Help Needed with FIRST CREDIT CARD

[Benn Griffin]

Hi all. So I thought it would be a good idea to apply for a credit card since I have used responsibly a debit card since 2004, never once overdrawing. I am a reliable and responsible kid and I applied and was approved for a VISA credit card with a 3500 dollar limit. I have a question though. I signed up for online statements and free bill paying. I paid my car insurance with the card and use it now for everything I would use my debit card for as I get 1-2% returns on everything, which translates to in a couple months I will get a $50 credit to take off of a bill (kind of cool, right?!). My questions is regarding statements because Im' not sure how they work. I paid off my balance that showed online about a week and a half ago, but I guess my statements end on the 16th of every month and then they give me until the 10th of the following month to pay. Do I just pay off whatever the "New Balance" says on the statement ? i.e. this one says I owe only 78.59 left since I paid my 324 bucks off for car insurance already. Also, does this mean that anything I'm buying now will show up on the following month (November's) statement?

[Paul Petersen]

My only tip is to cut up the card and cancel it. I'm 29 and don't have a credit card, and I get around just fine (own a home, etc.). Rewards are kind of joke, and at some point the card company will mess you over, or you will forget to pay a balance, which negates any rewards.

Regarding the statement, just check your online profile and see if you currently owe anything. If it says "0", then you are fine. Paper statements generally have a lag, and don't show very recent activity. You can always call Visa if you have any doubts.

[Carolyn Herlin]

Don't call Visa if you have a question. Call the 800 number on the back of your card. It goes to the bank that issued you the card, or their representative.

Your statement should show a statement balance as well as a minimum payment. If you want to pay off the card every month (which is what I do), pay the statement balance. That statement balance is less than what the current balance of the card is if you look at it online, because you've had more transactions since the closing date of the statement. Those transactions that happened since the closing date of the statement won't be due until the next statement. If you always pay the statement balance by the due date, you won't pay any finance charges.

[Paul Petersen]

Don't call Visa if you have a question. Call the 800 number on the back of your card. It goes to the bank that issued you the card, or their representative.

Yeah, that's what I meant. Call Chase or MBNA or whoever.

[James Winzenz]

When purchases show up on your card statement depends on your statement cycle.  As opposed to a debit card, which draws money directly from your bank account, and which purchases show up immediately, you may not see your purchases on a credit card statement right away.  Although since you are viewing your card online, you should see the purchases fairly quickly.  Here's what I will say about credit cards - they can be good to have in an emergency, but that's about it.  We have been in the process of slowly getting rid of all but about one of our credit cards, and that is from the bank that we have our checking and savings accounts with.  Credit cards are an easy way to dig yourself a bit hole with debt, and the interest rates on a credit card are almost always MUCH higher than anything else.  If you pay off your balance every month, that's better.  My advice - if you are going to have a credit card, be responsible with it and don't use it for purchases you can't really afford - save up for those.  If you are concerned with someone stealing your debit card pin, use it as a credit card.

[Sasha Pachev]

I have a credit card for two reasons:

a) Cashback
b) Convenience

I always pay off the balance 15 days before the payment is due.

I have also used credit cards to get a no-interest loan before to help with the mortgage. Take credit card with no interest in the first 12 months, and either no or a very small balance transfer fee. Max it out and pay off a loan that has an interest that would be higher than the credit card balance transfer fee over the 12 months. Over the next 12 months pay off the credit card instead of that loan. Make sure no balance is left on it at the end, and make sure you do not miss your payments - the moment you do you lose the no interest part, and now you are paying a heck of an interest.

After 12 months throw away the credit card if it has no cash back. If you still have a balance, find another credit card offer with no interest and repeat. This time you have more options because some credit card companies will not give you a balance transfer in the form of a blank check - they want you to give then a competing credit card to transfer from. Well, give them one! Not the use of the credit card that the credit card companies have intended, but I figure it is only fair to beat them at their own game and rub it in their face.

Never, never, never, absolutely never carry a balance on a credit card. They say a lottery is a tax on the mathematically handicapped part of the population. Carrying a balance on a credit card belongs to the same category. Do not subject yourself to this form of tax.

[Sasha Pachev]

This thread is great for upping blog revenues. Adsense provides contextual ads, so if we are talking about money, the ads will be financial. Those pay very very well, much better than running ads.

[Paul Petersen]

I have a credit card for two reasons:

a) Cashback
b) Convenience

I always pay off the balance 15 days before the payment is due.

Regarding convenience, you get the same convenience with a VISA check card.

