Two credit card related questions.. - Tilted Forum Project Discussion Community

Grondar · 10-18-2004, 02:48 PM

I recently signed up and received a Citi Rewards card with a $1000 limit.

I have two questions I was hoping you could help me out with.

The first relates to my use of the card. I didn't apply and get this card with the intention of going into debt. I intend to use the card for most (if not all) my purchases during the month, and as soon as I make a purchase, I physically put the money (cash) aside in a drawer/box/etc so that when the time comes to pay the bill, I just deposit the money, write a check, and start over at $0 next month. The reason I thought this might be better than using cash, was because it allows me to get an idea of how much I spend each month, as well as not having to carry lots of money with me. Lastly, the card kicks back 5% on all gas and groceries, and 1% on all other purchases, and while that isn't a lot, any amount of money back seems nice to me. My question is, can you see any problems or reasons I shouldn't use the card in this way? I also want to start to develop a credit rating (this is my first card, no debts or credit history as of now), and I figured as long as I stay on top of things and put the money aside, don't spend what I don't have, and pay on time, it should work out well. But I may be missing something.. Am I?

Secondly, I got a letter in the mail today from Citi about the ability to "Personalize" my card with a picture of myself, that will then get placed on the card, as a sort of photo ID, and an added security measure. My question is, are there any negatives/downsides to opting to have my photo placed on my credit card? Do vendors even check this, or isn't it really a security measure at all?

I realize that credit cards are an opportunity to spend more than I have, go into debt, and ultimately screw up the financial aspect of the rest of my life, but I really do have the self control to not spend what I don't have, and I do put the money aside as soon as I spend it, so I am not worried about that aspect. But I am wondering if I am overlooking something, anything, and if I am, I'd really appreciate it if those of you that can think of, or see, something wrong with my methods could post here with what it is.

I was brought up by parents that are very anti-credit, and I think this is good for me, because I only buy things I can afford. They don't understand why I use a card instead of just paying cash, and while I think they kind of have a point, I like the benefits that using a card offers, providing everything is kept under control.

Is there anyone else that uses a credit card, and puts the money aside right away? What are you experiences with doing so, and do you find them to work better than just paying cash?

Apologies if this turned into more than two questions, but that is the nature of my ramblings.

Thanks!

eribrav · 10-18-2004, 04:32 PM

What you are describing makes perfect sense. I charge just about everything over the course of a month, then pay it all at the end by check. You can rack up some substantial rewards by doing that.

To give you an example, I have 2 active credit cards. Within the past year I've received several hundred dollars bac from one of them (a Citi M/C, coincidentally).
The other just saved me $1000 on a new car. I have never paid a finance charge or membership charge on either of them.

kevin100 · 10-19-2004, 07:07 AM

I avoid credit cards these days. It's too easy to charge things and forget you have to pay the bill someday. Then you end up paying for your groceries for years. It's not worth it.

NoSoup · 10-19-2004, 07:52 AM

The way you are using them are how people should use them

Ultimately, having a good score will likely save you tens of thousands of dollars when you take out a mortgage, or any other big ticket items you may purchase.

A word of caution, though - don't spend over 50% of the limit if you can avoid it, it will damage your credit scored, even if you pay it in full each month.

Just thought I'd give you a heads up

shakran · 10-19-2004, 07:56 AM

that's exactly the way you should use credit cards (although keeping a log and deducting the amt. from your checking account when you buy on credit also works - just pay from the checking account at the end of the month and then you don't have to have tons of cash lying around the house.)

Where most people screw up is that they start out using it for that and then move into the "well I'll have the money next week so I'll buy on credit today" mentality. That works until you overestimate your paycheck.

clavus · 10-20-2004, 02:43 PM

Brilliant! That is exactly how you should use credit cards. This will save you big money in the long run.

aliali · 10-22-2004, 02:04 PM

Quote:

Originally Posted by NoSoup

The way you are using them are how people should use them

Ultimately, having a good score will likely save you tens of thousands of dollars when you take out a mortgage, or any other big ticket items you may purchase.

A word of caution, though - don't spend over 50% of the limit if you can avoid it, it will damage your credit scored, even if you pay it in full each month.

