How to choose a credit card?

[moerl]

Seems to me it's about time I get a credit card, if only to start "building" my credit report. How do I go about choosing a credit card?

I'm a student still and will be for another 1.5 years or so.

[Armando]

Some basic criterias :

- Low interest rate
- No annual fee
- Fraud Liability Guarantee
- And maybe pick a well known one (easier when/if you travel): VISA, Mastercard, American  Express...
- A second one can be handy if you loose the other. Just don't keep them in the same place.


You could also check the web... There might be some reviews.

 

[moerl]

I definitely want to go with Visa. That much I know. What I don't know is how to know where to get it.. it seems these days you can find a credit card offer in a bubblegum wrapper. This stuff is everywhere, making the choice a difficult one.

[Armando]

You could just go to your bank and see what they offer.

[CWuestefeld]

Do you have the discipline to fully pay the balance every month? Avoiding the trap of credit card interest is perhaps the most important thing you can do to manage your finances.

Assuming that you can do this, the interest rate of the card is really irrelevant. Shop around for cards that will give you cash back. Some give a flat, say, 1% of all purchases back to you; some give a higher percentage but only over a certain ceiling, others a percentage of only certain categories of purchases (e.g., gas). If you can discipline yourself, this is a great way to earn a 1% discount on every dollar you spend.

I would avoid incentive plans that give out frequent flier miles, at least if you have a choice like I've described above. "Miles" are the highest-inflation currency in the world (other than Zimbabwe): since the airlines keep "printing" more, they have to simultaneously raise the bar of how much a given service costs in miles; if you don't spend your miles immediately, they quickly become worthless.

But again, the most important thing is that you not fall victim to credit card debt. Here's a personal experience. When my wife and I bought our house, our lawyer handled the closing and disbursal of all the money. We were buying from a couple that was getting divorced, so the lawyer had to handle dividing the funds according to their divorce agreement. Our lawyer first paid off their mortgage lender, and then paid off their credit cards. Once their credit card debt was paid, they each walked away from selling their house with about $1000 in their hands  . Imagine that, selling a house and only walking away with $2000 because of your credit cards.

[Armando]

Another rule of thumb most people use to not get in "trouble" : use your your credit card to spend money you already have. Unless you really know what you're doing (you're investing at a very high interest rate, a check is coming, etc.), of course.

[Laughing Man]

I've talked to my dad about this myself since I've been wondering about it (I figured I'd get one with no annual rate and leave it at home with my parents). My dad told me if your going look for one with rewards (or kickbacks) then make sure they don't give points like my debit card does. Because points can't be spent anywhere (only on what the card dealer deals with). For example my card only lets me redeem my points for items they've listed (such as starbucks).

Try to get one that actually returns cash to you. Because with points, they're worthless till you get enough to redeem them (and if your mindset is you want to redeem them, then your spending more money).

[Lashiec]

There are cards that doesn't cost you a cent until you're 25, at least mine is one of those. So better ask for options at the bank.

[Josh]

If you are a student and find getting approved for a credit card to be hard, I suggest trying Citibank. They offer several cards for students which make it easy for students to build their credit. They are not VISA, but they do help and offer some attractive extras.

[tinyvillager]

 
 What i've experienced too,was if your a day late, your interest rate will jump like a kangaroo.
What i would really suggest,when you say you want a credit card,just get one credit card
cause they are so deliciously evil.There is nothing easier than spending money you don't really have.
When filling out an application my advice would be to ask for a conservative limit like $1500.I don't
know your self-discipline but if you have 3000-5000 dollar limit it seems like it's oh so easy to justify
maxing it out.

Be careful.They're evil i tell ya! 

[katykaty]

Get the one that looks best 

When you're in a shop buying lots of funky stuff the last thing you want is public humiliation when you whip out a CapitalOne or other such monstrosity 

[Deozaan]

Let me share a personal story:

Once upon a time I was 18 years old and didn't have any credit history. I hated not being able to buy stuff or always requiring my parents to co-sign for me on stuff. I tried to get a simple card, like from a gas station but no one would give me a credit card because I had no credit history.

Finally I got an offer in the mail that gave me a card with a limit of $500 on it (with my parents as co-signers). Problem solved, I thought.

I was absolutely responsible with the card, always paying it off every month and never even approaching the limit. Then after about a year and a half I started wanting to make some bigger purchases, like a nice Tempurpedic bed for about $1,500. There was a nice deal on it where I didn't have to pay interest on it for several months and with my income I could easily pay it off in time. But for some reason I couldn't get approved for the loan. I still had to have my parents co-sign for me. :-( Thankfully (for them and me) I was responsible with my money so they were willing to do that.

Anyway, eventually I wanted to be free from the card my parents co-signed and so I got a new card with a lower limit ($300) and NO annual fee. I had that one for several years and every so often they raised my limit. Well, about two and a half years ago I got to a point where there was one month in which I could not pay off the entire balance. I had let my self-control on my spending slip a little. Long story somewhat shortened, I never have gotten that balance back down to zero in all these past two and a half years. In fact, my limit is up to somewhere around $12,500. I managed to get myself in about $8,000 debt in just two years, and those interest payments are a killer!

Over the past few months I've canceled the card, gotten new ones with balance transfer deals, and am working my debt back down to nothingness. My plan from here on out is to never ever use a credit card again. I'll stick with debit. Spend money the way it was meant to be spent: Pay with what you have, not what you might have eventually.

I personally think the best advice anyone can give you is to not get a credit card. It's best to just save up your money and have interest work for you instead of against you. There are only a couple things really worth going into debt for in my opinion, one is a (modest) house, the other is an education. And by education I mean paying for the classes and books and supplies. Not taking out a student loan to pay for your college lifestyle (car, clothes, technology, etc). Everything else should be paid with money you already have.

[Armando]

The thing is, it's pretty hard to do certain things without a credit card... Like renting a car in advance (for a trip or whatever), buying stuff over internet, etc.

So it's best to learn how to discipline yourself and use your card as if it was a debit card (ie : never spend what you don't have). Of course, if you absolutely can't do that, it's another story... 

[Laughing Man]

I think you still get a good credit score if you have a card (but not use it). Not sure though. I still don't  have a credit card (I turned 20 on the 3rd.) and I just have a debit card. And I watch my balance carefully and I make sure to always keep my money around 400 dollars. Right now I'm below but that's because I haven't deposited my money into it yet (birthday money lol).

[ljbirns]

Your a student ? Take some advice from an old man.  Get a credit card. MasterCard, Visa it doesn't matter.  Make sure there is NO fee per year etc.  USE it.  BUT  pay it off in FULL every month.

That is how you build a credit rating.

Lew

[Laughing Man]

I may do that sometime, since I just do the same thing with my debit card right now.