Credit card 101?

[BuzzKillington]

I'm looking to build my credit and I'm thinking about applying for a credit card.

* Intro APR:
0%*
* Intro APR Period:
6 months*
* Regular APR:
14.24%*
* Annual Fee:
$0*
* Balance Transfers:
Yes*
* Credit Needed:
Good Credit*

I've always stayed away from credit card simply because I've heard a ton of horror stories but from what I understand, it's 100% the users fault. They spend more than they make and end up not being able to pay the bill they accumulated over the month and end up paying 10-20% more than they originally intended because of interest.

My question is... if you pay off the bill after every month, do you end up paying interest? What if you only pay the minimum? Do you end up paying interest on the remainder?

[Omega]

My dad has talked to me a hell of a lot about credit cards.

Intrest is compounded monthly. Pay it all off before the next month, and there's no outstanding balance to put intrest on. Simple as that.


Probably the biggest piece of advice I or anybody can offer is this:

"Make sure you have enough money to pay for something completely before you buy it on a credit card".

ie: don't buy that new flatscreen TV if you're $300 short, because if you can't get that $300 paid, they'll tack on the intrest and next month it'll be ~$345, which is obviously more than the price you THOUGHT you'd be paying.

If you just pay the minimum it will take you forever to pay off your card and you'll get raped (hard) with intrest.

Remember: Credit card companies aren't there to help you. They're there to turn a profit. Keep your ass out of trouble or holy god, there will be pain.

[NightrainSrt4]

Well, my post got lost as the internet cut out as it was posting.

But, afaik it would be 14.24%/12 each month, which would be only like owing ~306$ish the next month, not 345$. As the APR is a yearly amount, not monthly, no?

As when I bought my tv last year, I had the money for the entire tv, and the amount of interest I'd pay for the months I divided payment into, and it sure didn't go up 100+$ the next month.

[chaksq]

IF and only IF you can discipline yourself with money I strongly recommend getting a credit card, or even two. Read and reread all the information on the card before applying, then when you get the card read and reread all the information before using it. Be aware of any penalties and your obligations before you use it so you do not get any surprises. You are best off if you pay off your balance in full every month.

Why I think a credit card is a good idea is simple. It can be easy to fall into bad habits or abuse your card if you are lazy, not careful, uninformed, don't care. However if you can avoid the pitfalls consistently and always take good care of your account you are showing you are a responsible lender and that helps build your credit score. I have heard that having two cards is better because it helps build your credit faster. Basically using a credit card responsibly and within your means is good debt, which is the kind of debt you are in control of and benefits you via the increased credit score. Having a good credit score is essential when it comes to buying a car, taking a loan, even getting a job.

[SKDgarbage]

The more credit you have availiable to you the better, as long as you don't charge up over 30% of it. If you're worried about discipline get a store card for like hello kitty super store or somewhere else no person in their right mind would shop and let it sit there (as long as there's no annual fee). Or get a standard one and ONLY use it for bills and stuff then pay it off every month. Most cards should have the option to make automatic payments too, so you could just use one instead of cash and have a little peace of mind with not getting too far behind with it. One of my big peeves with cards is some places just ping the card for 1$ to make sure it's legit, then nail you with the rest like 4 to 7 days later (like ALL gas pumps) so when you first get it, keep it balanced like a checkbook. But! If you want some (free!) expert advice give clark howard a call or his free advice line http://clarkhoward.com/cac/
Good luck man! Don't get too worried, I'm a 21 year old kid and my two cards are just fine.

[Eclecticos]

If you do decide to apply for a credit card make sure your read though everything thoroughly several times there are always hidden charges called "Finance Charges" which include monthly fees, annual fees, and basically anything else they can squeeze in there. I would avoid them all together, inless you absolutely have to have one.

The best way to build credit is to apply, and accept small loans from a local loan or credit agency.
I have done this several times when I needed a little extra money to purchase a vehicle.

[Spawn-Inc]

here is what i do/did for my first CC.

i made sure there was no annual fee and got a 1% cash back card. the interest is 19.7% but with the way i use it i never get interest. i only buy what i have money for. i'm pretty much just using it for building credit.

i pretty much put anything on the CC, even a $2-3 purchase, it just means more money back for me. the only problem is i will only ever see a 2000 limit, right now its 1000.

i just pay it off every 2 weeks and its worked out great for the last 6 months. i was even offered a 8000 line of credit i accept and will never touch unless i need it bad. sitting there it just helps me with credit. to my knowledge i have perfect credit.


the only thing i never understood/stand is lets say your statement is the 1st of every month. you buy some on the 3rd day of the month, then buy something on the 29th. do you have to pay the 3rd day AND the 29th?

[Xpirate]

My question is... if you pay off the bill after every month, do you end up paying interest? What if you only pay the minimum? Do you end up paying interest on the remainder?

This all depends on the credit card's grace period. The credit card that I used to use changed the terms of their grace period so they could charge deadbeats like me some interest. I promptly got a different credit card that still has a grace period and does cash back rewards.

"Deadbeat" is a term that the credit card companies use to describe people who usually pay the balance in full and rarely ever pay interest. If you use your new credit card as a convenient way to pay for stuff and pay the balance off in full, you are still earning credit. You do not have to pay interest on a credit card to build up your credit score. Anyone who tells you that you have to owe a bunch of money for a long time to increase credit score is wrong.

Also some cards "minimum payment" will not pay on the principal of the balance. So you should always pay at least a little more than what the interest is every month. Otherwise, you will owe even more the next month without even buying anything with the card for that month.