Credit line

[J23]

I asked about banks last week today I wanted to ask about Credit Cards

The question is simple. Ive never had a credit card before and want to know how much credit can I get if I apply for one tomorrow ?

Im 20 y/o no debt and keep approx $20K in checking accounts

I spend roughly $3K per month for my part time business and need a card that I can get benefits from, IE cash back or travel rewards. Up until now I have always used cash.

Thanks

[snafu]

Get a free credit report and ask your FICO score. AMEX is not accepted as widely as VISA. Check on-line to see who is giving the best benefits that are useful to you. If you travel a lot that could meet your needs. If you think you can't pay your balance by the due date, seek 0% interest, if you pay-off balances by due date go for the highest cash back card you can find. Rate CCs by interest rates charged. Do they claw back points after a specific timeframe? What do credit grantors need from you? Do they expect you to use a co signer or start witha prepaid card?

[naomibatac]

Start with a prepaid credit card in order to build your credit. Instead of rewards and cash backs, concentrate first on building your credit. After few months, you can apply for a regular card with cash backs. However, most cash backs are for $1, you can rarely find $2 on all purchases.

[disneysteve]

Originally Posted by snafu

If you think you can't pay your balance by the due date, seek 0% interest

I respectfully but firmly disagree with this statement.

If you think you can't pay your balance by the due date, DO NOT GET A CREDIT CARD!
You should ONLY use a credit card if you will pay the balance in full each and every month.

I'm not sure there is any good way for you to know how much credit you will be approved for. It is based on your credit history and score as well as your income. Since you are young, you probably have a fairly short and limited credit history which will count against you. You may only be given a $500 or $1,000 line to start.

One thing to keep in mind is that you should never charge more than 30% of your credit line so if you are given a card with a $1,000 limit, keep your monthly charges below $300. Going higher than that can negatively affect your credit score.

[dczech09]

I completely agree with DS. Telling someone that they should get a 0% card if they may not be able pay the balance in full every month is extremely irresponsible advice.

If you cannot pay the balance in full every month, DO NOT GET A CREDIT CARD!!! Even if it is at 0%, the no interest period is likely temporary and will end with the start of a new interest rate (likely pretty high). So when someone gets a 0% interest card to take care of an overspending issue, guess what will turn into debt with an interest rate?

If you ask me, 0% cards are offered for a very good reason: they produce revenues for the banks! Duh! A 0% card has the potential of producing short term moral hazard as people only consider the fact that they are not paying interest today.

[disneysteve]

Originally Posted by dczech09

If you ask me, 0% cards are offered for a very good reason: they produce revenues for the banks! Duh! A 0% card has the potential of producing short term moral hazard as people only consider the fact that they are not paying interest today.

I agree, but to be fair, there are folks (like myself and others here) who are quite capable of beating the CC companies at their own game and exploiting those deals to our maximum advantage. In that case, I think it is okay to get a 0% card and carry the largest balance you can while earning money on that float, but that isn't something I'd suggest to the average person.

[dczech09]

No I understand. The point is that you have the means and resources to pay off the debt though whereas putting money on a 0% card without a plan to pay it off is plain stupid. As Alexander Hamilton said, the accumulation of debt should be accompanied with a means of extinguishing the debt.

[disneysteve]

Originally Posted by dczech09

No I understand. The point is that you have the means and resources to pay off the debt though whereas putting money on a 0% card without a plan to pay it off is plain stupid. As Alexander Hamilton said, the accumulation of debt should be accompanied with a means of extinguishing the debt.

People used to joke that years ago, in order to get a bank loan, you first had to prove that you didn't need it.

Today, of course, just the opposite is true. They'll lend money to anyone with a pulse, or at least they would before the whole financial mess occurred, though I'm not sure it is all that different today. Giving credit cards to college students with no jobs, no incomes and no money is a perfect example.

[SeanH]

Originally Posted by J23

I asked about banks last week today I wanted to ask about Credit Cards

The question is simple. Ive never had a credit card before and want to know how much credit can I get if I apply for one tomorrow ?

Im 20 y/o no debt and keep approx $20K in checking accounts

I spend roughly $3K per month for my part time business and need a card that I can get benefits from, IE cash back or travel rewards. Up until now I have always used cash.

Thanks

The only thing I would add is to be very careful with business credit cards should you pursue that option or be offered it through a credit card company. I'm under the impression that some of the recent consumer protections that apply to credit cards are not applied to business cards. I also wouldn't want to assume business related debt that could become personal debt.

[photo]

If I'm not mistaken, cc companies don't ask for your checking account balance but will ask for your annual income, mortgage (if any), and will obviously do a credit check on you. Even if you have lots of cash, it doesn't mean as much as your credit history.

[disneysteve]

Originally Posted by photo

Even if you have lots of cash, it doesn't mean as much as your credit history.

That's true, and is one reason why many people, like Dave Ramsey for example, think the FICO is such a joke. It is in no way a reflection of how successful you are or how well you are doing financially. It is possible to have a ton of money in the bank and a low credit score. It is also possible to have a great credit score but essentially be broke. Who would you rather lend money to?

[JoshuaHeckathorn]

Unfortunately, there's no way to know what credit limit you'll be offered until you apply for a card. But since you've never had a credit card before, you can probably count on it being $1,000 or less. That's obviously not going to help cover your monthly business expenses, but after 6 months or so of responsible use you should be able to get the credit limit increased closer to what you need.

What are your current FICO scores? You need to know where you stand first, and then you can start to compare credit card options online. If you choose to go with a biz card, remember that the new rules which were part of the CARD Act only apply to consumer cards.