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Mrs. Micah Gets Her First Credit Card

Well, it finally looks like I have a credit history and a credit report. So I decided to test this by applying for a credit card. After looking around a bit, I used the Capital One lab to build a card with no annual fee.

Yesterday, my first credit card arrived in the mail.

Before activating it, I read through the all the paperwork with a highlighter (for the important parts) to make sure there weren’t any hidden fines or fees and that it was really what I applied for. My credit limit is $500. APR is 12.5%, but I don’t intend to ever carry a balance.

My plan for using this credit card: Paying our cell phone bill each month and then paying it off as soon (using the online option) as the charge shows up. Otherwise, the card will live in a safe place in our apartment so that it can’t easily be stolen or used on impulse.

The sole purpose of this card is for continuing and improving my credit history. It’s not for arbitrage, rewards, etc. I want to keep buying things because I have the money not because I can finance it.

Why I didn’t apply for a rewards card: At this point, we won’t be using the card enough for the rewards to really mean anything. In a few years we’ll re-evaluate, but getting the most from a rewards card requires a good strategy and using it for most of our purchases. I don’t feel like screwing it up, especially since the credit game isn’t really weighted towards the customer.

Why I want a credit history: Because this means I should actually be able to do things like sign up for a Money Market without going through loads of paperwork because they don’t know that I exist.

For a little light reading, here are some highlights from the history of my quest for a credit history:

{ 11 trackbacks }

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StackingPennies June 10, 2008 at 11:27 am

I suppose it is better to be cautious then reckless. But “the credit card game” really isn’t that difficult. Owning a cc doesn’t make an otherwise responsible person get reckless and start spending out of their means, or missing statements and bills.

Admittedly, the rewards aren’t that high unless you spend a lot. I average maybe $10/month, and pay for most things with my cc. But it is something. If you only plan on using it for one bill, then you are right, it’ll take years to earn any rewards!

deepali June 10, 2008 at 11:52 am

There is one potential snag. You’ll get the “credit” of owning a card (thus building the history). But if you pay off the balance before you get a bill, then you’ll risk losing the “credit” of paying off your card on time. I’m not sure if that makes sense? Basically, the card company only reports “on time” payments if there is actually an official payment to be made (ie, a bill).

It might be that just building history is enough though…

A.J. June 10, 2008 at 12:08 pm

C(r)apital One is horrible. They give low limits and don’t regularly increase them. I got mine senior year of high school (2003) and they just bumped up my limit from $500 to $1000 in April 2008.

Meanwhile I’ve been given much more generous limits and limit increases with my Citi and Chase cards in only a matter of months.

Vered June 10, 2008 at 12:13 pm

“APR is 12.5%, but I don’t intend to ever carry a balance.”

“The sole purpose of this card is for continuing and improving my credit history.”

SMART. You are doing great! Congratulations on your new card.

Fabulously Broke June 10, 2008 at 12:54 pm

Wow 🙂 Congrats on your new card. I can’t imagine NOT having my own card because it’s been such a while. And you are definitely not in other people’s positions where they can’t handle credit

Frugal Dad June 10, 2008 at 1:04 pm

Glad to hear you are taking a smart approach to this. One thing to consider (which deepali also mentions) is I would let the cell phone charge cycle on the credit card statement and then pay it as soon as you receive the credit card statement (or as soon as you see it is due online). By paying it before the statement cycles you will never run through a billing cycle with a “payment due” amount, and it could ever-so-slightly lessen the positive effect on your credit. Actually, this has less effect on your bureau score and more effect on Cap One’s proprietary system which measures payment history, risk, etc. Most banks use this “inside” score along with your bureau score when evaluating your account.

Of course, this float (or grace period) I’m referring to is one of the reasons to use a credit card – essentially you are borrowing Cap One’s money for free from the time the cell phone bill hits until you pay it. Just don’t be late because then the interest accrued is charged.

