ot: credit card recommendations

[LesserBlackDog]

I feel like this forum needs the little "off-topic" coffee cup icon for this thread.


Anyway, I'm looking at moving into an apartment (instead of the house I've been sharing for the past couple years) sometime in the next few months. It will be the first time I've rented from an actual rental company rather than just a private individual. The applications I've seen all require credit checks. Here's the thing - I know I will fail these credit checks because I have no credit score. I've never taken out an actual loan or used a credit card in my life (which I consider something of a personal badge of honor, but is evidently not so impressive in this particular context).


In order to develop a credit score, I'm thinking I'm going to have to actually get a credit card, but that's a new and novel world for me so I was wondering if anyone had any recommendations as to what card I should get. Limits and interest rates aren't really an issue, since I would only use it to develop my credit score (i.e. make very small purchases every once in a while and pay them back immediately). I know that there are certain cards that you get through various retailers that can get you certain discounts and stuff - maybe you guys have experience with that. Since I'm a student making essentially no real income, I know I'm not going to qualify for any of the fancy cards.


The other suggestion I've heard is to get my name put on a family member's already-existing account, like one of my parents' accounts, but I'm not sure that idea would thrill them.


Any thoughts or suggestions?

[jordan]

Making purchases and paying it off immediately has no affect on your credit. It takes 6-8 weeks for things to show up, so if you pay it off quicker than that you will never show any change in debt:income ratio. The one way I made my credit skyrocket was to take out a signature/personal (unsecured) loan. I had the cash for it, but i sat on the loan for about 2 months and then paid if off. All it cost me was the interest accrual for that time frame, but it made my credit score go way up because my debt:income ratio went way up and then way back down.

[Deke]

This is all too familiar of a subject.


I had a credit card through my parents account all throughout college. They have a ridiculously good score, and we assumed that I was at least establishing some sort of credit by being tied to their account. This was not the case. After graduation, I found myself as a full-time employed engineer that couldn't get approved for the lowest of the low credit cards due to having no history. Even my bank (who I had a good amount of money in) rejected me.


What I ended up having to do is taking out a loan with my bank (secured by a matching CD deposit in the amount of the loan). I paid in installments for 6 months or so and then tried to get a card through the bank again. That time, no problem. I had managed to establish an exceptional credit card score in 6 months.

[jicarv]

Read this:

http://www.creditcards.com/credit-card-news/help/10-ways-students-get-good-credit-6000.php


Here are some good options for a student:


http://creditcards.citicards.com/usc/college/dual/offer/Jan2012/default.htm?BT_SC=J%2EOc%2EBSX%2Elk%2ECvT%2EZSR%2E b0D%2EA%2EMQa&BT_TRF=116880&m=60G200000DW&cmp=KNC~ 01~110901~CRDACQXX~Google&BT_MKWD=e%5F17acf78eb4b8 499900f198b82fb11827&ef_id=VoJPbgMoxX8AAE47%3A2012 0324172352%3As&ProspectID=704C10C543E44348845D8659 DF1C8516


https://www.discovercard.com/cardmembersvcs/acqs/app/display?pageFileId=student10&sc=RHTG&iq_id=r127938 2639&ef_id=VoJPbgMoxX8AAE47:20120324172510:s


I do use my credit card to purchase everything, even for purchases that are less than $5.00. I do this for one simple reason...rewards. I always pay my credit card balance by the due date, so I never pay interest. However, I do get 2% back in rewards from my Fidelity Investments credit card so for me, it's free money that I wouldn't get if I used cash. If you use credit cards wisely, you can definitely benefit versus paying in cash.


These forums can we a wealth of information too:

http://www.fatwallet.com/forums/finance/

[runner-guy]

@BenR - I would recommend a rewards card above all others, like Juan said. I have a Visa Signature card that gets 1.25% back on every purchase. You might as well get paid something for your purchases. However, I don't charge every single thing on my credit card. Even though I pay off my card every month, I don't like being surprised when I get my bill. Also, I really don't like using it at restaurants because I do worry about fraud. As Juan said, creditcards.com is an excellent resource.

[alan]

Bank of America is my primary bank so I have my credit cards through them to simplify everything. I can see all my saving, checking, and credit card accounts on one website screen, and paying off a card is as easy as as transferring from one account to another.


I have a VISA and an American Express (both through Bank of America). They're both reward cards with no annual fee, and since they're both through Bank of America, I can share reward points between them. So regardless of which one I use, I'm gonna get my points either way.


I pay cards off every month and never charge something I can't pay back immediately. I also keep emergency savings accounts in case something awful happens since I'm not going to rely on a credit card for emergencies. I may charge the card for the emergency, but I know I'll already have the money to pay it off when the next statement comes in. In other words, credits cards are ONLY a payment method for me - not a source of funds.


I'm not very helpful for building a credit score, though. I've always had a great one. Even when I was a junior in college and went to get my first cell phone cell phone, they checked my credit score and told me I qualified for up to 7 phones.

[bruschetta]

BenR, my first job was at a bank where I peddled, among other things, credit cards. My advice is to stick with a credit card from your local credit union and ignore things like rewards. Most credit cards have a multitude of hidden fees and "trigger" fees, fees that apply once certain conditions are met.


For example, the credit card may have no annual fees, but the fine print may say that it will gain a monthly fee after two years of use. This is extremely common.


