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I just got a credit card and have some questions


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#1 Mark Pellegrini

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Posted 28 February 2012 - 12:27 PM

I currently live with two roommates, but they'll be getting married this august and so we're all planning on going our separate ways next summer (I'll be moving to Arkansas). I've never had a credit card before, but I figured I ought to start building a credit score now, as I may need one for apartment shopping.

I got a Bank of America Visa card, which I'm only going to use for things like gas and groceries. The lady at the bank who got me the card was "in training" and couldn't answer any of my questions for me beyond how Bank of America was involved.

I just have a few general questions if anyone can give me some tips:


*About how long does it take to build an okay credit score? Does it matter how much I spend and pay-off? I'm not expecting a *great* score in just a year and a half, but what are my chances?

*Through BofA's online banking, I'm able to make payments on my card whenever I want and so I can pay off a balance immediately. Is it better to wait until I get a billing statement before paying my balance or does paying it immediately matter?

*I've heard conflicting advice that letting a tiny bit of interest acrue and then paying it off immediately boosts your credit score, but at 21% interest I'm not so sure I want to risk it. Is there any truth to that or is it just a popular rumor?


I've never had need of a credit card because I never spend more than I have, and buying something then paying it off online just seemed like an unnecessary extra step when I could just use my debit card. But like it or not, I need a credit score.

So any advice would be appreciated. Like I said, I just want to use it for gas and groceries (I get "cash rewards points" for that stuff according to BofA, but I'm sure those rewards don't amount to jack) and I'd rather not put it online to make it easier to get stolen (won't be buying any fanclub memberships, if you know what I mean).

#2 wonko the sane?

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Posted 28 February 2012 - 12:39 PM

Like trying to build muscle, building a good credit score is hard to do, and easy to hug up. One bad report and you really can lose a lifetime of effort.

To build good credit, its not about how much you spend, but how well you pay it off. But its not just paying it off, you need to repeatedly pay it off. The easiest way to build good credit (or so I am told.) is to carry a small charge on it, and pay off the interest every single time the bill comes in.

You could use the card to pay off your rent every month, but if you pay off the card before they can tag you with interest, you really gain nothing. The whole system is designed to make the credit card companies as much as possible at your expense, so you will need to spend some time in hock to them to build good credit. Doesn't have to be much, leave say 20 on the card and pay off the interest every month, that should help a bit.

Just keep the idea in mind that to the credit company, you are not a person: you are a slush fund. Act accordingly and with this in mind, and it should easy to build good credit. Just don't hug with any video stores: they will screw you over and hard core.

#3 Galenraff

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Posted 28 February 2012 - 12:40 PM

I pay my card off every month, about 5 days before the due date. I think the paper statement arrives in the mail by then? But I'm not sure, I usually just file those since I'm always watching it all online anyway. Paying it off every month is smart - not only will you not get any interest charges, but it's just a responsible way to manage your money when you're not buying things you don't have money for.

Your credit score is also affected by paying utilities on time, so if you have a history of always paying your bills on time and in full, then you shouldn't have any problem with your credit score. Anyone looking to rent to you or loan you money will be more concerned about your cash flow (monthly salary versus monthly debt like car/student loans) and that you haven't had problems in the past. They might prefer your credit history not be thin, but it most likely won't make a big difference.

Another advantage of a credit card, if you have one with a rewards program, then you are effectively getting a discount of about 1% on everything you buy with it. The Capital One Visa I have is just a 1% cash back - and every year at the beginning of November they have a bonus on whatever's in your rewards account at the time. It's well worth using the credit card instead of a debit card to get that.

TL;DR: Don't let the threat of "not enough credit" convince you to make poor financial choices. Good credit is better than having little/no credit, but having little/no credit is better than wasting money.

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#4 Mark Pellegrini

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Posted 28 February 2012 - 12:48 PM

Ah, thanks guys.

I see what I ought to be doing instead of paying off each purchase immediately once I get home and log in, I should just wait until the end of the month and knock it out, then.

With this being my first credit card, it just makes me feel... I dunno. Anxious, seeing a debt lingering on my online banking. I just need to get over that, that's all.

And I didn't know that what you pay with your card can affect your score; such as rent and utilities. That's something I'll have to add to "gas and groceries" to use my card for, then.

