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  1. #1
    Join Date
    May. 28, 2006
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    Florida
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    3,448

    Default Can we talk about credit cards?

    A disclaimer: I understand that ideally, you should budget enough savings to have an emergency fund, and not have to use a credit card. We are working towards this, but we are newlyweds, we're both in two of our friends weddings, and most of our savings is going towards that. We just don't have a lot of cushion right now, and have had several times where something expensive and unexpected has come up, and not only drained the savings, but cut into our day-to-day budget.


    DH and I have played with the idea of opening up an Emergencies Only card. I'm a little scared of the idea...growing up my parents were about as anti-credit card as you can get. We've discussed ONLY using it for serious emergencies, and we've also discussed using it for only gas, groceries, etc. But only for the credit-building aspect; we would pay it off immediately after using.

    Here are the pros and cons that we've discussed so far.

    Pros:

    -It helps build credit. We are both young, don't have a lot on our credit yet. Tried to finance a car, and were turned down because we had high/good scores, but it was all "soft" credit. Nothing substantial enough, just student loans and whatnot.

    -It's there if we get stuck/stranded. With the combination of our jobs, and our budget system, we work with mostly cash, so if we get stranded somewhere and NEED something (need, not want...auto repair, etc), and don't have enough cash on us, we will have access to some type of money.

    -It's that emergency cushion. If we have an unexpected medical expense, or a flat tire, or a wreck, or a vet bill, or ________ etc, and we don't have enough money in our savings, it's there. We can use the card to get the immediate issue resolved, then make efforts to pay it off as quickly as possible. DH gets paid daily, so while we have a constant cash flow, we don't get large chunks of money at once, we get smaller amounts more regularly. So paying off the card bill in payments is much easier on us than coming up with a couple thousand dollars on the spot.

    Cons:

    -It's very easy to get in over your head, have a huge bill, debt is never a good thing.

    -It can potentially hurt your credit, high interest rates, etc.

    -The definition of an "emergency" can falter if you reallyreallyreally want something.


    What have we missed, what else should we think about, what are your experiences and suggestions? Also, which card company would you guys recommend? We have a friend who is a financial advisor, we will definitely talk to him as well, just wanted to know what the general advice was going to be Thanks!



  2. #2
    Join Date
    Aug. 30, 2011
    Location
    Massachusetts
    Posts
    1,341

    Default

    I have one credit card. I usually only charge what I can pay off. I use it primarily for horse medications- my old guys pracend, and pop rocks from India. Sometimes I put other stuff on it, like when I bought a saddle. Then I carried a balance untill I paid it off over a few months. It also is attached to my checking account for overdraft protection.

    I grew up the same way as you I suspect- don't buy what you can't pay for- and I still make large purchases in cash.



  3. #3
    Join Date
    Mar. 4, 2007
    Location
    Western Washington
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    3,016

    Default

    I think it's a smart idea as long as you're disciplined. I put everything on one of three credit cards and haven't carried any sort of balance for probably 20 years. I use one for all of the day-to-day things and the second for things that might be tax deductible. The third has a very low credit limit (about $500) that I can use anytime things seems a little sketchy. I opened that one just this year after my "main" card got hijacked and had to be closed.

    The hard part might be during the transition. If you're used to buying $40 in gas, for example, and now put it on the card, don't be fooled into thinking you have $40 in your checking account and spend it on something else.

    The other thing I've noticed in the past few weeks around here is the price of gas. Now they're charging one price for cash/station credit card, and a second price (usually about 10 cents more per gallon) for other credit cards. So perhaps you might look at two cards: one gas card and a second one for other purchases or emergencies.

    Visit bankrate.com to help you decide which card to get.

    Good luck!


    2 members found this post helpful.

  4. #4
    Join Date
    Oct. 21, 1999
    Location
    Rochester, NY
    Posts
    12,883

    Default

    I think stryder has given you very good advice. I do the same thing. Everything goes on one of my two credit cards and both get paid off in full every month. I, also, have been doing that for over 20 years. It's a lot easier than carrying cash around, or writing checks all of the time. If you both can be disciplined and not start using the card just because it's there, it is an excellent way to build your credit and give you that little added bit of security, in case something unexpected happens. There have been a couple of times when having that credit available has been invaluable. Once was when my horse coliced and ended up at Cornell, needing surgery. They, of course, wanted approximately half up front and it was a substantial amount. Luckily, it didn't exceed my line of credit. I don't know what I would have done if I hadn't been able to do that.
    Originally Posted by Alagirl
    We just love to shame poor people...when in reality, we are all just peasants.



