Isn't it important to establish credit though? RE: credit cards.
Aveda4 said...
Isn't it important to establish credit though? Can you do this through the use of a bank debit card which also acts as a credit card?
Money Prof:
Yes, you should establish credit but don't think credit cards are worth the potential problems. Bear in mind that almost everyone starts off saying they will pay the bill in full every month. In the beginning they do pay it off, but then an excuse comes up: The car needed repairs, I was "burnt out" I really needed that vacation ( I hate that one!!!!) , it's not my fault I had a dental bill, ( BTW it is your fault as those items should have been saved for in advance) etc etc. so only the minimum is paid that month.
Think about this: do you really think the millions of people who paid over $50 billion in finance charges last year thought they would pay that at the time they took out the credit card???
Do you think the average American that owes $8,562 plus interest in credit card debt thought they would owe that at the time they first got the credit card??
If you can prove to yourself you can be in the minority that pays it off in full every month then maybe you can take the chance. But............ "proving it" to me means having put 10% of your pay into a retirement acct. for at least a year or two, having 3 months pay saved in a "rainy day" fund, having at least the down payment saved for your next car. etc. Then your odds are pretty high you'll pay it off in full every month.
Instead of credit cards to establish credit, save a big down payment for your next car. With a large enough down payment you'll get the loan and a good rate without having credit cards. Also keep in mind other things also effect your credit: no bad checks on your checking acct., phone bill paid on time, utilities paid on time. Etc
So use a debit card instead of a CC for now...... Yes, of course the debit card comes off the "other" checking acct. NOT the "household" acct. (if you don't have this set up yet see the 2/27/05 post).
Isn't it important to establish credit though? Can you do this through the use of a bank debit card which also acts as a credit card?
Money Prof:
Yes, you should establish credit but don't think credit cards are worth the potential problems. Bear in mind that almost everyone starts off saying they will pay the bill in full every month. In the beginning they do pay it off, but then an excuse comes up: The car needed repairs, I was "burnt out" I really needed that vacation ( I hate that one!!!!) , it's not my fault I had a dental bill, ( BTW it is your fault as those items should have been saved for in advance) etc etc. so only the minimum is paid that month.
Think about this: do you really think the millions of people who paid over $50 billion in finance charges last year thought they would pay that at the time they took out the credit card???
Do you think the average American that owes $8,562 plus interest in credit card debt thought they would owe that at the time they first got the credit card??
If you can prove to yourself you can be in the minority that pays it off in full every month then maybe you can take the chance. But............ "proving it" to me means having put 10% of your pay into a retirement acct. for at least a year or two, having 3 months pay saved in a "rainy day" fund, having at least the down payment saved for your next car. etc. Then your odds are pretty high you'll pay it off in full every month.
Instead of credit cards to establish credit, save a big down payment for your next car. With a large enough down payment you'll get the loan and a good rate without having credit cards. Also keep in mind other things also effect your credit: no bad checks on your checking acct., phone bill paid on time, utilities paid on time. Etc
So use a debit card instead of a CC for now...... Yes, of course the debit card comes off the "other" checking acct. NOT the "household" acct. (if you don't have this set up yet see the 2/27/05 post).
posted by MoneyProf at Monday, June 27, 2005
0 Comments:
Post a Comment
<< Home