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[tino]

What's the general credit score damage done for applying for a credit card? I don't have a credit card, but I'd like one, but I also might be trying to take out a loan for a car later this year.

I'm current in good standing, having only my student loans as debt and never having had a credit card or any other loans before.

It really depends on the person. If you don't have confident you can get a credit card approved, I recommend starting with a "ghetto card" like Discover.

Building credit is not hard. My wife was new immigrant. I started out her crefit building with a couple co-signed cards from me. I was going to get her a secured card but they ask for too much documents so I didn't apply. It only took a little over a year for her to start getting preapproved cc letters. The first 2 real credit card she applied was Capital One and Discover. After that its really easy. It took her from 300 (first store card deny letter had credit score on it) to high 600 in just 3 years.

By the 3rd year she could pretty much apply for any high bonus "premium card". I just applied the 40k point Chase Sapphire Preffered for her since we need to buy a lot of furnitures in the new apartment. I would like to apply for the US Bank Cash+ card which gives 5% money back on furniture stores, but too bad its not available in NY.

 

[distantmantra]

I've got a American Express Delta Skymiles card. My wife and I use it for absolutely everything we can and then pay it off in full every month. We don't view it is a source of endless money and still spend within our limits. Our flights to Osaka/Tokyo in April were paid for with miles, plus we have free check baggage on Delta and all their partners. We've also got a debit card through a bank and use that at places that do not accept AmEx.

I do realize that not everyone trusts themselves with credit cards and that's fine, but the whole Dave Ramsey "credit cards are the devil" thing is mind boggling.

 

[Retro_]

It's weird seeing so many people saying that using a debit card is better so that they don't overspend.

It's the opposite for me. When I used a debit card is when I'd have like a million small transactions on my statement that I couldn't possibly remember if they were all accurate.

So now I just have about 2 credit cards, and just an atm card I use for cash.

On card for gas and groceries. One for restaurants and online purchases. And I give myself a cash allowance each check for smaller miscellaneous purchases.

Has gone a long way towards helping me keep track of and limit my spending. And I get points/cash back on purchases I would have made anyways. Now the only thing on my bank statements are cc payments, cash withdrawals and checks. Not convenience store and fast food place etc. Easy to keep track of.

Debit cards are convenient, but it's precisely because of that that I don't think it's easier to be on top of than credit.

 

[FyreWulff]

If you're in the US I assume you just ignored all the pro-credit card posts in this thread. If you're not in the US, you probably have a valid point as many of the CC perks seem to be US-mostly.

There are many reasons it is worthwhile to have a "real" credit card in the US that as far as I know are not offered with most debit cards.

Airline miles? I fly at most, once a year, and around dates they tend to blackout.

Rewards? I get better interest off the money that just sits in the account. Making investments is smarter. My local grocery store gives me more free gas than any available credit card, for buying food I was going to buy from them anyway.

My bank is also the largest privately owned bank in the USA. Their transactions clear near instantly. Everyone I know with a credit card has to often wait up to a day or more for transactions to post. Makes it much easier to track what's coming and going.

My personal view of credit cards is I'm paying someone to let me spend the money I already have. When I get to the point that I need to make large purchases continously, then a credit card makes sense. But at this point in my life, I even have overdraft protection turned off on all my bank accounts. I simply prefer to not owe money.

 

[DrSlek]

With a credit card you can get cash back/airline miles/points/etc...

You know these are just marketing and loyalty schemes, right? They don't actually offer anything of significant value.

 

[I'm an expert]

You know these are just marketing and loyalty schemes, right? They don't actually offer anything of significant value.

you have got to be fuckin kidding meeeeeeeeeeeeeeee

 

[XiaNaphryz]

Rewards? I get better interest off the money that just sits in the account. Making investments is smarter. My local grocery store gives me more free gas than any available credit card, for buying food I was going to buy from them anyway.

The point people are trying to make is that if you make the same exact purchases you would with cash/debit/check but use credit instead, the cashback/rewards is a net gain. This isn't taking the place of money you have accruing interest or other investments, or implying you need to purchase additional stuff you don't have the funds for.