Regarding cashback, if you are like Sasha and are extremely disciplined, you will come out ahead. But if you are like 95% of Americans you will effectively lose all rewards by either A) carrying a balance; or B) impulse buying. Studies have shown that people spend significantly more (~20%) when they spend with plastic than with cash (that includes debit as well). The emotional connection of spending becomes lost. Fast food restaurants have shown that people spend almost 50% more when buying with plastic. It's too convenient. Again, if you are very disciplined, and are living on a written budget, you are not likely to impulse buy, so perhaps not an issue. But credit card companies are profitable for a reason.

Regarding emergencies, try to carry about 6 months of living expenses in a money market account. In other words: have about 10K in cash. Also, carry some extra $$$ in your checking account. I can access my money market from an ATM, and I can get to it anytime. Ample cash can buffer virtually any emergency. And most emergencies, you will not need money immediately. I can't think of any situation where I'd need to come up with $10K on the spot.

Anyway, I realize my views are on the fringe of how people tend to do things. Take it for what it's worth. But also ask yourself: We are a credit-driven country. How is that working out for us?

[Dale]

Use caution in relying too much on those VISA Check Cards and their ilk.  The problem is that they access your bank account *too* conveniently!  Even running the card as credit doesn't protect you from the possibility that your card data could wind up being stolen, which is a really BAD deal because, unlike credit, the money comes right out of your account.  I made the mistake of using my Visa Check-card on my PayPal account, which got hijacked and had $1300 withdrawn from my checking account before I was able to freeze everything.  Scary part was that they could've just as easily cleaned my checking out and beyond since I've got overdraft protection.  Cleanup of the whole mess took about 1 week (made more difficult because I discovered it when out of town), which meant I was surviving on my credit card and the cash I had on-hand.
Credit cards make it easier to recover if your card has been hijacked.  I got a phone call one weekend from my MC company asking if I'd bought anything from AntOnline lately.  Uh, no.  Someone had gotten those card #s and bought things from three places, two of which MC managed to stop.  Ten minutes after the MC company call, QVC called saying a purchase I'd made was "suspicious" and they were rethinking the approval, so it wound up being just an easy card replacement.  The important part was no real $$$ were at risk since it was credit, not debit.
Another issue with Debit cards....if they're not Visa/MC, you don't have the same buyer protection...you could be held responsible for more than the first $50 in fraudulent charges. 
Credit cards are good to have in a pinch but require careful management....don't spend what you don't have and you'll be safe.  When you buy something on the credit card, identify the actual money you have on-hand that's going to go to pay it off and you'll stay safe. 

[Jon Allen]

Sasha, the ad up top is still for Mizuno, sorry.

Regarding emergencies, try to carry about 6 months of living expenses in a money market account. In other words: have about 10K in cash

Man, Paul, I wish 10k would cover 6 months... 

[Paul Petersen]

Man, Paul, I wish 10k would cover 6 months... 

Yeah, I guess 10K doesn't go as far as it used to back in the pre-kids days. But you get point. $10K, 20K, whatever fits your particular household. I would think 10K would be plenty for someone without kids or a mortgage. The point is to borrow from the "Bank of Jon" or the "Bank of Benn" rather than from Chase if life knocks you upside the head.

Oh, and the money market emergency fund has "rewards" too...usually about 4% interest. Enough to buy Christmas presents, or to cover little mini-emergencies if you pile enough cash in it. Food for thought. 

[Paul (RivertonPaul)]

One word of caution if you use the no interest terms offered -- be sure somebody knows when the payments are due.  My father has always loved taking advantage of no interest or low interest credit offers and paying them off before the balance is due.  To me its not worth the risk and time involved.  Anyway, he had about 4 such cards which were coming due when he had a stroke.  Remarkably, as he was in the intensive care unit on death's door, fortunately he had the presence of mind and the ability to tell me about these so I could pay them off.  Had he not been able to tell me how to pay them off he would have been hit with the interest for the whole period of time, which would have vastly outweighed any benefit he received from playing the difference between the interest rates. 

[Eric Day]

Benn, a credit card is easy to manage just as long you are disciplined in paying up. If you signed for $1,200 in one month, you -should- have that same amount in cash in your check or savings acount to pay before the cards deadline. If you do this, the credit cards are very easy to use.
And yes, after you get your statement (or better said after credit card cut date), everything sign on the card is for the next statement....

[adam]

http://www.daveramsey.com/fpu/home/

learn to live debt free.

[Benn Griffin]

Thanks for all the tips. I got my credit card and enrolled in paperless statements as well as free online bill pay. Essentially I am doing everything I did with my debit card, only now with the credit card and paying it off as soon as the statement is emailed to me like 2 wks before the payments due. Is this the right way to do it? I just figured as long as I'm responsible it is the smart thing to do, since I get % cash back with my credit card, which will add up over time, and I don't with my debit card. i.e. just bought 2 pairs of shoes with my credit card and on top of already saving 20%, I earned another 2-5% cashback !