  5. #5
    Join Date
    Dec. 20, 2003
    Location
    N. Augusta, SC (but forever a BUCKEYE!)
    Posts
    1,768

    Default

    I grew up with parents that beat it into my head that if you put ANYTHING on a credit card, you pay it off completely at the end of the month.

    I now put every single thing I would normally pay for with cash on my credit card. I find that when I do that, I actually can keep my budget more intact than when I paid cash or wrote checks. I check my balance twice weekly, and there's a 'maximum number' that I allow myself to spend based on my income. Once I get close, I do without.

    My main expenses on credit card are groceries, gas, and a few miscellaneous expenses (a rare Starbucks run, dog food, etc.). I also use a credit card that pays me cash back. Since I pay no annual fee and I don't have a balance, I actually come out ahead because of the cash back I receive. I generally just apply it to my statement as a credit once every 6 months.

    I do have a Care Credit card that I applied for because of my dogs. I had an emergency vet visit a few weeks ago that 'only' ran me $350, but if I had a true vet emergency, I'd be hard pressed to just pay it in cash because while we have a savings account, it is truly OFF LIMITS if it's close to the minimum balance amount my husband and I chose to always have in savings.

    Anyhow, with the Care Credit card, if you pay it off in 6 months, there's no interest. If, however, you don't do that, you're slammed with interest fees. Care Credit, though, can be used for vet, doctor, hospital, etc.
    Random horse pics http://www.flickr.com/photos/glfprncs/
    Talk to me about fitness or nutrition (I'm an A.C.E. Certified Personal Trainer)!
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    1 members found this post helpful.

  6. #6
    Join Date
    Jun. 24, 2005
    Location
    Alabama
    Posts
    9,780

    Default

    I use my credit and debit card the way Strider does.

    I use my debit at the grocery, and gas station because it's a pain to have to go inside to pay, and paying cash is a hazard because of the thieves out there now. One caution on debit cards is that two big credit unions I've run into charge customers to use the card as a debit, but if they do a credit instead it's free.

    I also use my credit or debit for online payments, such as bills and get virtually instant credit for my payments.

    An emergency card for things like doctor or vet bills can be a good idea, because the special credit arrangements you do at the office can be very high interest rates. It's better to get a low or zero interest card for emergencies, because you might have to pay it off over a few months.
    You can't fix stupid-Ron White



  7. #7
    Join Date
    Feb. 28, 2006
    Location
    The rocky part of KY
    Posts
    9,598

    Default

    There are quite a few things that you almost have to have a credit card for, mainly having to do with travel. Internet purchase of airline tickets and hotel and rental car, and expenses during the trip. Now you might say you don't plan a vacation anytime soon but the last time I flew anywhere it was on 24 hours notice to see a sick family member, and I had to get myself to her home and the hospital too so a rental car was necessary.

    I got a college credit card through my checking account when I was a junior - they had a program and I qualified, I used it sparingly, for my books which I already had budgeted and paid it off faithfully. Then the car broke down out of town and the only way I could pay for it was through the credit card. I had no transportation to get to my bank to get the cash (didn't have that much anyway) so I put it all on the credit card and every paycheck I went to the bank, deposited my paycheck, and paid down on my cc balance. I totally ignored that whole minimum payment thing and looked at the cc as a cash debt. So I never used the cc to pad my lifestyle.
    You'll always have to maintain an attitude about credit though, it's altogether too easy to fall into the "this is on sale!" trap and discover you haven't got the budget to pay it off and end up paying interest that negates your "sale" price.
    Courageous Weenie Eventer Wannabe
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    1 members found this post helpful.

  8. #8
    Join Date
    Nov. 8, 2001
    Location
    Cambridge, IA
    Posts
    1,678

    Default

    I see that credit cards are like fire. They can be very damaging if used without thought (forest fire), and they can be extremely useful when used as your servant (cooking, heating, campfire fun).

