what are the ins and outs of having a credit card?

Discussion in 'Off Topic [BG]' started by xcental34x, Dec 24, 2003.

  1. xcental34x


    Feb 28, 2003
    Memphrica, TN
    I just came up with a solution to my gear needs. Get a credit card. I just turned 18, so I need to build some credit. How do I do this? I know there are tons of small print. I just don't understand it all. Like APR, interests, fees? I wouldn't go out and overuse or nothing, but put my bass head on it, then use for it emergencies. Help me to understand the fine print, por favor?

  2. The only way you are gonna understand the fine print is to read the registration forms, because every credit card is different with different benifits and catches.

    That being said, i was very 'anti-creditcard' for a very long time...and managed for quite a long while without one. But i gave in cause i wanted to start building credit up. So i signed up for a 200$ limit Mastercard last month.
    Ive only used it once so far...and i think as long as you set strong bounderies for yourself and your spending habits it can be a useful tool. It is just another measure of responsibility. Use it wisely. :)
  3. xcental34x


    Feb 28, 2003
    Memphrica, TN
    So if I were to have purchase a GK 2001RB for $1099 on it, I'd have to have it paid off by the end of the month, or just pay it in installments, and the APR is the interest that I'd be charged to that?

  4. Matthew Bryson

    Matthew Bryson Guest

    Jul 30, 2001
    You'll find that it is a little hard to get credit when you've never had credit. Beyond that you should never plan to carry a balance on your credit cards. That is to say that you should live within your means - don't spend more with the card than you otherwise would in any given month and when the bill comes, pay it in full. Don't fall into the trap of making only minimum payments. (that is how they get rich off of you)

    APR = Anual percentage rate. This is the interest you'll pay. The lower, the better. Watch out for a really low APR that the fine print explains is for 6 months and then it jumps up to 17% or more. A low fixed APR is better. I don't think that you should have to pay any anual fees, although a lot of credit card companys do charge anual fees. read the fine print and check for anual fees or any other hidden fees.

    You may not be able to get a credit real credit card at your age if you have 0 credit history. Watch out for "secured" credit cards. That is when you pay the credit card company (usually) around $500 dollars, about $100 of which goes to fees and then you have aprox $400 available to you on your "credit card" ...I guess there angle is that you are being given an opertunity to establish credit credit and they'll eventually give you actuall credit. This is a scam IMO and there are better ways to establish credit. Start with store credit accounts - Like when your at Target or JCPenny or something and you can save 10% when you apply for a card. Pay at the end of the month. You wil start getting credit card offers in the mail soon enough. Be carefull, it can be a slippery slope.
  5. Personally i dont agree...but then i am in a different country. Where i am there is a thing called 0 credit...which can be worse then bad. Cause it shows you have no history at all.
    If you are consistant with your payments and on time it will reflect on your credit report that you are a responsible payer, and that make it easier for you to get loans, down payments for car/house etc..
    If you have bad then it is harder to...but still possible..if you have 0, then its pretty much impossible.
    For the longest time i had 0 credit cause i paid for everything in cash. No history whatsoever...i have an excellent paying job and been there for many years and you should have seen the hassles i got for just applying for a card.
    I finally was able to convinced them to give me a chance.
  6. Ty McNeely

    Ty McNeely

    Mar 27, 2000

    I agree with everything in your post but this Josh. This is not true.

    Credit is determined by a score that is computed by the number of payments you have made on time out of the number of payments total. Things such as utility bills DO NOT improve your credit rating, but a late payment can affect it negatively. Things such as car loans, home loans (doubtful you'll get one of these with NO established credit), and credit cards help improve your credit as long as every payment is made on time.

    xcental, my advice is the same as Josh's--do not put more on the credit card than you can pay at the end of the month (or whenever your statement comes due). The *ONLY* exception to this is if you can find a ZERO INTEREST credit card (some cards have an introductory period of zero interest) and you can pay off the balance of the card IN FULL before the introductory period ends. This is only recommended if you have IMPECCABLE budgeting skills and can be sure to pay it off in time. For example, I have a credit card that I got in August that has zero interest until May 2004, and then the interest is 18.9%. So, I'm taking advantage of the card now. I still pay the balance of the card in full every month, but I have it in case I need it.
  7. Pro
    - You always have money available.
    - It's easy to buy stuff on the internet.
    - You can buy now, pay in terms.
    - With VISA your purchase is automaticly insured for 180 days. And it won't cost you any extra.

