Credit Card Basics

[Queen]

offroad- your credit score is now being used in many more ways than loans. For example, I got a lower insurance rate from State Farm as my credit score rose, when we moved to FL in May we had to pay no deposits for utilities due to the credit score. That's the ensnare part I was referring to. They will probably check it when I apply for work as well, the situation just stinks.

 

[offroad]

That sucks. Think i will move to a van down by the river. Lol. Wait wait. That is my plan.

 

[Queen]

That sucks. Think i will move to a van down by the river. Lol. Wait wait. That is my plan.

Yup, it's definitely the "haves" deciding all the rules in their favor. Keep the sheeple in line and scared by gradually using the tool they devised to keep us all in debt the rest of our lives.

 

[Canine]

...I think there is another, very dark side of the story.

You said it well. That is such an important aspect of credit that I dropped the ball by not highlighting that in the OP. Any other threads I start related to credit will include the seductiveness of easy credit and the potential life-altering downfall of misusing credit. Being in debt is like being in jail without bars. You aren't living free if you are tied down by massive debt. Then, yes, the sheeple among us must cow to the overlords. In that sense, debt can be one of the biggest forms of evil I can think of.

I don't think of having credit as a scam. Anything can be scammed and manipulated with credit being an easy one to use against you (or you unwittingly using it against yourself), but it is not inherently bad. It is a tool that one has a surprising amount of control over. I find it a valuable and use it to my advantage. Do I need it? No. I don't need electricity either, but it sure is nice.

When I eventually have a battery bank and solar, if I "spend" more electricity than I can have or can make, I don't get the luxury of putting some juice on my Electricity VISA. Neither am I the Federal Government; I must operate within my electrical limits or pay the price. No entitlement there.

Managing credit well does show a lot about your character. I'm not saying if you have bad credit, you are a bad person, but it does statistically demonstrate that those with good credit are safer drivers, more reliable when renting, etc. Of course there are exceptions. While most companies will consider your credit in context (eg. severe medical debt), not all do, which is an abuse of FICO.

Some credit cards have points or hearts or whatever it is that isn't cash. Those have much higher reward values, but what you can spend them on, when you can spend them on, and if they expire are cards that are B.S. I don't want to play those games. All I want to do is be rewarded for paying my bills on time in an easy to understand way that doesn't require me to frequently log in and be on time to be able to take advantage my "points".

When applying for something, we want to show who we truly are. Much of the time all we have is our word, which means squat to most people because too many people lie. And a whole other group of people have deluded themselves into thinking they are good, but aren't, which is another reason why many people won't take you at your word. FICO is one way of objectively and tactfully showing who we are as a person to some credible degree. Even an egg has a heart of gold, but you don't know until you break it open. FICO allows that heart of gold to shine.

 

[akrvbob]

Sorry, I was guilty of hijacking this thread with my rat race rant, so rather than let that happen I split it off as a separate thread.
Bob

 

[VanLifeCrisis]

i never had credit. Moved around alot, never had loan debt. If i had my credit checked, it would come back as no history. I decided to build it up, so got a secured card. I laughed cause the instant i generated a credit score/account history a collection (medical) appeared lol Oh well, i utilize just 9% of my limit and autopay in full each month and its climbing each month. I read an article from a credit counselor who married a foreigner with no credit, and they wrote exactly how they got them to 700 from nothin. Get secured card, pay 9% utilization in full every month for 6 months, get a no fee store card but dont use it (second line raises score and drops utilization). Score will get to 700 and then get a good reward card. Seems to be working so far.

 

[Canine]

Just learned something new. Most of you know that when you apply for a loan, your credit gets checked, which dings your FICO score a few points. People who keep trying to apply for credit and keep getting denied will severely hurt their credit score.

There is what is called a soft pull and hard pull. When a landlord checks your credit history, that is a soft pull and does not ding your score. Same with those pre-authorized junk mail credit card offerings. Should you apply for one of those cards in the mail, it will then become a hard pull. Sometimes that hard pull will be removed from your score if you qualify for the loan/credit card.