    I think you are being drastically conservative to not have a credit card for emergency purposes. You could be really stuck someday soon. And, like you say, you need to build your credit. My guess is that you'll be thinking of buying a house sometime in the next decade. A car?

    I put nearly everything on my credit card and I pay it off every month. I seldomly have more than $20 cash in my wallet. I have a Marriott rewards card so I earn free hotel stays for spending money I would spend anyway. I have another card that gives cash back, which I just apply back to the balance. Sweet. I also have a Target card because i get 5% back on groceries that I would buy there anyway. I have a JCP card because it also gives points back on basics and jeans that I (say it with me) would buy anyway. The trick is to not buy anything with a credit card you wouldn't pay for with cash. The better trick is to get rewards for the spending you would do anyway.

    You sound like a smart, thoughtful person. You don't have to focus on all the drama about credit cards. If you can master your spending, credit cards are a fantastic tool.


    2 members found this post helpful.

  9. #9
    Join Date
    May. 28, 2006
    Location
    Florida
    Posts
    3,448

    Default

    Thanks for all the responses! I feel much better about this whole thing. I'm really leaning towards wanting one, just wanted to make sure we went about it in a smart way.



  10. #10
    Join Date
    Mar. 4, 2007
    Location
    Western Washington
    Posts
    3,016

    Default

    Also, check into a credit union. Fees are lower because they are member-owned. And they often have arrangements so you can use another institution's ATM, for example, if you are out of area.

    The other thing about credit cards: once you get one, learn when the closing date is. For example, if it closes on March 10 and you have a choice between making a purchase on March 9 or March 11, wait until March 11. Things purchased on or before March 10 will be due April 8. Things purchased on March 11 will be due May 8. You can use that to even out your cash flow if you need to. Work the float. :-)


    3 members found this post helpful.

  11. #11

    Default

    I work at a bank and I can tell you that credit unions almost always have lower rates. I currently have one through a CU that has a max of $500 but the interest rate is very low. I have had it since I was 18 and have only used it in emergencies. I advise using it only if a expense comes up that will interfere with your monthly bills. Or like the other posters said, if you use it just to pay it off every month. It's better not to use more than half of what your limit is because that can be seen as dependent (if you leave a balance every month). Anyway, if you think you won't spend unwisely, they are great!



  12. #12
    Join Date
    May. 28, 2006
    Location
    Florida
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    3,448

    Default

    I am a member of a credit union, I can check with them about rates. I also looked up bankrate.com and a capital one cash rewards came up that looked so-so. ETA: I say so-so because all the ones that looked awesome say they require an excellent credit score. I'm assuming my score doesn't count as "excellent".
    Would getting a normal card like that be better, or what about a Wal Mart card, where we can get groceries, gas, most day to day things. Stupid question: Wal mart cards (or any store card) can ONLY be used there, right? I couldn't use my wal mart card at a hospital or mechanic. Right?

    How hard is it to get approved usually? After getting turned down about the car, I'm pretty insecure about my credit now, and I'm really nervous that I won't be able to get a decent card.



  13. #13
    Join Date
    Dec. 1, 2007
    Location
    Gettysburg, PA
    Posts
    2,652

    Default

    I suggest going in and talking with your bank about what they offer. My bank offers a VISA free of charge and gives 1.75% cashback. With on-line banking you can check the cc balance, so you can pay on it daily, weekly, or on the normal monthly schedule. I use it for almost everything and it is always paid in full. So basically everything I buy has a 1.75% discount and it adds up when you look at daily items + anything else. It gives you the emergency backup, build credit, and you would need one at some point if you ever need to rent a car, make a hotel reservation etc.
    Epona Farm
    Irish Draughts and Irish Sport horses

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  14. #14
    Join Date
    Apr. 12, 2002
    Location
    Texas
    Posts
    4,046

    Default

    There are 2 kinds of Wal-mart cards as I understand it. One is a Discover Wal-mart that can be used anywhere and one is the store only card. I do have the store only one, since I already had a Discover, and I wanted to get the 5 cents off per gallon of gas.
    Rhode Islands are red;
    North Hollands are blue.
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    Stomped on your roo. Originally Posted by pAin't_Misbehavin' :



  15. #15
    Join Date
    Feb. 19, 2009
    Posts
    5,233

    Default

    The other pro about a credit card is a lot of them can make your money/spending work for you. My DH and I use our Amex for all purchases because of the cash back offers. Based on our spending, we generally get around $500 back at the end of the year. That $500 is essentially free money (assuming you're paying off your cc every statement) that you are getting for purchases you would make anyway.