Just thought I'd give you a heads up

I have never heard of the 50% of the limit rule? Does it matter how high the limit is? Does it matter how often you go over the 50%? Is it better to put 35% on two cards rather than 70% on one? Does that make any sense?

fryan5 · 11-13-2004, 08:24 AM

I think you're on the right path

NoSoup · 11-14-2004, 01:06 AM

Quote:

Originally Posted by aliali

I have never heard of the 50% of the limit rule? Does it matter how high the limit is? Does it matter how often you go over the 50%? Is it better to put 35% on two cards rather than 70% on one? Does that make any sense?

Yep, basically it will damage your credit if you have ever gotten near the limit on a credit card, as it keeps track of the highest balance you have had on that card.

As odd as it may seem, it is far better to have 2 credit cards with 35% of the credit used than one credit card with a higher percentage of credit used...

amonkie · 11-14-2004, 01:14 AM

Quote:

Originally Posted by NoSoup

Yep, basically it will damage your credit if you have ever gotten near the limit on a credit card, as it keeps track of the highest balance you have had on that card.

As odd as it may seem, it is far better to have 2 credit cards with 35% of the credit used than one credit card with a higher percentage of credit used...

Without going into more details per company policy gag, NoSoup is very right. The best key with credit is MODERATION.

Jimellow · 11-14-2004, 02:38 AM

Is it true that if you don't carry a balance, you aren't building any credit rating?

For instance, if I charge $150 every month, and pay it off entirely every month, does that mean I won't build any credit rating as a result.

I was told that if I don't carry a balance (even if it's a small one), I won't build a credit rating, and was advised to "pay down" so that my balance is lower, but still not $0, so that I carry a little into the next month.

Is this sound advice, or no?

Thanks!

Bamrak · 11-14-2004, 10:43 AM

The only issue with this is this...

Credit card companies DO sometimes 'lose' your payment. Then, if you aren't able to get the late fees and penalties taken off, you've lost all your gain from having the rewards program.

I just don't see the gain from using a credit card as a checking account. It is one more payment you have to keep up with, with the potential to cause you headaches in the long run.

NoSoup · 11-14-2004, 07:34 PM

Quote:

Originally Posted by Jimellow

Is it true that if you don't carry a balance, you aren't building any credit rating?

For instance, if I charge $150 every month, and pay it off entirely every month, does that mean I won't build any credit rating as a result.

I was told that if I don't carry a balance (even if it's a small one), I won't build a credit rating, and was advised to "pay down" so that my balance is lower, but still not $0, so that I carry a little into the next month.

Is this sound advice, or no?

Thanks!

That is poor advice, my friend.

The credit reporting agencies will see whether or not you have made a payment that month, so as long as you use your card - even if it is only to purchase a pack of gum, and pay it off in full when you recieve your bill, you are building as much credit as carrying a balance - likely even better having an extraordinarily low balance vs. a higher one.

The only issue you may run into is if you make a purchase and then immediately pay it off. An example of this would be if you purchased something and then went home and transferred the payment online to pay off the balance.

If you just wait till you recieve your bill, it will almost definately report that you had a balance and that you made your payment - and you still avoid paying interest.

