First credit car 2 quick question

[red92s]

I'm just wondering what chargable expenses you have as a college student that total $450 a month. It sounds like you are determined to charge that 20% even if you need to or not, because you think it will boost your scores.

Running up 20% of the limit and paying it off every month won't help you build credit any faster than just using it for food and groceries. If you are never carrying a balance, the amount on your credit report is likely not going to be zero, but not going to be whatever your max balance is either as the reporting schedules are likely not lined up. So, I think you are much better off just using the card for one category of recurring purchases (gas, groceries) than TRYING to run up a certain balance. Again: if you are not carrying a balance, the amount you charge in a given month won't greatly affect your score. Occasional use and paying a full balance will boost your scores over time, regardless of how much you are charging. So, don't go out and try to buy yourself a higher credit score.

As for cash back, be careful. It can be a great reward. But, studies have shown people spend up to 10% more with a cash back credit report than they would paying cash, because they are so motivated by getting the "cash back". At that point, you are just overspending, not earning anything!

[boosami]

Occasional use and paying a full balance will boost your scores over time, regardless of how much you are charging. So, don't go out and try to buy yourself a higher credit score.

Absolutely correct. As you can note from the FICO chart, "how much you charge" is not a category used to determine your credit score. You should charge something each month so that the payment is reported. If you don't make a payment because there is no balance, some creditors do not report the data at all and it will not help you as much.

[boosami]

I'm just wondering what chargable expenses you have as a college student that total $450 a month.

I worked as a consultant in college and made ~$40k a year, while being enrolled as a full-time student with additional summer classes each year. With $450 as only about 10% of my gross income, I easily spent more than that a month on credit cards paid in full. I also got a monthly supplement from my parents equal to what they would have paid for me to be in the dorms. I know the stereotype is the "poor college student" but that's not what all of us were. I celebrated my graduation by buying a bottle of Cristal. Not exactly a smart purchase, but one that I afforded myself--in cash.

[red92s]

With $450 as only about 10% of my gross income, I easily spent more than that a month on credit cards paid in full. I also got a monthly supplement from my parents equal to what they would have paid for me to be in the dorms. I know the stereotype is the "poor college student" but that's not what all of us were.

I don't doubt that at all, as myself and most of my friends had internships that paid more than most new college grads earn. I was more questioning the "$450 in necessary expenses" for a college kid that could be put on a credit card. You can't put rent on a credit card. You can't put a car payment on a credit card.

I was questioning what "expenses" is a college kid running up to arrive at $450 a month. Could be pretty easy if you lived off campus, paid a cable bill, had an iPhone, drove a lot, buy a lot of groceries, pay for a gym membership, pay to park etc. But it could also be pretty hard if you were on a meal plan, living in a dorm, walking most places, have on campus healthcare, etc. My concern is that he is trying to find stuff to spend $450 on every month just to use the card, when his expenses could be significantly less.

[boosami]

You can't put rent on a credit card.

Sure you can, if the rental agency allows it. My apartment in college accepted credit cards for paying the rent. You could even do it online. That was years ago and I'm sure even more accept them now.

My concern is that he is trying to find stuff to spend $450 on every month just to use the card, when his expenses could be significantly less.

This is a perfectly valid concern. Spending just to spend or for a "reward" that's not worth it doesn't make any sense at all. I think he's made it clear though that this is not about spending and rewards, but rather about how best to build credit. I think we've disspelled some of the incorrect ideas he had about that.

[disneysteve]

I was questioning what "expenses" is a college kid running up to arrive at $450 a month.

You forgot one very significant expense that almost every college student has: tuition. Most schools accept credit card payments. Then there are textbooks and other school supplies. $5,400/year is nothing when you include the actual costs of being a college student.

[red92s]

You forgot one very significant expense that almost every college student has: tuition. Most schools accept credit card payments. Then there are textbooks and other school supplies. $5,400/year is nothing when you include the actual costs of being a college student.

He said after 2 years of school he is debt free, so I assumed he wouldn't be putting tuition or any of those other "expenses of being a college student" on a credit card. I know my school recently stopped taking credit cards as tuition payment, as the fees they were paying on all those $20,000 transactions were really starting to pile up.

[boosami]

He said after 2 years of school he is debt free, so I assumed he wouldn't be putting tuition or any of those other "expenses of being a college student" on a credit card.

Also, tuition usually requires full payment for the semester upfront, so I'm sure he's not charging that because it would be way more than $450. Books and other supplies though are definite candidates.

[WeirdLinguist]

thank you everyone I've got a lot of information to digest now

@red92s: I commute and don't live on campus so yes I have many of the expenses "a typical college student" might not have. While I'm not planning on charging tuition; books, school supplies, gas, groceries average about 350 a month and im pretty sure thats 20% or something around there

[disneysteve]

He said after 2 years of school he is debt free, so I assumed he wouldn't be putting tuition or any of those other "expenses of being a college student" on a credit card.

You are making the same mistake as arthurb999. You are equating using a credit card with being in debt. They are two different things.

OP is debt-free. That doesn't mean he hasn't used a credit card. It could mean that he used a credit card and paid the bill in full each month.

[red92s]

You are making the same mistake as arthurb999. You are equating using a credit card with being in debt. They are two different things.

OP is debt-free. That doesn't mean he hasn't used a credit card. It could mean that he used a credit card and paid the bill in full each month.

The title of the thread is "first credit card . . .", so yeah, I was assuming he wasn't using a credit card in his own name to pay his tuition. I think that is a fairly logical conclusion.

[arthurb999]

You are making the same mistake as arthurb999. You are equating using a credit card with being in debt. They are two different things.

OP is debt-free. That doesn't mean he hasn't used a credit card. It could mean that he used a credit card and paid the bill in full each month.

He's asking about a car loan too so he won't be debt free for long...

[disneysteve]

He's asking about a car loan too so he won't be debt free for long...

True, though I do think there is a fundamental difference between a car loan and an outstanding credit card balance, a secured loan and unsecured debt, borrowing to buy a need such as a house or car and borrowing to go shopping or out to eat or on vacation. Ideally, we should all be buying cars with cash but realistically, that isn't feasible for lots of people, especially younger folks just starting out in life like OP.

[boosami]

True, though I do think there is a fundamental difference between a car loan and an outstanding credit card balance, a secured loan and unsecured debt, borrowing to buy a need such as a house or car and borrowing to go shopping or out to eat or on vacation. Ideally, we should all be buying cars with cash but realistically, that isn't feasible for lots of people, especially younger folks just starting out in life like OP.

There is a huge difference between secured and unsecured debt. Secured debt is not a bad thing, and it is much, much better than unsecured debt. There's nothing wrong with having an auto loan or a mortgage. I'm tired of people saying "debt is evil," "credit cards are evil," etc. Inherently, there is nothing wrong with them. They just become bad when people use them irresponsibly.

When the time comes, there is absolutely nothing wrong with shopping around and getting an auto loan for a practical and affordable car.

[disneysteve]

There's nothing wrong with having an auto loan or a mortgage. I'm tired of people saying "debt is evil," "credit cards are evil," etc. Inherently, there is nothing wrong with them. They just become bad when people use them irresponsibly.

Exactly. The problem comes when someone takes out an interest-only mortgage to buy a home costing 5 or 6 times income with nothing down or someone earning 30K goes out and borrows to buy a $60,000 SUV.