. (Don't pay super-early, though, because it may cause them to move the next due date up. "Oh, we thought you wanted a payment date at the start of the month. We just didn't think to tell you about it.")
posted by LobsterMitten at 7:50 PM on October 22, 2006
- On your payment slip, they may list "balance" (say $200) and "your payment for this month" (say $15). Online, they may automatically fill in the lower amount. Don't fall for this. Be sure you're always paying off the full balance, NOT just the minimum payment. But if you do get in truly bad trouble, be sure you at least pay the minimum -- if you miss one minimum payment, usually the interest rates go way up and there can be huge fees.
- Some companies will move your payment date around unpredictably from month to month -- it can move by as much as 15 days. Check your bill online once a week and you won't get caught by this. (Don't pay super-early, though, because it may cause them to move the next due date up. "Oh, we thought you wanted a payment date at the start of the month. We just didn't think to tell you about it.")
posted by LobsterMitten at 7:50 PM on October 22, 2006
As far as credit cards are concerned, you are better off starting a savings account to aquire the things you want
I disagree. You should get one credit card now. They are easy to get when you are right out of college, but if you go for several years without having one, it will be harder to get. (The only exception to this would be if you have poor impulse control or are otherwise primed to get into trouble with the card.) You don't need to pump up your credit (by buying expensive things and paying them off) immediately, though, unless you want to buy a house in the next couple of years. Regular responsible use of the card -- especially with the Christmas season, or the odd car repair or other big ticket item -- will raise your credit pretty fast anyway.
posted by LobsterMitten at 7:54 PM on October 22, 2006
I disagree. You should get one credit card now. They are easy to get when you are right out of college, but if you go for several years without having one, it will be harder to get. (The only exception to this would be if you have poor impulse control or are otherwise primed to get into trouble with the card.) You don't need to pump up your credit (by buying expensive things and paying them off) immediately, though, unless you want to buy a house in the next couple of years. Regular responsible use of the card -- especially with the Christmas season, or the odd car repair or other big ticket item -- will raise your credit pretty fast anyway.
posted by LobsterMitten at 7:54 PM on October 22, 2006
Response by poster: Thanks for the advice, everyone. You've all been a great help.
posted by ckolderup at 8:55 PM on October 22, 2006
posted by ckolderup at 8:55 PM on October 22, 2006
Check your bill online once a week and you won't get caught by this.
A lot of cards will let you auto-pay either the statement balance or the minimum each billing period. I'd get one of those cards and set up at least automatic minimum payments immediately. (If you want to pay more, just pay the bill before it's due.) If your credit card issuer's site sucks, get a different credit card.
I can say I really quite like Chase's site. They will e-mail you reminders, warnings, etc. related to your account ("your statement is available," "your payment is due," your payment has posted," "you just charged something to the card" -- the latter is handy if you didn't actually make a charge). They also have the aforementioned auto-pay features.
posted by kindall at 10:41 PM on October 22, 2006
A lot of cards will let you auto-pay either the statement balance or the minimum each billing period. I'd get one of those cards and set up at least automatic minimum payments immediately. (If you want to pay more, just pay the bill before it's due.) If your credit card issuer's site sucks, get a different credit card.
I can say I really quite like Chase's site. They will e-mail you reminders, warnings, etc. related to your account ("your statement is available," "your payment is due," your payment has posted," "you just charged something to the card" -- the latter is handy if you didn't actually make a charge). They also have the aforementioned auto-pay features.
posted by kindall at 10:41 PM on October 22, 2006
You should know that a credit score is only good if you want to borrow more money. It's tough to build a good score without making monthly payments and it's tough to do that without paying interest. It's much better to use the cash you've saved to make the purchase you're planning.
posted by kc0dxh at 8:11 AM on October 23, 2006
posted by kc0dxh at 8:11 AM on October 23, 2006
I'd like to second jellicle's advice:
The ideal credit card has no annual fee ..., a low interest rate (less than 20%), and a lengthy grace period each month to pay off your purchases (you want 25 days, not anything less). Look for one with no late fee or a minimal one.
You're not used to paying monthly credit card bills, so a longer grace period will be REALLY helpful. I also suggest that you keep your credit limit UNDER $5,000 for at least 3 years. You might even have to call to have them lower it. This will help prevent you from getting into overwhelming debt if the most you can get into debt is $5k. Of course, you'll pay it off completely every month, right? RIGHT?
As for the ring, look into bank loans or a payment plan with the place where you end up getting the ring.
posted by Sprout the Vulgarian at 8:43 AM on October 23, 2006
The ideal credit card has no annual fee ..., a low interest rate (less than 20%), and a lengthy grace period each month to pay off your purchases (you want 25 days, not anything less). Look for one with no late fee or a minimal one.
You're not used to paying monthly credit card bills, so a longer grace period will be REALLY helpful. I also suggest that you keep your credit limit UNDER $5,000 for at least 3 years. You might even have to call to have them lower it. This will help prevent you from getting into overwhelming debt if the most you can get into debt is $5k. Of course, you'll pay it off completely every month, right? RIGHT?
As for the ring, look into bank loans or a payment plan with the place where you end up getting the ring.
posted by Sprout the Vulgarian at 8:43 AM on October 23, 2006
kindall, save as long as you want, you can't rent a car without a credit card. You don't have to use the credit card to pay for the car, but you do need it to make the reservation.
posted by lhauser at 10:48 PM on October 24, 2006
posted by lhauser at 10:48 PM on October 24, 2006
Yeah, see, I'm the one who said you need a credit card, not the one who said you should save up for everything. ;)
The car rental thing's a good reason. Other reasons include:
1) Cashback rewards on some cards of up to 5% on gas and groceries (or airline miles, or whatever -- I generally prefer the cash, though).
2) Warranty extension on some cards. I've never needed it, but it's a very nice perk.
3) Far better consumer protection in case of a dispute with a merchant.
posted by kindall at 7:56 AM on October 25, 2006
The car rental thing's a good reason. Other reasons include:
1) Cashback rewards on some cards of up to 5% on gas and groceries (or airline miles, or whatever -- I generally prefer the cash, though).
2) Warranty extension on some cards. I've never needed it, but it's a very nice perk.
3) Far better consumer protection in case of a dispute with a merchant.
posted by kindall at 7:56 AM on October 25, 2006
This thread is closed to new comments.
I found the AMEX clear card that had no annual fee (which is something you really want) and gave 2% cash back.
I also found the Citi Dividends card that gave 1% on most purchases 5% on necessities (gas, groceries) and also no annual fee.
At this stage, you want one with no annual fee. Both of the above also include 0%APR for the first six months (but since you're planning on paying it off, it doesn't matter)
The limits on both when i got them were about $4200 on the AMEX and $3600 on Citi. Hopefully that meets your definition of 'large items'.
The rates shouldn't matter to you, if you're going to pay it off immediately.
As far as other information, just don't wait to pay it off, and pay on time! Both of the above have really easy online billpay, and I use Yodlee to email me whenever there's a new bill.
Hope this helps!
posted by unexpected at 10:23 AM on October 21, 2006