My first credit card. Halp!

[Tony]

Just got my first credit card and I wanna build credit. It has a $500 limit and I was wondering if I should pay medical bills I have with it. I'm paying $500 a month for 5 more months and I know if I used the credit card I would have the money to pay in full every month. Is this a good idea?

 

[colton]

Just got my first credit card and I wanna build credit. It has a $500 limit and I was wondering if I should pay medical bills I have with it. I'm paying $500 a month for 5 more months and I know if I used the credit card I would have the money to pay in full every month. Is this a good idea?

Yes. If you can pay in full every month, then that seems like a good plan for building credit.

 

[Beantown]

Dave Ramsey is gonna kick your ***.

 

[colton]

Dave Ramsey is gonna kick your ***.

I've listened to Ramsey's show several times, and generally agree with him. But if he says never to use a credit card, than that's something I think he's very wrong about. If it's an expense that you're going to pay ANYWAY, then paying for it with a credit card that you pay off every month is great.

 

[Stifle Tower]

I've listened to Ramsey's show several times, and generally agree with him. But if he says never to use a credit card, than that's something I think he's very wrong about. If it's an expense that you're going to pay ANYWAY, then paying for it with a credit card that you pay off every month is great.

Agree. Unfortunately, the only way to build credit is to show you pay back your debts as agreed. And paying cash does not show that. To anyone starting off, I say NEVER...unless in the case of a dire emergency...build up a revolving balance on your cards. Use them for monthly bills and pay them off 100% each month.

 

[♪alt13]

Just got my first credit card and I wanna build credit. It has a $500 limit and I was wondering if I should pay medical bills I have with it. I'm paying $500 a month for 5 more months and I know if I used the credit card I would have the money to pay in full every month. Is this a good idea?

NO do not max out the card that would only hurt your credit. Likewise a zero balance will do nothing for you because you need to show you can carry a debt(if you are not paying interest they are not making money).

You need to keep the balance of your credit cards slightly over a 1/3 of your limit and never over half. Put $175 on your credit card and then put it away. Pay the minimum payment so that you pay down the interest but not the balance. Once you have built some credit then you can decide if you want to pay it down.

 

[colton]

NO do not max out the card that would only hurt your credit. Likewise a zero balance will do nothing for you because you need to show you can carry a debt(if you are not paying interest they are not making money).

You need to keep the balance of your credit cards slightly over a 1/3 of your limit and never over half. Put $175 on your credit card and then put it away. Pay the minimum payment so that you pay down the interest but not the balance. Once you have built some credit then you can decide if you want to pay it down.

These seems like rather bad advice to me.

 

[Dr. Jones]

These seems like rather bad advice to me.

It's not bad for such a small sum of money. That answer or course changes if/when your limit is substantially raised.
The tiny amount of interest he would be paying, while raising his credit score, will more than payoff when getting a larger loan (I.e. car) in the future.

As a sidenote, it's also about 'high credit' when making larger purchases. Having 'good credit' resulting from responsibly handling a $500 credit card will do almost nothing when going into more major purchases. Treat it as a starting point. Learn to eagerly await bills as you cannot wait to pay them... like happy to do so. Be responsible with all your debts and it can save you tens of thousands of dollars over a lifetime in paying smaller, lower risk, interest loans.

And be careful of hey hey... he's damned.

 

[Duck Rodgers]

What you want to do is borrow the $2500 from a Pay Day loan shop, pay off the medical debt, and then use your credit card to pay the Pay day loan people for the next 6 years.

 

[bigb]

I've heard the "it's better to carry a balance on your credit card" theory before. I personally don't buy into that. I've carried a cc balance exactly one time in my life. My credit score is in the high 700's. To me, the astronomically high interest rate of a credit card balance isn't worth it. You'd be better off getting a loan if a different kind at a lower interest rate to pay off the medical bills and then pay off the loan.

 

[moevillini]

One thing I've heard relative to raising your credit score is that it's better to have a higher credit limit than you use. In other words, have a limit of $1500 but charge $500 or less per month, and pay if off each month. Supposedly it looks bad to the credit rating agencies if you're always charged at your limit, even if it's paid off every month.