#5 Defensis Prime

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Posted 28 February 2012 - 01:51 PM

QUOTE(DrSpengler @ Feb 28 2012, 11:48 AM) <{POST_SNAPBACK}>
And I didn't know that what you pay with your card can affect your score; such as rent and utilities. That's something I'll have to add to "gas and groceries" to use my card for, then.
Think you misinterpreted what Galenraff said, a little. Your utility bills, for instance, if not paid on time (by WHATEVER method), can result in accounts being sent to collections, putting that unpaid debt on your credit report/s, which in turn lower your creditworthiness.

By all means, use the card to pay for utilities if you can pay that portion of your credit card bill off immediately. But getting those utility bills paid on time and in full is what's important here. One stupid little incident on your credit report can result in things like your insurance company deciding that they need to raise the premium paid on your home &/or car insurance (because they've gotten the idea in their collective heads that your credit score can tell them how likely you are to crash your car or burn down your house).

The bit about letting a little interest accrue...a little bit is perhaps fine. The people who pay their balance off every month are referred to, by the credit card companies, as 'deadbeats'. Having your card canceled out from under you 'cus you're not making them enough money in their eyes is a possibility, albeit not a large one. I doubt they'd do it in the year-and-a-half you want.

Don't let it sit idle, either. Make a purchase with it at least every six months, perhaps every three or four, even if it's just a pack of gum or a bottle of Mountain Dew. Inactivity can get it yanked, too. Gas and groceries will probably work for you just fine in this regard.

A tip, also, regarding your 'gas and groceries' comment, specifically regarding the gas: NEVER NEVER EVER EVER DON'T EVEN THINK ABOUT DOING IT pay for your gasoline at the pump. Walk inside and swipe your card there. Credit or debit, the hold on 'additional funds' that can and will result is always something to avoid.

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#6 wonko the sane?

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Posted 28 February 2012 - 02:53 PM

QUOTE(DrSpengler @ Feb 28 2012, 01:48 PM) <{POST_SNAPBACK}>
Ah, thanks guys.

I see what I ought to be doing instead of paying off each purchase immediately once I get home and log in, I should just wait until the end of the month and knock it out, then.

With this being my first credit card, it just makes me feel... I dunno. Anxious, seeing a debt lingering on my online banking. I just need to get over that, that's all.

And I didn't know that what you pay with your card can affect your score; such as rent and utilities. That's something I'll have to add to "gas and groceries" to use my card for, then.

If you can afford the purchases, its not so much debt as it is just changing money from one "account" to another. When it goes over the due by date and you didn't pay it all of... then its debt.

#7 Destron D-69

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Posted 28 February 2012 - 03:01 PM

and if at any future time your credit card info is stolen ... take SWIFT ACTION ... pay the bill, close the account and move to another bank...

dealing with Royal Visa has been the Bane of my existence the last 4 years.
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#8 Benbot

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Posted 28 February 2012 - 03:56 PM

Pay the balance off every month. And remember--the bank issued the card to make money, not to do you any favors, so they WILL screw you over any chance you give them. Never ever use a credit card for a short-term loan to yourself. The rules are written to work against you, so anything you think might be short term can easily result in long-term financial entrapment. Don't let it happen.

#9 Paladin

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Posted 28 February 2012 - 04:08 PM

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#10 Galenraff

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Posted 28 February 2012 - 04:17 PM

Defensis is right, I didn't necessarily mean paying the utilities with the card. I'm just saying that how you pay your utilities affects your credit score. Now, if you have a rewards card and can pay your utilities with it, then feel free. A $100 power bill becomes $99 if you get 1% cash back. It's not much, but it's a little. icon-fire.gif

The other thing to remember is that even if you're a "deadbeat," the credit card company still makes plenty of money from you. They get a couple percent in service fees from the merchant for the convenience of letting you use a credit card. So even if you pay the bill off every month, they still want you out there using the card.

However, do be careful of terms changing. Chase's credit card (the bank behind the Amazon Rewards card) twice moved my end-of-period date up about a week. Since I paid every month about 5 days before it was due, that means I logged in to pay and found out I was already a day or two late. No notice, no nothing, just moved up the due date. They reversed the charges and all, but after the second time, I got a new card with Capital One. Don't put up with that kind of stuff. There's lots of bank brands out there with credit cards, so you do have some choice and some power when it comes to what card you go with.