Funny about Money June 10, 2008 at 1:22 pm

Ditto Frugal Dad!

For several reasons, it’s a good idea to wait for the statement (i.e., for the billing cycle to close) before paying.

To be sure the money’s still in your account to pay it, simply write a check for the phone charge when it occurs, debit the amount from your checking account balance, drop the check in a file, and then mail it as soon as the statement arrives.

If you’re paying by EFT, debit your Quicken account by the amount of the phone charge on the date the phone bill posts. Pay the amount with your credit card. Then in Quicken change the date of the debit to the date you make the EFT to pay the Visa bill. Because your bottom line will reflect the amount you have left AFTER you’ve paid the charge card bill, you’re lots less likely to spend the amount owing before the statement comes due.

mrsmicah June 10, 2008 at 1:28 pm

Thanks everyone, good point about letting it sit.

That One Caveman June 10, 2008 at 1:35 pm

Congrats on finally becoming a “real person” in the eyes of the credit companies.

I have to agree with some of the other suggestions to not pay immediately. If you’re worried about not being able to pay your balance when the bill shows up, just set up an envelope (physical or virtual) for the amount and just pay the bill in full when it arrives.

I think you’re approaching this in a very smart manner, but don’t let yourself be afraid of credit. Just like anything else, it’s a tool in your belt. You just have to know how to properly utilize it.

Going Gazelle June 10, 2008 at 1:58 pm

Sad… The bankers have taken over so much of this culture….

Depending on your utility company – you could have put that in your name – Detroit Edison reports to the bureaus. Some phone companies do.

Capital One is one of the absolute worst. Trying to close an acct with them is next to impossible. They ignore requests repeatedly…

Be sure to honestly post about their fees, gotchas, and other shinanagins they pull on people… With a $500 credit limit, you’re almost 100% gaurenteed to get hit with over the limit fees from stupid holds that chew up your credit limit.

Good luck practicing with debt so that you get the opportunity to play with more debt in the future.

mrsmicah June 10, 2008 at 2:15 pm

@Gazelle, but you see without a credit history I couldn’t get on my lease…utilities…etc. I needed an entree.

I will, of course, post about any tricks they pull. That’s what makes blogs tick. It’s also a great way to let others know. I think the limit will be fine, though. It’s not like my cell bill is $500/month. If it were, I’d have much bigger problems than my credit limit.

As many have said, C1 is a bad company. I know. It’s possible that Amex would take me…they’re the only “good” ones I know of. BofA? No. Chase? No. Discover? No. Citi? No. I’ve heard countless horror stories about every company out there. So if I want to do this I’m going to have to pick one.

Pinyo June 10, 2008 at 2:51 pm

I think you are leaving free money on the table by not using a reward card. If you are planning to pay the CC off in full, the reward is free money!

SavingDiva June 10, 2008 at 3:39 pm

CONGRATS! You could also set your bill to be automatically paid….I have one card automatically deduct the balance from my checking account.

thebaglady June 10, 2008 at 5:16 pm

The way I got my first card was through Bank of America. They knew of me because I had a checkings account with them for about five years. My first card’s limit was $500, too. It was sad because I was earning $4000 a month then as a summer intern but I couldn’t buy a computer with my own credit card at the end of the summer. Later, when I got my first job, I got a new card with a limit for $900 because the credit card companies didn’t seem to believe that I made $60k a month. It’s really bizarre because they gave a card to my husband with a limit of $8600 right away. The difference between us was that he had a history of car and school loans. So I find it funny that you need more debt to be deemed more trustworthy, but that’s how it is I guess.

Going Gazelle June 10, 2008 at 6:19 pm

All you had to do was complain to the public utility commission in your state. They cannot deny you service because you are a credit ghost or even if you had horrible credit. They’ll do anything they can to try not to. You just have to push back. Worst case scenario – they would have required an extra deposit or a co-signer.