 

[tino]

Airline miles? I fly at most, once a year, and around dates they tend to blackout.

Rewards? I get better interest off the money that just sits in the account. Making investments is smarter. My local grocery store gives me more free gas than any available credit card, for buying food I was going to buy from them anyway.

My bank is also the largest privately owned bank in the USA. Their transactions clear near instantly. Everyone I know with a credit card has to often wait up to a day or more for transactions to post. Makes it much easier to track what's coming and going.

My personal view of credit cards is I'm paying someone to let me spend the money I already have. When I get to the point that I need to make large purchases continously, then a credit card makes sense. But at this point in my life, I even have overdraft protection turned off on all my bank accounts. I simply prefer to not owe money.

Do you even know how much interest rate you are getting from your saving account? Humor me, tell me how much you have made from your saving accounts last year.

 

[Zoe]

Rewards? I get better interest off the money that just sits in the account. Making investments is smarter.

If you pay your credit card bill once a month, wouldn't you have more money sitting around in your account for longer thus accruing more positive interest?

 

[I'm an expert]

Do you even know how much interest rate you are getting from your saving account? Humor me, tell me how much you have made from your saving accounts last year.

I had this exact post written up but decided against it.. luckily that drslek post came in after to draw my attention..

 

[Retro_]

You know these are just marketing and loyalty schemes, right? They don't actually offer anything of significant value.

I've gotten about 150 dollars in cash through my rewards card that I opened last summer.

Just spending what I would have on gas and groceries regardless

And all interest on my balance is deffered until summer this year. So as long as my balance is zero at that time I'll have paid them nothing.

So basically I was paid 150 dollars and counting to develope healthier spending habits.

Can't beleive I fell for that!

 

[I'm an expert]

I've gotten about 150 dollars in cash through my rewards card that I opened last summer.

Just spending what I would have on gas and groceries regardless

And all interest on my balance is deffered until summer this year. So as long as my balance is zero by that time I'll have paid them nothing.

ssshhhhhhhh

that money isn't real

it's a scheme

$150 is nothing of significant value


(don't fuck up that 0 apr bullshit)

 

[FyreWulff]

If you pay your credit card bill once a month, wouldn't you have more money sitting around in your account for longer thus accruing more positive interest?

No, because it's better to make investments with that money instead of having to spend it to gain it back.

The concept of it being a positive because you had to spend the money to gain the reward requires a bit too much cognitive firewalling for me.

I've yet to be accepted for a credit card recently, anyway. If the glorious credit card wonderland exists, they clearly don't want me in it.

In the end, I view it as a tool. I want to buy stuff online. I get a VISA branded bank card that every store views as a credit card as far as they're concerned, so I can buy stuff online. The functionality that I desire has been provided, and I am happy with that, hence why I don't have a need for a secured credit card either. I manage my finances with known money with some investments here and there. Rewards can be nice, but rewards are locked into the credit company's vendor network and whoever else they've signed deals with - and those rewards can change when contracts expire. The fact that I'm doing business with a local bank just makes it all that much nicer, instead of giving money to the wal marts of finance.

 

[Marty Chinn]

No, because it's better to make investments with that money instead of having to spend it to gain it back.

The concept of it being a positive because you had to spend the money to gain the reward requires a bit too much cognitive firewalling for me.

I've yet to be accepted for a credit card recently, anyway. If the glorious credit card wonderland exists, they clearly don't want me in it.

In the end, I view it as a tool. I want to buy stuff online. I get a VISA branded bank card that every store views as a credit card as far as they're concerned, so I can buy stuff online. The functionality that I desire has been provided, and I am happy with that, hence why I don't have a need for a secured credit card either. I manage my finances with known money with some investments here and there. Rewards can be nice, but rewards are locked into the credit company's vendor network and whoever else they've signed deals with - and those rewards can change when contracts expire. The fact that I'm doing business with a local bank just makes it all that much nicer, instead of giving money to the wal marts of finance.

