let it go before it destroys your credit! go for prepaid cards much better for you in the long run!

Domin8orX,

Congratulations on graduating college.. I have no doubt that you are a very intelligent person and have learned a great deal about money and finances due to your major.

That being said... only 4% of your fellow graduates are actually going to make it to financial independence, the other 96% of finance majors is going to FAIL financially.. why is that?

The difference between the 4% that will succeed and the 96% that will fail is something that was NOT taught in college.

It's the ability to think LONG-TERM. That means keeping your financial destination in mind as you make choices today, tomorrow, next month, and next year.

There are essentially 2 destinations ahead of you. You could be a debt-free millionaire or you could be financially dependent on others or have to work till you die.

It if sounds rather extreme.. it is... and it's true.

What will make the difference for you, Domin8orX, is how you use credit. The answer is: DON'T USE IT. You mentioned you were apprehensive about the card you have.. do you know why? Deep down.. you are questioning the "conventional wisdom" that using credit is how you get ahead in life.

The pitfall you mentioned? USING credit is the pitfall!

Don't just take my word for it...

If you ask any debt-free millionaire out there "How'd you do it?" they will tell you that they:

-Saved 10% of everything they earned
-Bought their cars with cash
-Bought their homes instead of renting an apartment
-Lived well below their means
-Built their wealth ON PURPOSE.

and the one thing that they all did - they paid off all their debt (if they had any) and they never borrowed money again.

Debt-Free millionaires don't NEED credit, and they don't use it.

They became debt-free millionaires because they BROKE their dependence on credit, paid cash for everything, and built their wealth on purpose.

If you want to be a debt free millionaire.. cut up your card now.. and read these books.

"The Richest Man in Babylon", by George S. Clayson
"The Total Money Makeover", by Dave Ramsey
"The Millionaire Next Door"

So to answer your question, Domin8orX, you don't need another card.. you need to pay off and close out the one card you do have.. and if you have other debts.. you'd want to pay them off as quick as possible.

Feel free to PM me if you have any questions.

David, thank you for responding with such conviction. Since your post I went ahead and downloaded "The Richest Man in Babylon" and I am simply blown away by the simplicity of the lessons.

The underlying reason to why I went and got a credit card to was to establish credit. Throughout college I worked for every penny I spent in college and luckily got out of college debt free. During this entire time, I came out with ZERO credit history. I did not think much of it until I went a established my own cell phone plan, and Verizon required a $400 refundable (interest bearing) deposit to start my account. It became a wake-up call, "I have to establish some sort of credit if I am ever to purchase a house and/or acquire competitive interest rates"

I am getting married later this year and so establishing a home has become a top priority.

With TARP, bank foreclosure, and sub-prime mortgage fallout, it is apparent that lending standard are going to be tighter than ever. So that is why I turned towards a credit card, which was to establish a history.

How would you successfully establish credit without the help of credit cards?

Domin8orX,

I understand your plight.. the problem is that there just isn't enough time for you to establish the credit history without a credit card.

I advise people not to get them because people fall into all sorts of TRAPS with them.

So here's how to establish your credit history quickly without paying a dime. (Yes.. you'll need a credit card)

Since you have your card already, follow these two rules and you'll do fine.

1) Charge no more than $100 of your $500 credit line each month.

2) Pay the balance in FULL each month. This way, no interest is charged and so the 19% rate means nothing.

Your Credit History is just that.... A history of you paying your bills. When calculating your credit score.. they look at your credit balance/maximum credit ratio. If the ratio is too high.. (as in the case when someone maxes out their credit cards).. then the score is lowered.

As long as you don't charge more than $100, and you pay your balance off in full.. you won't pay a dime in interest and you'll be establishing history.

It doesn't matter WHAT you charge on your credit card, that sort of information isn't reported. So you can pay your cell phone bill with the credit card.. then turn around and pay your credit card bill.

Now.. I'll tell you about the traps.. (I fell for each one)

1) Don't buy FOOD with a credit card.. the problem is that eating feels good... and spending on credit feels good. So buying food with a credit card becomes addictive. People start "treating themselves" into debt.

2) Don't handle emergencies with credit cards... the problem here is that if you don't plan for your car to break down.. you won't be prepared for it when it happens. Too many people stroll through life with a open credit line and when 1 tire goes flat.. it's just TOO EASY to charge up 4 new tires!. Save up an emergency fund instead, build it up to $1000 minimum.