10-18-2004, 02:48 PM	#1 (permalink)
Grondar Junkie Location: Pa, USA	Two credit card related questions.. I recently signed up and received a Citi Rewards card with a $1000 limit. I have two questions I was hoping you could help me out with. The first relates to my use of the card. I didn't apply and get this card with the intention of going into debt. I intend to use the card for most (if not all) my purchases during the month, and as soon as I make a purchase, I physically put the money (cash) aside in a drawer/box/etc so that when the time comes to pay the bill, I just deposit the money, write a check, and start over at $0 next month. The reason I thought this might be better than using cash, was because it allows me to get an idea of how much I spend each month, as well as not having to carry lots of money with me. Lastly, the card kicks back 5% on all gas and groceries, and 1% on all other purchases, and while that isn't a lot, any amount of money back seems nice to me. My question is, can you see any problems or reasons I shouldn't use the card in this way? I also want to start to develop a credit rating (this is my first card, no debts or credit history as of now), and I figured as long as I stay on top of things and put the money aside, don't spend what I don't have, and pay on time, it should work out well. But I may be missing something.. Am I? Secondly, I got a letter in the mail today from Citi about the ability to "Personalize" my card with a picture of myself, that will then get placed on the card, as a sort of photo ID, and an added security measure. My question is, are there any negatives/downsides to opting to have my photo placed on my credit card? Do vendors even check this, or isn't it really a security measure at all? I realize that credit cards are an opportunity to spend more than I have, go into debt, and ultimately screw up the financial aspect of the rest of my life, but I really do have the self control to not spend what I don't have, and I do put the money aside as soon as I spend it, so I am not worried about that aspect. But I am wondering if I am overlooking something, anything, and if I am, I'd really appreciate it if those of you that can think of, or see, something wrong with my methods could post here with what it is. I was brought up by parents that are very anti-credit, and I think this is good for me, because I only buy things I can afford. They don't understand why I use a card instead of just paying cash, and while I think they kind of have a point, I like the benefits that using a card offers, providing everything is kept under control. Is there anyone else that uses a credit card, and puts the money aside right away? What are you experiences with doing so, and do you find them to work better than just paying cash? Apologies if this turned into more than two questions, but that is the nature of my ramblings. Thanks! __________________ "Yes, I rather like this God fellow. He's very theatrical, you know, a pestilence here, a plague there. Omnipotence. Gotta get me some of that." -Stewie

10-19-2004, 07:52 AM	#4 (permalink)
NoSoup Non-Rookie Location: Green Bay, WI	The way you are using them are how people should use them Ultimately, having a good score will likely save you tens of thousands of dollars when you take out a mortgage, or any other big ticket items you may purchase. A word of caution, though - don't spend over 50% of the limit if you can avoid it, it will damage your credit scored, even if you pay it in full each month. Just thought I'd give you a heads up __________________ I have an aura of reliability and good judgement. Just in case you were wondering...

10-20-2004, 02:43 PM	#6 (permalink)
clavus pow! Location: NorCal	Brilliant! That is exactly how you should use credit cards. This will save you big money in the long run. __________________ Ass, gas or grass. Nobody rides for free.

10-18-2004, 04:32 PM	#2 (permalink)
eribrav Junkie Location: upstate NY	What you are describing makes perfect sense. I charge just about everything over the course of a month, then pay it all at the end by check. You can rack up some substantial rewards by doing that. To give you an example, I have 2 active credit cards. Within the past year I've received several hundred dollars bac from one of them (a Citi M/C, coincidentally). The other just saved me $1000 on a new car. I have never paid a finance charge or membership charge on either of them.

10-19-2004, 07:07 AM	#3 (permalink)
kevin100 Upright	I avoid credit cards these days. It's too easy to charge things and forget you have to pay the bill someday. Then you end up paying for your groceries for years. It's not worth it.

10-19-2004, 07:56 AM	#5 (permalink)
shakran Tone.	that's exactly the way you should use credit cards (although keeping a log and deducting the amt. from your checking account when you buy on credit also works - just pay from the checking account at the end of the month and then you don't have to have tons of cash lying around the house.) Where most people screw up is that they start out using it for that and then move into the "well I'll have the money next week so I'll buy on credit today" mentality. That works until you overestimate your paycheck.

11-13-2004, 08:24 AM	#8 (permalink)
fryan5 Upright	I think you're on the right path

11-14-2004, 02:38 AM	#11 (permalink)
Jimellow Junkie	Is it true that if you don't carry a balance, you aren't building any credit rating? For instance, if I charge $150 every month, and pay it off entirely every month, does that mean I won't build any credit rating as a result. I was told that if I don't carry a balance (even if it's a small one), I won't build a credit rating, and was advised to "pay down" so that my balance is lower, but still not $0, so that I carry a little into the next month. Is this sound advice, or no? Thanks!

11-14-2004, 10:43 AM	#12 (permalink)
Bamrak Enter Title Here Location: Tennessee	The only issue with this is this... Credit card companies DO sometimes 'lose' your payment. Then, if you aren't able to get the late fees and penalties taken off, you've lost all your gain from having the rewards program. I just don't see the gain from using a credit card as a checking account. It is one more payment you have to keep up with, with the potential to cause you headaches in the long run.