There are some things you wouldn't expect to initiate a hard pull. One that really caught my attention is using a debit card to pay for a car rental. Even though you are using a debit card, the car rental company still wants to know what your credit score is to evaluate your trustworthiness. Those cars are expensive and they don't rent them out to just anyone. You know that saying, "Drive it like you stole it!" My saying is, "Drive it like you rented it!" Apparently, car rental companies have a similar outlook on their customers. When the car rental company checks out your FICO score, it is a hard pull. If you rent frequently, that will show up negatively on your credit score. If you pay with a credit card, you don't get a hard pull.

Whenever you are asking for someone to extend you some line of credit even if it is a cell phone plan, it may include a hard pull. If you shop for cell phones and apply at each one, you will get dinged each time. Fortunately, if those occur within 45 days of each other, they are viewed as one hard pull. Same for mortgage shopping and other such activities.

 

[SoulRaven]

This thread is very helpful, thanks!

I regret not getting a credit card sooner.

There are a lot of $100 gift card deals I could jumped on if I had the credit score to do it. One of them I waited 8 months after initial rejection and applied again, and got it. Still waiting a while before applying for others.

My reasons? Gift cards, rewards, lower auto insurance, and emergency money. Made it through last winter with one credit card of $750. Unfortunately I didn't know that even paying it off every month on time it'd still affect my credit. Now that I have two lines I can spread it out more evenly and my score should improve. I also need to work out when the best time would be to ask my credit union again about raising that limit. This time I'll use the reasoning "so I can use your card more without hurting my credit score."

Never had a late payment, and there were only two statements where I've ever paid interest - that's when my van needed a bunch of emergency repairs in winter, like two tires blowing out on me and such. Those two months concluded with me maxed out of every monetary option, but I had paid the minimums on time and had just enough stored food to get me through. Even in my dire circumstances and low income, 2 months of interest is all I've ever paid.

I like how I can get $50 cash back from time to time, directly back into my credit account.

My family still warns me up and down of the dangers of credit cards, but IMO so long as you're responsible about it then they can be a useful tool. For me, I know that if I have to use it to temporarily spend above my means, then I know for the next month or two I'm going to have to live well below my means to make up for it. I track every expense and do not make purchases lightly, so it works for me.

 

[Canine]

This thread is very helpful, thanks!

I regret not getting a credit card sooner.

Am glad this helped. If you decide to get a credit card, not get one, get another one, change cards, or increase your limit, it is good to make an informed decision.

 

[SoulRaven]

Just wanted to add something else...

Though conversations with others I've realized most people who don't use credit cards have never found themselves in a situation that needs one, due to either making a lot or being able to save a lot. I can do neither.

I recently found myself in a situation where I'm trading my old van with someone who was intent on gifting me a Sienna that's mechanically sound, and while their generosity is totally appreciated I've only recently discovered that bald tires are not included. Which, for winter months is really important for safety. Having just spent my meager savings on other essentials, I know I can't immediately pay for 4 new tires, even cheap ones.


So I got another credit card that has 0 APR the first 15 months, though I presume I'll pay it off in 5 or less. I really dislike debt and have only ever carried a balance for two months before. This card has a lot f cash back bonuses too, so I'm getting $100 cash back on top of 2% or 10% cash back the first year of use, the latter in revolving categories.

Would I prefer to have a simpler life where I could afford everything without juggling cards? Yup. But since I don't have that, I'm going to be smart and carve out a way to navigate the system to my advantage.

Btw Credit Karma is an awesome site for those who use credit cards to sign up at. You can get FICO scores and lots of information about what's affecting your credit there.

 

[Canine]

Seems my mailbox is full of credit card offers every day.Got an offer yesterday for one that would refund me $250 when I charge $1000 on the card.I'll admit it was a tempting offer,but in the end I threw it in the trash.I'm like OP in that I have 2 credit cards I have had for probably 25 years with available credit of $45000.I use them occasionally to order from Amazon.Great peace of mind to have money available when on the road.