3) Don't think of credit cards as a tool. Just remember, that the company who gave you the credit card is HOPING... that you are horribly IRRESPONSIBLE... and that you'll charge yourself to the max and stay that way. I had a credit card myself that had a $1000 limit and I kept it as max for nearly 10 years before I wised up about it. I can't calculate how much that cost me over the years. The bank doesn't make a PENNY unless you go into debt.


That's all for now..

Congratulations on your upcoming marriage, and I hope that soon you'll be a homeowner as well!

if you do so, do not spend over limit, and pay credit debt on time, then you donot need worry about whether the rate is 19% or 0%. in current enconomy, it is a good idea not to have any credit card debt.

Do you have credit unions operating in your college campus? its always better to subscribe to the cards issued by them since they offer low interest rates.

Make sure you pay it on time and keep the balance below 30% of your available credit.

I have to agree with David...
even successful business owners who use credit cards (because it's almost impossible to operate these days without them) either have the funds to cover their expenses or use a debit card directly linked to their account (with actual money)
as I'm sure you learned in college (congratulations!) bookkeeping involves accounts payable and accounts received... when the accounts received fall short most business owners make adjustments... the same can be said of personal finances although most people can't make the adjustment when they should and outspend their budgets

Find one with the best cash back + sign up bonus and you are good to go. Just make sure to pay it off at the end of each month.

Chase Freedom is probably my favorite since it has cash back + sign up bonus.

if I were you, I wouldnt get a credit card in the first place. but it's your call, if you want it go for it.

Well David, on this I completely disagree. Having a credit card and/or a good credit report is almost a necessity for a couple of functions in this society these days.

As the OP has already pointed out, you tie up a fairly significant amount of cash establishing a cell phone account without it. To compound the problem the cell phone carriers do not report to the credit bureaus so you can't even consider the cash an investment in building credit so you don't have to do it again if you decide to change carriers.

Likewise it can be very difficult to rent a car with a debit card. It's not impossible but it is certainly more hassle in my experience. If you plan to travel or you need to rent a car due to a major repair on your vehicle you want to have a credit card.

You don't need more than a single card. Here's how I would utilize the credit card to build good credit and not go into debt ever.
1. Since you pay your cell phone bill every month out of your checking account (probably), set up automatic cell phone payments from the credit card.
2. Put the credit card in your sock drawer or something like that and NEVER CARRY IT IN YOUR WALLET.
3. Pay the credit card bill in full every month. You avoid paying interest and the only thing that changes in your budget is who you're sending the check to.

The end result will be a good credit history and zero debt.

It's actually quite sad really... the use of the FICO score to determine what kind of person you are.

Take this real world example:

A young couple I know recently became debt free about a year ago. They still have their mortgage but have had no other debts for at least 12 months.

They walked into a credit union to open up an account. Of course their FICO score was pulled up: 577.

Because of this, the "FREE CHECKING" account has some limitations.

1) $100 daily limit at the ATM
2) They can see the teller only 3 times in any given month.
3) Cannot open savings accounts for their kids
4) Cannot deposit or cash checks that are not from their employer without an 11-day hold.

All these restrictions will be lifted after 12 months of excellent use of their checking account (no nsf's) or can be reviewed if their FICO goes up.

I told them to keep the current bank they have.. at least there, they are treated better.

I myself, don't have a credit cards anymore and I don't plan on ever getting one again. I recently needed to rent a car at the airport unexpectedly. I went to the Enterprise desk and asked to rent a car. When I presented my debit card they would not accept it. They said they could not pull my credit. It didn't matter to them that I had more available cash than most have in credit line.

So I asked the clerk very nicely... Do they (pointing at Avis/Budget) take debit cards. She said yes. I said, "Great, they will get my business from now on."

There was no hassle... Avis/Budget took my debit card, held funds for incidentals and off I went with a rental car.

I will concede the fact, that if you choose not to have a credit card, nor care about your credit score, you will be "marked". For me, that doesn't phase me at all, I use cash for everything and I don't expect to borrow money again for as long as I live. Although I have a good credit score, I'm not worried about it going up or down, nor am going to take steps to increase it.

If you must increase your score, the steps cjscully just outlined ARE indeed the way to do it. Don't go into debt just to raise your score.

__________________
"If nothing changes...NOTHING CHANGES! But if something changes...SOMETHING CHANGES!" - Mark Balmer

www.debtfreemarriage.org