    - You always have money available ( which means you can and will do impulsive purchases that you will regret later on )
    - It's easy to buy stuff on the internet ( sometimes TOO easy, if you know what i mean )
    - If you buy now, don't forget that you must pay it back sometime.

    In short : It gives you a lot of possibilities, but it also gives you a lot of responsibilities. If you can't controll your GAS, then a creditcard is not the thing for you.
  8. By the way, since this might be your first card...you might not be able to get that GK 2001RB for $1099 right away...generally if your a first time card holder your limit is set pretty low in the beginning.
    It will go up with time....but i wouldnt get your hopes up for a 1000$ limit just yet.
  9. Matthew Bryson

    Matthew Bryson Guest

    Jul 30, 2001
    If you've never had a credit account with anybody, nobody is going to give you that much credit. There is such a thing as establishing a credit rating - if you have never had credit it is hard to get anybody to sell you anything on credit. Once you have had credit, everybody will offer you credit cards and let you finance anything. I was told when I was young that when they pull your credit history, no credit history is considered worse than a slightly blemished record. IME buying a car and making your payment each month is one of the eaasiest and best ways to establish good credit quickly. (but you'd better have a job and a down payment to get them to sell you that car.)
  10. xcental34x


    Feb 28, 2003
    Memphrica, TN
    So in other words, forget the idea of getting a new bass head on credit. I'm right now in job limbo. With maybe $25 every two weeks. I'm hoping for a job with UPS in less than a month. If everything goes right, I'll be pulling in about $600 a month.
  11. Matthew Bryson

    Matthew Bryson Guest

    Jul 30, 2001
    Yes, if you are 18 and have no job and a 0 credit history you should probably forget about anybody offering you credit.
  12. secretdonkey


    Oct 9, 2002
    Austin, TX
    Agreed. I have obtained my credit scores from one or two of the big consumer credit scoring entities (can't recall the names right off) but I got a pretty average score despite having no negative marks on my record, having a fairly low debt load, and solid income. The report advised that I could improve my score by obtaining and using more consumer credit (I don't have a credit card, just a VISA check card, because I am anti-credit card too). So yeah, having a credit card can help your credit. Hasn't made me pick one up yet, though...
  13. Ty McNeely

    Ty McNeely

    Mar 27, 2000
    It is very difficult to get a credit card if you have no history, but I'm lucky.

    I got started in the credit system at 16. My dad actually cosigned a loan in my name, and I made my payments on time every month for almost 2 years. Whenever I turned 18, I applied for a card and got it. I had that one about 2 months, then I got an offer for another at zero interest with a $5000 credit limit. I have yet to NOT pay off my card every month, so I guess I'm still doin' alright.

    By the way--to answer your latest question.

    Let's say that you get a card that charges 15% interest. Now, you go out and buy something for $1000, then when your CC bill comes in, you pay $500 on it. Your oustanding balance for that statement is $500. Now, since your credit card interest is 15% APR (Annual Percentage Rate), you need to divide 15% by 365 days to get your DPR (Daily Periodic Rate). What this means is that since you will have a $500 outstanding balance for approximately 30 days (until your next bill comes), it will look like this:

    15% (interest) / 365 (days in a year--"annual") = .041% (DPR)

    .041% (DPR) x 30 days (approx # of days with an outstanding balance) = 1.23% (approx. monthly interest rate)

    $500 (outstanding balance) x 1.23% (approx. monthly interest rate) = $6.15

    So, you'll be paying $6.15 interest on your next statement. Instead of owing $500 on your bill, you now owe $506.15, and your interest begins accruing AGAIN the next day after your statement ends.