 

[compassrose]

For those who would like to get CC with bad score or (even worse) no credit, you can get a secured card. My card is thru Capital One and I only have the one card. This is my experience.

So I was trying to get a dropshipping business started and the yo-yos I was dealing with said I had to have a credit card. My debit cards wouldn't work. (I also apparently have a website someplace... lesson learned, when I'm only getting a couple hours per week of sleep, and freaking out with grief, stay off the internet). So I got a secured card. $100 to secure and a $200 credit line. This was back in January. I ended up keeping it after a little sanity returned. I'm still desperately trying to figure out how to earn money, but that's neither here, not there. So I have been buying little things and paying the card off a few weeks later. My score is creeping up. I now have 728. That's called "good" credit. Capital One has increased my card limit to $500. I still only put stuff on it that I actually have the money for. Like the other day I put the groceries for the month on it (saves me money to shop once a month). My daughter & I are combining our resources right now and we had the money to buy the groceries. So I put it on my card. About a week before the interest gets added, I will pay it off. Probably next weekend. That way, I avoid the interest and it's paid "on time". I use my debit cards more (Schwab, PayPal and WalMart Moneycard). So the nice thing is Capital One has this little program where you can plug various numbers in to see what you can do to raise your credit rating. The only thing that increases my credit score is putting more credit on the card. And if my credit line increases to $1K, my credit score will stay the same. If it increases to $2K my score will go down slightly. If I add $200 debt and carry it, my score will go up but not enough to satisfy the uneasiness of carrying the debt. I'm just fine with "good" credit. I would have to get to 751 to have "excellent" credit (751-850). Of course the credit bureaus still are way behind on my address.

The "billing cycle" is an odd thing on credit cards. One of the ways David & I got into trouble years ago with credit cards is we had a couple that the billing cycle was an odd amount. The bill "due date" was every month on the same date but the billing cycle was not. One was 28 days and the other was 21 days. This was before we had internet. My fault, as I did not get a magnifying glass and look at the tiny tiny print. When I did finally get a magnifying glass (really) I found the billing cycle. By then the damage was done. The cards were based in FL which has the highest interest rates legally allowed. Even though I paid the cards off, I had high interest charges. Now I keep an eye on my Capital One account weekly. I don't put enough stuff on any of my cards to warrant the "special rewards" programs. I just simply do not spend that kind of money.

 

[VanLifeCrisis]

i did the same with cap one, tho my score is lower cause the instant i pinged a history, medical creditors found it and brought me down a bit. I plan to open a no fee store card or something and not use it having more than 1 line can boost your score ive read, even if you just use the other one.

 

[Canine]

The "billing cycle" is an odd thing on credit cards.

Here is what I understand how the billing cycle and the due date works. I'm going to call it the billing period as that is the official terminology, but I believe we are talking about the same thing. Let me know if what I write agrees with what happened to you as I don't completely understand what happened with you.

The billing period can vary depending on the credit card. It can last 20 to 45 days. The billing period is when everything that is charged within that billing period is what is used to calculated interest, late fees, etc. This information is also reported if you have used 30% or more of your available credit (which accounts for 30% of the total FICO score!). If you pay off the entire amount, then no interest is applied for that billing cycle, no late fees, etc.

Then, by law, you have a minimum of 21 days to pay at least the minimum due. The due date of a minimum of 21 days after the end of the billing period occurs at the same time of every month regardless of the billing period.

Therefore, if I understand correctly, the billing period does not matter to me in regards to paying at least the minimum amount on time. If I were trying to figure out potential interest accrued or available credit, then this would be a pain in the keester. As long as I know what the due date is, I'm gold. Knowing the difference is vital, though, as a mistake could easily happen.

This is my understanding so far, but I can't say this is 100% accurate.