Look, if you spend money on groceries, what is better? Spending $400 a month on groceries or spending $376 on groceries? You're going to spend the money on the groceries regardless. Wouldn't you rather spend less? That's what a credit card does.

 

[I'm an expert]

Look, if you spend money on groceries, what is better? Spending $400 a month on groceries or spending $376 on groceries? You're going to spend the money on the groceries regardless. Wouldn't you rather spend less? That's what a credit card does.

We have typed this countless times in this thread. They don't get it. For some reason they think that $376 is some evil debt monster or that $24 in savings is completely fake. They don't get they are using the exact same money to pay less.

 

[Zoe]

No, because it's better to make investments with that money instead of having to spend it to gain it back.

You said you have money sitting in the account that you pay out of earning interest. Money is draining out of that account on a daily basis. That's less money you have each day to invest with.

If you were paying a monthly credit card bill, that's a larger sum of money you get to invest up until the day it's due.

 

[RumblingRosco]

No, because it's better to make investments with that money instead of having to spend it to gain it back.

The concept of it being a positive because you had to spend the money to gain the reward requires a bit too much cognitive firewalling for me.

Are you purposely being illogical? Here, let me give you an example of how this could work:

I have $1,000. I want to buy a PS4 from Walmart.com which costs $400. I charge it to my credit card at the beginning of the month. I still have $1,000 available for whatever I want because I do not have to pay back that $400 until my credit card statement comes in near the end of the month. At the time my bill comes in, I pay that $400 off before any interest is earned, so I pay exactly the same amount as if I used debit card... but, as a bonus, my credit card company has paid me $20 (5%) because I used their credit card service online and I was able to hold onto that $400 in the meantime. To make this process easier, I have the amount owed on my monthly credit card bill automatically withdrawn on the day it is due, although I still check over my bill from time-to-time just to monitor for fraudulent charges.

Now, I am $20 wealthier than I would be if I had bought the PS4 with a debit card. I have $620. You would only have $600 if you used your debit card. No one[/i] is advocating that you should purposely spend more money just to earn back 1%, 5%, or whatever % you recover from credit card spending. We are advocating for spending what you already spend, but do it on your credit card (and pay it off before you owe any interest) so that you can reap the rewards.

 

[Deleted member 12837]

I feel like these posts (plus some more about what others have gotten with rewards, cash back, etc) should be put in the OP because they address all of the misinformed people who jump into the thread without reading any of it.

If you are using a credit card the "right" way, you are using it like a debit card, except you're getting paid (either in cash back or other rewards) to do so.

1. You are only using the card to pay for things when you have money in the bank.
2. You do not use your card to charge something that you don't have money for.
3. All your money sits in the bank until the end of the month when you pay one bill (the credit card).
4. You get the rewards as a bonus.
5. You get the side benefits (insurance, extended warranty, price protection, etc.) as a bonus.
6. You pay it off in full each month (since you never charged more than you had) so you never pay interest.

In the past two years (just with an American Airlines card) I've gotten:

• 150,000 mile signup bonus (signed up for two cards, cancelled one after bonuses posted)
• bunch of additional miles
• discounted mileage flights (which would have cost around $1,000 if I paid w/cash rather than miles, paying w/miles meant no cost out of pocket)
• Free baggage (and other airline perks)
• Car rental insurance

With rewards points I have also gotten:
iPad 2
PS4
27 nights worth of stays in hotels

 

[tino]

I think people think credit card sign up bonus = FREE IPOD SCHEME

 

[I'm an expert]

I think people think credit card sign up bonus = FREE IPOD SCHEME

I think people in this thread have this antiquated idea that credit card = what you use when you have no money. There are probably people in here that think you buy cars and houses with credit cards.

 

[Marty Chinn]

I think people in this thread have this antiquated idea that credit card = what you use when you have no money. There are probably people in here that think you buy cars and houses with credit cards.

What gets me is the common reason people say is they use debit to make sure they only spend cash that they have, but not one single person seems to use their debit until it's declined.

 

[tino]

What gets me is the common reason people say is they use debit to make sure they only spend cash that they have, but not one single person seems to use their debit until it's declined.