    And as for store specific cards (like Wal Mart or Target) I believe they are credit cards that you can use anywhere. But a lot of the perks (like Targets 5% off discount) will sometimes only apply at the specific store.

    My Amex is linked to my Costco account so I don't pay a yearly charge (I just pay my Costco membership). We shop there often enough and fill up with gas there that it makes it worth it.

    And yes, if you aren't careful credit can be dangerous. However, you already sound pretty conservative financially so I doubt you will go on a shopping spree and rack up a whole bunch of credit debt!



  16. #16
    Join Date
    Jan. 26, 2010
    Posts
    6,773

    Default

    I am the most frugal person ever. Credit cards are a good way to build up redit if you need it. I have a few cards and use them and pay off everything every month. I use my Discover as much as I can and get at least 1% back. I have used that money to buy news sets of tires, twice.

    Research into the card that pays you back in the best way that works for you. I don't consider interest rates because I NEVER hold a balance, and if I needed to, which I did once, I get 0 % for 6 months and transfer to another card until paid off.


    1 members found this post helpful.

  17. #17
    Join Date
    Mar. 4, 2007
    Location
    Western Washington
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    Default

    Not every merchant who takes credit cards will accept Discover cards because the merchant fee is higher.



  18. #18
    Join Date
    Mar. 4, 2007
    Location
    Western Washington
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    Default

    Quote Originally Posted by talkofthetown View Post
    I'm assuming my score doesn't count as "excellent".

    How hard is it to get approved usually? After getting turned down about the car, I'm pretty insecure about my credit now, and I'm really nervous that I won't be able to get a decent card.
    It might be that your score isn't excellent because you don't have much credit usage in your history. But if you're a member of a credit union, you could talk with them about a low-limit card to get you started. Credit unions want to offer their members as many products as possible. They certainly don't want you to take your business down the road. Once you bank at a credit union, then get a credit card, then down the road you need a new car loan .... you become a lifetime customer. The lifetime value of a single good customer is huge for a financial institution.

    Personally, I would go in and talk to someone. Tell him/her you're getting started and want to apply for a card but are a little nervous because you were turned down for a car loan in the past. They will see that on your credit history anyway, so no point in ignoring it.

    Set a reasonable limit in the beginning. Then as you get used to using it, you can always ask to raise the limit.



  19. #19
    Join Date
    Feb. 7, 2005
    Location
    Lancaster, PA
    Posts
    5,192

    Default

    I have one credit card. I use it a little bit almost every month and pay every bill in full so the interest never kicks in. If you work it right, you can borrow money for about 2 months interest free. (Make a big purchase right at beginning of billing cycle - get the bill the next month, and then that payment isn't due for almost another whole month.) I do have money in a savings account that I would use in emergencies, however it may not always be immediately accessible. So I would use the card and then pay the bill at the end of the month.



  20. #20
    Join Date
    Apr. 2, 2003
    Posts
    5,047

    Default

    I am the credit card queen-- because I am reimbursed for business travel and so I have cards for every major chain, etc.

    That said, I have one card with a fairly high limit that is my "emergencies" card. This is "need $10,000 to pay for colic surgery" emergency not "$350 vet bill emergency". I find my money is better off invested right now, than sitting around being liquid savings.

    That card is a credit union card with no annual fee, very low interest rate (7%).

    However I'm going to be the dissenter and say that if you need to consider having an emergency credit card because you can't pay a car insurance deductible or buy a new tire without one, you need to say no to friend's weddings etc until you have an emergency fund saved up to cover true emergencies. I'm 25, I understand being young and not having a ton of money, trust me, but this is REALLY important. Some people recommend $1000, I personally do not feel comfortable without 1 full month's regular expenses sitting in cash in my bank account. Then you get to sit down and define what a true emergency is, and it's not stuff like "excise tax that comes on the same day every year" and "new tires for the car that we last got tires for 4 years ago" it's for truly unexpected things that need to be taken care of right away.


    2 members found this post helpful.

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