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#11 Mark Pellegrini

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Posted 28 February 2012 - 04:25 PM

All great advice; I really appreciate it, guys.

The nice thing about my Visa being issues through BofA is that I can watch it like a HAWK via my online banking account, which I monitor several times day in utter paranoia (if you know about BofA's hidden BS fees then you know why I'm paranoid).

So it tallies everything I spend on the card and if there's ANYTHING out of whack I'll immediately know about it. I still haven't gotten my first billing period notice, though, which is why I'm afraid to wait to pay off my purchases.

I'm fairly frugal with my accounts; I have a "do not touch" savings account that's gonna pay for my big move, I have an emergency checking I keep around $1k in for you never know, and I've got my regular checking.

So I'm always in a position to pay off my credit card purchases; it's just an added step I feel I don't *need* to do, but have to for the sake of building credit. So I've no plans to take out loans or anything scary like that.

But if I ever DO have to, I will keep this advice in mind. When my mom died, she had $72,000 in credit card debt that was a PAIN IN THE ASS to deal with for me to deal with. So I'm wary of them, yeah.

#12 JRSBill

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Posted 28 February 2012 - 04:59 PM

If I use any of my cards for purchases, I usually pay it off within a few days and not wait until the end of the period. Your using the card to make them happy, yet when you get the bill, you might be tempted to make the minimum or not pay in full and then next cycle your paying a finance charge and your in their trap.

If I want to not pay right away, I'll make the purchase just as my next cycle starts. That way, you can effectively skip an entire month before paying off.

Like mentioned above, don't use it for a personal loan. If you don't need something or can pay it off within 30-50 days using my tip above, you probably don't need it.

Good luck!!

#13 Msol

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Posted 28 February 2012 - 05:07 PM

One mistake my girlfriend made was that she thought it was 20% per month. It's not, it's per year.

FYI, just in case you go over: it's not the end of the world.

#14 Dake

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Posted 28 February 2012 - 06:50 PM

Just for reference - my wife had no credit when we started dating except for a car loan (cosigned by her dad) that she paid off. She got a credit card and did the gas-n-groceries thing, paying it off every month and within a year and half she had a score in the high 700s - the only thing keeping it from being higher was she hadn't had the card for very long.

Carrying interest is a waste of your money. Just pay the bill off every month, or multiple times a month, whenever you feel like. Just don't be late and don't go over your limit. Those may not effect your score right away but they definitely cost you money. Credit card companies typically report once a quarter, so it will take that long at least for anything to show up. They also report how big a balance you carry even if you pay it off every month and that can negatively impact your credit - it's the one downside to paying utilities and everything because all that's reported is every month you have a X-hundred dollar credit card bill which looks high to the agencies. That being said, I still do it. I have two cards, one has a monthly 4.95 charge posted to it just to keep it active. The other is used for EVERYTHING and the bill is usually a grand or so and it just gets paid at the end of the month and I still have over an 800. The only other warning is not to pursue higher and higher limits because part of your score looks at debt to income ratio (as you pay off your card, the company will naturally increase your limits anyway and then asking for them to be decreased can negatively impact your score too).

As others have mentioned, it's weighted against you and easy to slip up. But if you're smart, don't be late and pay your bill off every month, you'll be fine.

Edited by Dake, 28 February 2012 - 06:56 PM.

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#15 kizudarake

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Posted 29 February 2012 - 02:19 AM

Any time you do use your card at any unmanned card reader, wiggle the reader. If it moves, STOP! Do not use it, and report it to the company that runs it and the police.

If the reader or keypad don't seem to be quite right, report it to the bank/company. Don't use it.

Do not use it at a restaurant/establishment where they have to take the card out of sight to run it. This makes it harder to write down the number/date/name/security code.

Memorize your 3 digit security code on the back, then cover it with an opaque sticker. That way, if someone does copy the number/expiration date, it's harder to use online.

If it has an RFID chip in it, buy a sleeve that blocks the signal. Always use it.

Keep it between two other cards in your wallet. It can leave an imprint in the leather over time, and that could be used to steal the number, when you change wallets.

Every few months, go to the bank/issuer and ask them to reduce your interest rate. 21 percent is really high.
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