Well in theory, you can have a "spear money" debit card you direct deposit a certain amount to every month. But... you can just use your head to budget it. I mean how hard is it.

 

[Retro_]

What gets me is the common reason people say is they use debit to make sure they only spend cash that they have, but not one single person seems to use their debit until it's declined.

Yeah that's what was confusing to me as well.

My bank account is never empty so I couldn't understand how this would work.

You try buying starbucks and your card geta declined WHOOPS nice save debit!

 

[Prax]

Credit cards add an extra layer of abstraction for most people between their cash and purchase and that confuses them. (most direct is cash => then debit => cheque => credit card => investments/big loans probably go here lol)
It's okay. Some people like to keep it really super simple.

I use my credit cards for cashback rewards, but I, for example, don't like the complexity of "churning" and moving money around a lot to min-max interest/savings/investments, so those 0% interest cheques they allow you to have and balance transfers or whatever get thrown out.

So I understand that people may be wary of messing up or having to deal with extra complexity.

But still, credit cards are pretty awesome if you're fairly responsible, can handle ONE extra step of paying off a credit card bill in full to avoid any interest charge, and reside in North America (because apparently, every other continent hasn't gotten a pro-credit card environment).
About every 3 months, I make about $50 back from buying groceries and paying bills with my card. It's pretty nice!

 

[Marty Chinn]

Well in theory, you can have a "spear money" debit card you direct deposit a certain amount to every month. But... you can just use your head to budget it. I mean how hard is it.

Couldn't you just request your CC to have that amount be your monthly limit and then you just auto pay from that amount every month?

Yeah that's what was confusing to me as well.

My bank account is never empty so I couldn't understand how this would work.

You try buying starbucks and your card geta declined WHOOPS nice save debit!

Ya, I have to think they're doing some sort of mental thinking about what they can and cannot spend if they're not letting a decline tell them they're out of money. Just use the same method with a credit card.

 

[Alcoholikaust]

has the "I don't want to make stupid monthly payments" been used as answer?

haha

that's why I use one-I know I have money in the account-that's a given-so using it and not having to pay out percentages overtime makes me happy.

$5.00 yeah. $700.00 why not?

the last time I used my credit card was for an engagement ring for my wife. that was 5 years ago-paid cash or used my debit card for everything since. easier that way.

 

[Zoe]

has the "I don't want to make stupid monthly payments" been used as answer?

haha

that's why I use one-I know I have money in the account-that's a given-so using it and not having to pay out percentages overtime makes me happy.

Why would you have to pay out percentages over time?

 

[muu]

Considering the number of people living paycheck to paycheck, or have zero assets, or are weighed down with debt, it's not surprising that debit cards are a popular choice. With the absolutely piss-poor personal finance education people get, if any, too many folks are just asking to get their ass kicked by the credit card industry. Automating payments is easy as long as you have a rainy-day fund; only problem is that so many people don't even have a couple thousand bucks of savings in case of an oh-shit situation.

Things do look bleak though, when we have chaps like this that seem to not realize you can pay the statement in full every month:

has the "I don't want to make stupid monthly payments" been used as answer?

haha

that's why I use one-I know I have money in the account-that's a given-so using it and not having to pay out percentages overtime makes me happy.

$5.00 yeah. $700.00 why not?

the last time I used my credit card was for an engagement ring for my wife. that was 5 years ago-paid cash or used my debit card for everything since. easier that way.

 

[tino]

Couldn't you just request your CC to have that amount be your monthly limit and then you just auto pay from that amount every month?

Probably most of the credit card won't have that feature (since its so useless).

I think the simplest way to set it up its put all the "cost of living payment" in 1 credit card, put all the "spear fun things I don't have to have" on a 2nd credit card. And then just let mint sort out the payment categories. Review the bills every month. You can also setup auto payment with email alarm with both credit cards.

Ya, I have to think they're doing some sort of mental thinking about what they can and cannot spend if they're not letting a decline tell them they're out of money. Just use the same method with a credit card.