If you ever miss a payment, even by a day, you'll be hit with a number of trigger fees. This is the case even if the error was on the bank's side. e.g. they misplaced your payment, or they held it for three days to clear. Once this happens you'll typically be charged interest, a one time fee for a late payment, your interest rate will switch to the "missed payment level" permanently, and they may add a monthly or annual fee.

[hornsup84]

Not sure why everyone is so scared of credit cards, but regardless you'll want to have one, even if just as an emergency fund type thing (assuming you keep your emergency fund in savings that can't be reached immediately, such as an ING account. Additionally, the length of your credit history is a positive factor for your credit score, meaning you probably should have gotten a small credit card 4-5 yrs ago in college, but regardless, no time like the present to start.


What Jordan says is kind of true, but not exactly. If you paid off every thing the next day, you might have no credit score impact. But that's pretty impractical, impossible for many cards (they don't let you pay that often), etc. **You don't need to carry a balance to build credit.** That's simply false. What you can and should do is charge things to your credit card, but pay it all off each month after the bill becomes due. When your credit is checked, it typically won't match up with right after you paid your last month's bill. This means that you'll have a balance (i.e., credit utilization) according to your credit report, which, so long as it's a relatively low percentage of your available credit, is a good thing and will increase your score.


I'm also not a huge fan of gaming the system in the personal loan route, but to each his/her own.


I would go with a cash rewards card (typically 1-1.25% cash back). I had a Chase Freedom card that was decent, as I had my brick-and-mortar bank with them and it gave me additional rewards (since then, I've ditched B&M banking totally and use a Schwab investor checking that's linked to an investment account (which I dont use), and have all my savings accts online... not applicable to you, but I also use an AMEX premier card and charge everything to it, which (even with the annual fee) makes sense for my expenses).


Seems like Alan had a good experience with BOA, but I've heard horror stories with them and also with CapitalOne. You may have to go the route that Deke did, as you won't have credit history to support getting a card in the first place, and typically whatever bank you use is a good place to start for that.

[frost]

nerdwallet.com.

[jicarv]

What bruschetta says about the fees if you don't make your payments on time can be true but I've never paid a fee on my card. It's simple to not miss a payment, just set it up on the credit card company's website for the full amount due to be automatically paid from your bank account every month. If your card doesn't offer that service, then put it on your calendar to go on the credit card website on the due date every month and make a payment from your bank account. Obviously, you have to make sure that you have enough funds in your bank account to cover your purchases. Not sure where the hidden membership fee thing comes from because I've had my Fidelity Investments credit card for nine years and I have never paid them a membership fee, or any other fee/interest for that matter, and I've earned 2% on everything that I've purchased for free. If you are responsible/financially savvy, you can definitely take advantage of credit card rewards without paying any fees.

[jordan]

You don't have to carry a balance, you just have to give it time to show up. I've never had items that have been paid off within a month of purchase ever show up as utilization or affect the ratios whatsoever.


The thing with credit is that everyone has different ideas of what works and what doesn't. There are a few basic rules, but past that its a crap shoot. I just know what has worked for me, and what hasn't.

[zerostyle]

Highly recommend this site to figure out which rewards card to get:


http://www.creditcardtuneup.com/


Also, a few more tips:


1. Open VERY few accounts. Having too many accounts open will hurt your credit score later.

2. If you have old credit card accounts, do NOT close them. The average age of your accounts influences your credit score.


You can see that #1 and #2 become an issue later if you have a lot of accounts, but don't want to close them because of their age.


IMO, you should carry 3 cards:

1. A general purpose card with high cashback on things like gas/groceries/etc

2. A travel card that gives you nice points for airfare, hotels, etc. It should also carry no foreign transaction fees.

3. I use a Charles Schwab debit card tied to a high interest rate checking account. Free ATM reimbursements everywhere, no foreign transaction fees, no minimum balance. Best card ever for having access to cash. I just keep $1000 or so in there for various travel and ATM needs.

[nicholascrawford]

I have a credit score of 800, and we still had a landlord turn us down with a boat load in cash. It's all very variable.


I understand the pressure to have a stellar credit score, but it's not *that* important. Having cash on hand speaks more. Buying a house with a plain old credit score but a huge down payment means more than a fantastic score but a slim, 5% down payment. With only 5%, you start out even and can quickly end up under water with a small 7% slip in the market.


With renting, cash is king because you can offer to pay your rent several months in advance or at least demonstrate that you could. Some strong personal character references from non-family members, a credit history void of anything negative, and at least 6 months of rent in cash is a great starting point.


I would shy away from an installment loan because it just gives the bank money as they profit off of those in a quest for credit. I buy on credit for rewards and for 5% off Target, but I originally got a credit card thinking it would build credit. I ended up putting tuition on it and got buried until I got married. If you get one, get only one, get a low limit, and pay it off monthly, regardless of what anyone else says.


Good luck! Renting is where it's at.

[jose_jackson]

I should have never read this thread. It's really stressing me out.

[Chareth]

I'm in the "get a rewards card" camp. I get back anywhere from $500 - 1000 a year from those alone, if not more.


Even if you pay your balance off each month, it should still affect your credit score positively. The credit agencies poll all your open revolving accounts for: a) total credit; b) current credit drawn.


I check my credit reports fairly frequently, and all my credit card accounts show the current balances on my accounts even though I pay them off every single month so they definitely do know about your spending activity. And like Juan said, I never miss a payment because I set up automatic deductions from my checking account every month.


Credit is not bad in and of itself, you just have to ensure that you're spending within your means.