If you had the same due date every month, then I don't see how you could have gotten in trouble with paying an appropriate amount. This is the part where I don't completely understand what happened in the situation you described. This is new information for me, so if I can understand this, this will help me from being in the same situation you were in. I thank you ahead of time for helping me understand.

 

[compassrose]

...If you had the same due date every month, then I don't see how you could have gotten in trouble with paying an appropriate amount. This is the part where I don't completely understand what happened in the situation you described. This is new information for me, so if I can understand this, this will help me from being in the same situation you were in. I thank you ahead of time for helping me understand.

I never understood it either. All I know is things went very wrong and I thought I was doing the right thing, paying the right amount on my due date. Apparently not. The whole mess was so confusing.

 

[Canine]

The whole mess was so confusing.

I can understand that! Some of the terminology is misleading or vague, which leads many consumers to make mistakes. I wasn't aware of some of this when I began this thread.

What I'm taking away from this is to focus on the due date which is the same every month. If you read anything else other than "due date", then it might not be the actual due date. That may not be a true solution, but it is a theory worth testing. Some credit card companies have some unscrupulous business practices. One does need to be careful. I try to keep things simple and not push the boundaries of my credit to keep the odds in my favor as much as possible. We do have a lot of control over our credit cards.

 

[SoulRaven]

Gosh, that stuff sounds confusing, sorry you went through that compassrose.

My typical routine is I set up automatic payment as a safety net just in case I forget to pay in time or there's some mix-up or whatever, then I pay it off manually before that automatic payment happens.

So, as an example of beneficial use of credit cards, I recently had to switch insurance to the new van and Geico wanted something like $40 more/month for the same coverage. I stripped covereage down to absolute state bare minimums just to bring it down to $92/month, which was still $17/month more than what I'd been paying previously, and was super uncomfortable with how little coverage that is.

Did a lot of shopping around, found what looks to be a much better company, where I can get heaps more coverage for $952/year. Plus if I pay in full there's a 2% discount, bringing it down to $932.

My new credit card will give me 1% cash back on that, taking another $9 something off, plus as a promotion it gives me a $100 bonus in credit back when I charge at least $1000 to it within the first 3 months. I read some people saying "I just don't spend that kind of money" but for me, a year of auto insurance and a couple months' bills definitely puts me over that.

So all in all I'm ending up paying less for auto insurance this year than I did last year, to get more coverage with a newer vehicle, because I'm utilizing a credit card. There will be no interest for15 months, giving me plenty of time to pay it off (though I will far sooner) and the credit limits are such that it will be easy to keep utilization percentage low.

I totally see how some people would prefer not to get involved in juggling all this, but for me personally I cannot afford not to.

 

[darude]

I don't want credit cards and the way I see it is if i'm saving money on rent or a mortgage then I don't need em if i'm socking that money away every month and not touching it!!

 

[Almost There]

I don't want credit cards and the way I see it is if i'm saving money on rent or a mortgage then I don't need em if i'm socking that money away every month and not touching it!!

Ah but that means that one sees credit cards as a way of stretching the money one does have, to fit the month.

My credit cards are used as a way of not having to carry cash all the time not because the money isn't in the bank but because it can stay there!!

I just lucked out with cross border banking. Royal Bank here in Canada has a US affiliate that used my Canadian credit rating to issue me a US dollar credit card and a bank account with debit card.

This simplifies the winter a whole lot. Canadian credit cards charge a 2.5% upcharge on conversion rates so I hate to use a Canadian credit card in the US. My Canadian banks' debit card is rather iffy to use because not all merchants' equipment with recognize it and the currency conversion is also settled when processed, not when used, which as we all know changes daily!!

With the US bank account I can transfer money once a month from my Canadian account at a time when I choose to do so, hopefully catching the best exchange rate. Then I can use the debit card and/or the credit card and pay everything stateside with them.

And it's all done online...

 

[B and C]

Credit cards also provide purchase protection you don't get with cash or a debit card.