Can we say debit card is a not very sharp one-edge knief and credit card is a double edge sword? Would this be a good analogy to communicate with the debit card people?

 

[faceless007]

Aside from all the other benefits that have been mentioned, many credit cards come with additional features that could be pretty fruitful. Depending on the card, it might offer an additional 1-year warranty beyond the original manufacturer's warranty on any purchases made with the card, or reimbursement if a purchase is lost, stolen or damaged within a certain timeframe (usually 60 or 90 days of purchase), or price matching if something you buy goes on sale for a lower price within a certain timeframe (60 or 90 days). Granted, I've never had to use any of these features but they are available and from many reports I've read on the Internet, they're not that much trouble provided you keep copies of your receipts for big purchases (which I do).

 

[Syriel]

I'm trying to figure out a way to use these cards to pay for our mortgage. That is very tricky to do though. If I could get even just 1% back on it each month I'd be thrilled.

You probably can't do the whole thing but... AMEX Serve.

That allows you to load it with a credit card ($200/day, max $1000/month).

Most CCs show it as a charge, not a cash advance to AMEX is eating the fee.

You can use AMEX Serve as a debit card, but you can also do bill pay from it.

Soooo...cycle the max onto the Serve card and then use that to bill pay part of your mortgage. Would suggest using the Serve card for a few regular purchases so AMEX doesn't flag you for unusual activity.

 

[Konka]

Thanks everyone for turning this thread into a wealth of information.

 

[distantmantra]

You know these are just marketing and loyalty schemes, right? They don't actually offer anything of significant value.

We get free checked bags on Delta flights (and all their partner airlines) and we've used our miles for numerous free flights that have no blackout dates. My wife and I have two roundtrip tickets to Tokyo for April thanks to the miles. We also get a $100 companion flight every year which comes in handy on flights to Nebraska to visit family during the holidays.

 

[cwmartin]

Has anyone thought about the purchasing mentality that may come along with having rewards tied to increased spending? I suppose this is more of a psychological question but it would seem completely plausible that people would spend more on things they didn't need to buy (even within their means) simply because they feel an added benefit in receiving rewards.

 

[distantmantra]

Has anyone thought about the purchasing mentality that may come along with having rewards tied to increased spending? I suppose this is more of a psychological question but it would seem completely plausible that people would spend more on things they didn't need to buy (even within their means) simply because they feel an added benefit in receiving rewards.

That's a possibility, but not one I fall victim to. My wife and simply use our AmEx to buy the things we'd buy anyways, and pay off the bill in full at the end of the month. We don't buy stuff just to accrue miles.

 

[cwmartin]

That's a possibility, but not one I fall victim to. My wife and simply use our AmEx to buy the things we'd buy anyways, and pay off the bill in full at the end of the month. We don't buy stuff just to accrue miles.

I don't think people do it conciously.

 

[Marty Chinn]

Has anyone thought about the purchasing mentality that may come along with having rewards tied to increased spending? I suppose this is more of a psychological question but it would seem completely plausible that people would spend more on things they didn't need to buy (even within their means) simply because they feel an added benefit in receiving rewards.

I don't even think about the rewards when buying things. I'm always thinking about how much did I spend, did I spend too much, should I wait for next month to buy this thing, etc. Not once do I factor in the rewards. In fact, I don't keep track of it and just check to see where it's at every once in awhile. That way it's just a sudden large sum that I'm not factoring in.

 

[Everdred]

I'm turning 28 soon and I've never had a credit card. I've always used a check card. I just prefer to know that I'm only spending money I actually have.

It's a myth that you need one to have good credit. My credit is around 800 from having a couple car loans and now a home loan, no school loans.

 

[Downhome]

Oh man, the first round of points on my new Chase Freedom card just posted! I'll talk cash value, not points, to make it easier for those not in the know to understand. The $200 from the sign up offer is there, but then on top of that I have an additional $11 simply from purchases I have made since the 2nd of this very month, right at two weeks. So for the sign up offer and then the normal purchases I made with the card I now have $211 that I wouldn't have had otherwise! The card is now paid off as well, I owe nothing. This is awesome, I may never use a debit card again, lol.

