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A Note on Credit


#1 justadude  

justadude

Posted 27 January 2016 - 01:51 AM

I see lots of misinformation and misunderstanding on the Internet about credit cards.

Obviously this is not a credit focused forum but a few rules for any credit account and those trying to help their credit report are these:

1. Length of Time

Don't cancel any account unless you're carrying a zero balance and paying a very large annual fee. I have several small limit (2k) credit cards but they cost me nothing to hold onto and add to the overal median age of my credit history. If you have older accounts you are helping your credit score. If you're being charged an annual fee see if you can have them credited or a special bonus for spending xx amount of dollars.

2. Credit Utilization

This doesn't mean paying off your bills before they even come in. Neither does this mean having $100 on all your credit cards. It means that your OVERALL credit to debt ratio is low. You can have one $5k limit card with $4k on it and that would look terrible. Now, add three more cards with $5k limits and zero balances, now you have $4k debt to $20k credit limit which makes you look good.

Don't forget other loans (installment loans like a car payment) are counted in your credit report, not just revolving accounts.

3. Use Credit

You aren't useful to creditors if they can't make money off you and retailers. Inactivity on your accounts means you're a bad investment. You should try to rotate your cards as best as you can and if you have bonus points for different categories use the one that has the most where you're shopping.

4. Points and Perks Matter

% back in cash or points can make or break the difference between scoring a deal or being like everyone else. If you don't take advantage of these programs you're just throwing money away. Some cards offer and additional bonus (see: stacking) for depositing the rewards into an eligible checking account. Others let you use bonus points in other ways which ends up being more valuable than cash. I won't sign up for any new card that doesn't offer bonus points categories.

When it comes to perks some cards can really outshine. Things like free extended warranties, travel insurance, premium rental car insurance, concierge service and other freebies also reduce your costs as the end user. Currently on my Amex I can buy concert tickets to shows other folks can't get at the box office yet, for example of a perk.

Don't forget sign up bonuses can be a nice way to get free money. If you plan to make a large purchase soon, you can find many cash back bonuses such as $150 with a $500 spend within 3 months. Plus you almost always get 12-15 months no interest. So that Xbox one elite that was $500 is now $350 and you have 15 months to pay it off before paying a cent in interest.

5. Too Many Accounts Too Soon

If you open 4-5 credit cards or loans in a short period of time it hurts your credit score but really it's only temporary and only a few points. Some credit card companies, such as Chase, won't let you get more prestigious cards like Slate if you've opened 4 or more credit cards in the past year. This also has to do mainly with a point mentioned earlier: median account age. You don't want too many new accounts hurting your overall age of your credit accounts. However, it's inquiry's that don't result in new lines of credit that can look bad and hurt your score and I don't feel that is fair considering you may be shopping around for something like a mortgage.

6. Avoid Paying Interest

Your minimum payment is always at least 1% of your balance, your interest rate + the prime rate not set by your bank. You can avoid paying any interest if you always pay the "statement balance". The "current balance" may be the same but unless that number is lower than the statement balance, pay the statement balance and you won't be charged interest.

7. Understand Promotional Balances

When you buy something "same as cash" or with X amount of months without interest, if you buy other things that do not have that same promotion: when you pay your bill you will not be paying towards the "same as cash" purchase. Your payments always apply to the highest interest purchase first unless you call and specificy where you want the funds directed. When that promotional period ends, you are charged all differed interest. Remember, it's never "no interest" on those deals, it's differed unless you pay it off entirely before the end of the promotional time period.

Ok so those are my 2c about credit cards and helping your credit score/report. Number 4 is a bit of a side note but I feel it's important.

#2 DisGonnaBeGood   But I need tacos! I need them or I will explode. CAGiversary!   3672 Posts   Joined 10.4 Years Ago  

DisGonnaBeGood

Posted 30 January 2016 - 07:00 PM

I am totally inept when it comes to credit cards, and am confused how payments work?

 

Say I get my statement in the mail or a digital statement. Do I have up until the payment due date to make a payment without getting charged interest, or does interest start accumulating immediately? My current statement went from 12/29/2015 to 1/28/2016, and it states that the payment due date is 2/22/2016. So essentially what I'm asking is as long as I make the payment by 2/22/2016, I won't be charged interest?



#3 justadude  

justadude

Posted 30 January 2016 - 07:48 PM

I am totally inept when it comes to credit cards, and am confused how payments work?

Say I get my statement in the mail or a digital statement. Do I have up until the payment due date to make a payment without getting charged interest, or does interest start accumulating immediately? My current statement went from 12/29/2015 to 1/28/2016, and it states that the payment due date is 2/22/2016. So essentially what I'm asking is as long as I make the payment by 2/22/2016, I won't be charged interest?


So your bill reads something like this:

Payment due date 2/22/2016

Minimum payment: $25.00

Statement Balance: $250.00

Current Balance: $250.00 (or more if you've made charges since the closing date of your billing cycle)

If you pay either the statement balance or current balance on or before the due date of 2/22/2016 you will not be charged interest. Your due date is the last day of your "grace period" which you are allowed before interest is charge on your balance. However, if you pay just the minimum payment you will be charged interest. Your next bill will show a minimum payment of 1% of your balance + interest, or whichever minimum your CC company requires.

Be aware: not all CC companies accept payments initiated on the weekend to post that day and some post the next business day which could make your payment late and you get hit with a fee. I always err on the safe side and pay on a Friday. Also make sure if you mail a payment you do it a week in advance. Lastly, be aware you may be charged a convenience fee to pay via telephone, but if your payment is due and you can't get to a PC you're better off paying a $6 convenience fee than a $35 late fee plus a potential mark on your credit report (but it's generally not reported unless it happens very very often and you're past due).

Hope I answered your question.

#4 P9087  

Posted 06 December 2017 - 08:26 PM

You're a genius man. Wish I would have learned all this years ago. But ya can't cry over spilt milk. Thanks for all the information and advice.

#5 EddieSbreen  

EddieSbreen

Posted 09 June 2019 - 04:04 AM

I have a plain old ATM card, after getting hacked 3 times. Is that safe at my banks own ATM since it is not being used as debit or credit?