I wouldn’t give them eletronic access as SavingDiva said. You allow them to PULL money from your account that way. They won’t let you pull anything more than a charge that has fully posted.

My wife insists on keeping a card. Instead I use free bill pay to push them the money. This way I can push them more than want to receive. She buys gas with it. Every 2 weeks on payday I push them money to totally pay off the card and go negative about $300. Most months we don’t ever have a balance. Every single month they report it to the bureau’s as an on-time payment. That would help you deal with this $500 cap.

Cell phone companies can double bill and make mistakes.

I’m with thebaglady – I would have picked a bank that I already have a relationship with. They’re usually more likely to cooperate. And you can personally complain to somebody in a branch about any misbehavior. To each their own.

After 6 months of on-time payments – they will usually want to give you more rope. They know if they give more rope – people will eventually hang themselves. Sooner or later it will be just Gas and the cell phone. Then something else. Then something else…

I had an Outback steakhouse put a $275 hold on my debit card…. It happens and in the strangest places.

mrsmicah June 10, 2008 at 6:34 pm

@baglady, I probably would have if I’d had a relationship with someone. But Wachovia and ING don’t offer credit cards. Neither does my old bank. I suppose we could have started a relationship with one that does it all.

thebaglady June 10, 2008 at 8:14 pm

Yeah, it doesn’t matter though, it’s good that you have a card now. My husband has a capital one card, too. He never uses it because our other cards have better rewards, but I told him not to close it because that’s his oldest card. So he just cut it up and I do monitor its balance. So eventually when you move to a better card you can do the same to the less good ones.

Megan June 10, 2008 at 9:26 pm

I agree with everyone else about waiting til the billing cycle ends before you pay the card. You don’t even have to wait til you receive a bill if you have online access. For example, I know that my billing cycle closes on the 17th, so every month on the 18th, I log in and pay the balance in full. A few days later, the statement arrives in the mail. 🙂

Also, if you are interested in increasing that credit limit (and thus improving your debt to credit ratio since you won’t be charging more), after a few months, you can call the company and ask for an increase. Frequently, they’re happy to give you more rope with which to hang yourself. Of course, you’re smart, so instead, you will be using that rope to create a ladder to a great credit score! (ok, didn’t know where to go with that one)

Dad June 11, 2008 at 5:24 pm

Good. At this point your idea of putting the card somewhere safe and using it only for the one bill is probably good. If you don’t use it for anything else, they can’t put a hold on it for anything but the phone bill. Be careful about using it with a car rental place (they will put a hold on your credit for several hundred while the rental is out) or video rental, they also put holds on to ‘test’ your credit line. At least take that into account. I agree that paying on time but not ahead of time is best. That is after the bill is printed (posted online, etc) but by the due date. I usually go for a few days after the bill is posted to avoid cutting it too close. Some card companies will send you emails when the bill is available online. I find that useful to remind me to pay.

Lin June 11, 2008 at 9:28 pm

It is very important for women to have credit (and a credit card) in their own name, separate and apart from any credit or cc’s that include a husband. Too many women have little or no knowledge and understanding about money, and suddenly a tragedy occurs that leaves them without a husband, and they have no credit history to build their lives upon. I’m very glad that you have a credit card; just be very cautious with it, cause it’s easy to get in trouble with those.

budgets are sexy June 13, 2008 at 9:02 pm

I can’t believe you’re really just getting one now! That’s soo cool, you don’t hear that every day 😉

what did you do (or would have done) in the case of emergencies back then?

mrsmicah June 13, 2008 at 9:24 pm

@J/Budgets I don’t know. Since I was 16, I’ve always had at least $1000 in short-term savings (except for a short period when I was 18) and my debit card linked to automatically overdraft from that amount (in case I couldn’t get somewhere to transfer the money, which was instant). Which is better than $500 credit.

For that period when I was 18 and rebuilding after a trip to Europe, I would’ve asked my dad. 😉

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