You know these are just marketing and loyalty schemes, right? They don't actually offer anything of significant value.

Oh yes, just marketing and loyalty schemes indeed. Nope, $211 is nothing of significant value at all!

Not to get to work on the $150 sign up bonuses on my AMEX Blue Cash Everyday and Discover It cards!

EDIT:

I need to make it perfectly clear that I am NOT spending anything I wouldn't be spending to get those sign up bonuses. You should never, ever, ever do that. I am paying my monthly bills using each card to get there quickly instead of spreading it out over three months. I used Chase Freedom for January, I'll use AMEX BCE for February, and I'll use my Discover It card in March to get there for each card. After that I'll pick one of the three to use as my permanent card for my monthly bills. Unless I find one that gives more than 1% on every purchase. I know they are out there, but I haven't done all the research there yet. For now I'm using what I have for the bonuses.

 

[Retro_]

Has anyone thought about the purchasing mentality that may come along with having rewards tied to increased spending? I suppose this is more of a psychological question but it would seem completely plausible that people would spend more on things they didn't need to buy (even within their means) simply because they feel an added benefit in receiving rewards.

Yeah this happens.

I remember being at a gas station and a guy in front of me came in and bought a candy bar and gum. He told the cashier he needed like 4 points more to get enough points to get enough for the 20 cents off per gallon. Not realizing that he probably just spent more on stuff he didn't even want than he stood to save through his discount.

So yeah I think people do this with credit cards as well, and yeah I think companies count on that when designing these programs.

That's why on an individual level you have to do your research and make sure you understand the rewards systems so you can make them work for you. So that you don't make the mistake of unconsciously associating more spending with more rewards/savings when they two are intentionally disproportionate to each other by design.

 

[XiaNaphryz]

I just prefer to know that I'm only spending money I actually have.

Heh, how many times will this argument keep popping back up?

 

[I'm an expert]

I'm turning 28 soon and I've never had a credit card. I've always used a check card. I just prefer to know that I'm only spending money I actually have.

It's a myth that you need one to have good credit. My credit is around 800 from having a couple car loans and now a home loan, no school loans.

How does it feel wasting money you actually have?

 

[Everdred]

Heh, how many times will this argument keep popping back up?

It's not even an argument, it's just a preference.

 

[I'm an expert]

It's not even an argument, it's just a preference.

(but you're preferring to not get free money)

 

[Everdred]

How does it feel wasting money you actually have?

How does it feel driving the debt of millions? Yeah those people may not be responsible and that's not your fault but that money has to come from somewhere.

 

[Retro_]

It's a myth that you need one to have good credit. My credit is around 800 from having a couple car loans and now a home loan, no school loans.

I don't think there's a myth that they're needed for good credit, so much as there is a bunch of (good) advice going around that they're a good way to build credit without taking on substantial long term loans like those for school, cars or a house.

and that it helps having good credit before you apply for those types of loans as it may enable you to obtain higher loan values at lower interest rates.

I just prefer to know that I'm only spending money I actually have.

Taking a loan for a house are a car is by definition spending money that you don't have.

 

[XiaNaphryz]

It's not even an argument, it's just a preference.

You can still spend money you only have while still mainly using credit cards to do so.

 

[I'm an expert]

How does it feel driving the debt of millions? Yeah those people may not be responsible and that's not your fault but that money has to come from somewhere.

dafuq are you talking about

pay a $1

or pay $.98

which is better

congratulations you are now a credit expert

 

[Everdred]

I don't think there's a myth that they're needed for good credit, so much as there is a bunch of (good) advice going around that they're a good way to build credit without taking on substantial long term loans like those for school, cars or a house.



Taking a loan for a house are a car is by definition spending money that you don't have.

I agree but there really is no other option with our system, especially for a home.

 

[Everdred]

dafuq are you talking about

pay a $1

or pay $.98

which is better

congratulations you are now a credit expert

Cedit card companies are not just giving out free money and taking a loss. It's coming from people in debt paying interest on their cards etc.