    I hope that is understandable. I know that *I* can understand it, but I usually understand what I say. Usually. :D

  14. This is so true.
    I knew this guy who was in mountains of debt with like 3 cards. Then one day he got a new one in the mail with like a 1000$ limit...he couldnt wait to go to the mall to use it. I felt like slapping him...
  15. Ty McNeely

    Ty McNeely

    Mar 27, 2000
    No, but later in life when one gets ready for a large mortgage, if they have had an established credit history from the time they turned 18 until the present time, they will be much more likely to get the mortgage and get it at a lower rate.

    What about what the credit bureaus say? Credit bureaus prefer that everyone have good credit--it makes their job easier. Why would they have a "sales pitch" if it only made their job more difficult?

    I agree with what you are saying in essence--credit card companies DO mislead you into thinking that you have to pay interest and generate some fees for your credit rating to improve, and that is simply not true. It IS important, however, to have established credit, and the sooner the better. The keyword is ESTABLISHED, not POOR. If you screw up, it can cost you BIG further down the road. I guess I speak the way that I do because I've been making payments and working nearly a full time job since I was 16, so I understand and appreciate the importance of it. I know that not everyone does the same.

    Agreed completely. Ignorance is definitely NOT bliss in this instance.
  16. Yup..its all about responsibilty.
  17. Ty McNeely

    Ty McNeely

    Mar 27, 2000
    Awwww shucks...:oops: :D

    I have financial nazi's for parents and I worked at a bank for over 2 1/2 years--it WAS drilled in to me to an extent, but I also have an avid interest in the finance industry that fuels my knowledge a bit. I've done lots of research for myself, so I at least have a general idea about what is going on :)

    Very true re: ample salary. The problem, however, is just what you said: not everyone has the luxury of a comfortable salary. I plan as though I'm going to be poor as a church mouse but I dream like an athlete, so maybe the two will meet in the middle somewhere ;) My theory is this: why not have both?

    Bingo. One slip can cost you big further down the road.
  18. jazzbo


    Aug 25, 2000
    San Francisco, CA
    Listen very very very very very very closely to this advice. Negligence with your credit WILL impair your ability to buy a car later in life. Negligence with your credit WILL impair your ability to purchase a home later in life. Negligence with your credit WILL cost you thousands and thousands of dollars. Negligence with your credit WILL cause you and your family or loved ones or significant other undue stress and turmoil.

    I can only wish that someone gave me advice when I was young. The 18-22 year old is one of the most heavily marketed toward group of individuals when it comes to credit. College campuses saturate quads and cafeterias with brochures and offers of "free mugs" or "free T-shirts," while they rake in millions due to this country's poor financial education.

    Please, I beg of you, be responsible. If you do not have the money, right now, in your account, DO NOT EVER charge something. Credit cards are for emergencies. You may find your car broken down one year, you may find yourself living far from home, and a loved one passes, and you need to fly there for the funeral. Credit cards ARE NOT for toys like electronics, musical equipment, DVDs or CDs, or anything of the like.
  19. jazzbo


    Aug 25, 2000
    San Francisco, CA
    ... and read Suze Orman.
  20. MJ5150

    MJ5150 Terrific Twister

    Apr 12, 2001
    Lacey, WA
    I second the suggestion to listen to Suze Orman. Good call jazzbo! Here is her site: Suze Orman

    My credit cards turned into little shovels that dug me a huge hole. Yeah, my problems were deeper than paying a bill at the end of the month, but I got it worked out. Thanks to my wife, and some good advice from Suze Orman, all is good in our family.

    I think using a credit card to buy bass gear, with the idea of making the monthly payments, is not a great idea. Only my opinion though.