But it can be difficult for some folks not to spend up to their limit so that's something to be careful of. Could be sort of a double-edged sword I guess.

 

[franklin]

I've heard the "it's better to carry a balance on your credit card" theory before. I personally don't buy into that. I've carried a cc balance exactly one time in my life. My credit score is in the high 700's. To me, the astronomically high interest rate of a credit card balance isn't worth it. You'd be better off getting a loan if a different kind at a lower interest rate to pay off the medical bills and then pay off the loan.

This. I'm well into the 800's and have never carried a balance past the "grace period".

If you want to build credit then go to Best Buy or RC Willey and buy something cool on one of their six months no interest cards/accounts. Same with tires or maintenance if you can find a shop that offers it.

Also, in your case, if you have an auto title then it wouldn't be bad taking out a title loan at a credit union @ 2.5% interest. You'll pay maybe $30 over six months, which isn't expensive if you have zero credit.

 

[Tony]

Okay, so i'm definitely not gonna hold a balance. I don't wanna pay more than I have to especially when the med bills i'm paying don't have interest and I only have to pay one set amount.
But to be clear, it's better to use 1/3 of the limit instead of maxing it out and paying it off immediately? True or false?

 

[colton]

This. I'm well into the 800's and have never carried a balance past the "grace period".

Same here.

 

[colton]

Okay, so i'm definitely not gonna hold a balance. I don't wanna pay more than I have to especially when the med bills i'm paying don't have interest and I only have to pay one set amount.
But to be clear, it's better to use 1/3 of the limit instead of maxing it out and paying it off immediately? True or false?

I doubt there's a difference. But I don't know for sure.

 

[bigb]

Okay, so i'm definitely not gonna hold a balance. I don't wanna pay more than I have to especially when the med bills i'm paying don't have interest and I only have to pay one set amount.
But to be clear, it's better to use 1/3 of the limit instead of maxing it out and paying it off immediately? True or false?

I doubt there's much difference, especially when the limit is only $500.

 

[Beantown]

I've listened to Ramsey's show several times, and generally agree with him. But if he says never to use a credit card, than that's something I think he's very wrong about. If it's an expense that you're going to pay ANYWAY, then paying for it with a credit card that you pay off every month is great.

He agrees with this theology but he agrees more to the fact that most of the United States have no self control.

 

[lauriandres]

Am i doing something wrong with my credit card compared to you in US? I have an AMEX; all the AMEX transactions will be automatically debited on my main bank account on the 10th day of the month. Although the yearly fee is about 20 EUR, the bonus points (6 EUR will give 1 point; with 400 points i can get a department store gift card valued about 10-20 EUR, depends on store) will somewhat compensate that. Of course, AMEX is not for me to spend money that i not have, mainly a tool to better manage my finances. Your stories are kind of complicated to my brain.

 

[bigb]

Am i doing something wrong with my credit card compared to you in US? I have an AMEX; all the AMEX transactions will be automatically debited on my main bank account on the 10th day of the month. Although the yearly fee is about 20 EUR, the bonus points (6 EUR will give 1 point; with 400 points i can get a department store gift card valued about 10-20 EUR, depends on store) will somewhat compensate that. Of course, AMEX is not for me to spend money that i not have, mainly a tool to better manage my finances. Your stories are kind of complicated to my brain.

It basically sounds like a rewards card that is automatically paid (deducted from your bank account). As long as you're disciplined and don't spend more than you have, it's a good way to go.

 

[♪alt13]

Okay, so i'm definitely not gonna hold a balance. I don't wanna pay more than I have to especially when the med bills i'm paying don't have interest and I only have to pay one set amount.
But to be clear, it's better to use 1/3 of the limit instead of maxing it out and paying it off immediately? True or false?

The 1/3 is only if you want to use the card to establish credit. If you have other lines of credit it is not necessary.

Me and my old lady had very poor credit due to young hooliganism. When we decided to grow the **** up along with actually paying our bills on time we got a $500 credit card. The card did not seem to make a difference after doing some research we did the 1/3 thing. once we had established other lines of credit (mortgage car loan etc.) we paid it off. we were in the high 400s like 5 years ago and last time we applied we were at 760.