Ask dumb questions here!

[Rome]

Some yagoff tried to use my wife's credit card to order a computer on the internet on Sunday Morning.

We got a call from the company and asked whether or not the charge was legitimate.   Nice of them since the idiot who tried to use it was in Chicago at the time.

[MURP]

Dio -  just an option for you if you want to look into something simple.   There are prepaid credit cards where you put $300 cash in and then use that as a credit card.  So lets say you buy $10 worth of goods that month.  You have $290 left on your card to use.  At the end of the month you just pay the $10 back to the card so you are up to $300 again.   This actually does count as a credit transaction even though you are using cash you already deposited.   If you choose to upgrade or close out you get the $300 back.    This allows you to keep from spending money you dont have while still building some type of positive credit for your future home purchase or whatever.  Just an option.

[Diomedes]

Like a prepaid phone.  Interesting.

The issue isn't that I'm worried I'd overspend, it's that I'd simply prefer to avoid the hassle of paying at a later date.  I like to pay now for what I get now, you know?

[MURP]

I agree.  Many times I only make one small purchase on a card (lets say a tank of gas) and just pay that $30 back at the end of the month to keep the card active and showing that the payments are made each month.

[PoopyfaceMcGee]

I don't think the prepaid cards do anything for your credit history - since it's not technically credit.

It's just a more "secure" way to carry cash.

[Wingspan]

How is that different than a check/debit card?

[MURP]

I don't think the prepaid cards do anything for your credit history - since it's not technically credit.

It's just a more "secure" way to carry cash.

FF, I understand where you are coming from, but that is not true.  -  The 3 major credit agencies do not see it as a debit secure type card.  It does act exactly the same way as a credit card would on your credit report.   Thats the whole point of it in the first place.  To be able to build credit.  I used one coming out of college and it worked like a charm. 

[PoopyfaceMcGee]

Debt/credit ratio: lower the better - unsued credit shows discipline

Isn't the problem with this that too much readily-available credit can be considered a risk?

IE:  If you have 8 credit cards with $15,000 limits and all have $0 balances, and you make $25,000 a year... that just might not be good for your credit.

That's the part that confuses me.

That's why time is so important - you've shown that you can manage that amount of credit without getting into trouble.  Also, I'd doubt that you'd get $120,000 of revolving credit when you only make $25,000.

Sure, but if you did have quite a bit of available revolving credit but you desire a new loan/card/etc, wouldn't it be smart to close one or two of your least-used accounts?

This whole thing confuses me greatly.  I think it's actually designed as such.

FF, I understand where you are coming from, but that is not true.  -  The 3 major credit agencies do not see it as a secure card.  It does act exactly the same way as a credit card would on your credit report.   Thats the whole point of it in the first place.  To be able to build credit.  I used one coming out of college and it worked like a charm. 

That's sweet.  You learned me a good lesson.  Thanks.

[MURP]

How is that different than a check/debit card?

It is different in the fact that it is viewed as a credit card to the 3 agencies (Equifax, Transunion, Experian).   A checking account or debit card do not report to your credit agencies in that fashion. 

[PhillyPhanInDC]

I agree.  Many times I only make one small purchase on a card (lets say a tank of gas) and just pay that $30 back at the end of the month to keep the card active and showing that the payments are made each month.

I agree with this completely. I have a card I use that has a $500 limit (it's a pain in the ass, as the bank constantly will jack up the limit without letting you know). I use it for gas primarily, and if I run to the local WaWa for a Pepsi and a sandwich. On average, the bill is less than $200 at the end of each month. I do have another card with a larger limit, but I rarely use it unless it is for something that I would rather not pay for with cash, mostly because of the amount. Things that fall into this catergory are car repairs, upgrades to my home, or buying a TV. Again, I only make purchases with this card if this is cash available to pay it off.

One other note, I'm not sure how this affects my credit, but since I have the cards through my bank, I can pay them on the fly from my banks website. As a car repair for say, $600, posts, I can just pay it off by transferring funds from my checking account to the credit card account.

[Cerevant]

How is that different than a check/debit card?

It is different in the fact that it is viewed as a credit card to the 3 agencies (Equifax, Transunion, Experian).   A checking account or debit card do not report to your credit agencies in that fashion. 

To clarify - what MURP is describing is called a Secured Credit Card.  This is different from a prepaid gift card or debit card.

[MURP]

Thanks Cerevant.   I think my wording by describing that you prepay first before getting the card may have caused some confusion on the issue.   Secured card is the right term..

[Susquehanna Birder]

I don't think the prepaid cards do anything for your credit history - since it's not technically credit.

It's just a more "secure" way to carry cash.

FF, I understand where you are coming from, but that is not true.  -  The 3 major credit agencies do not see it as a debit secure type card.  It does act exactly the same way as a credit card would on your credit report.   Thats the whole point of it in the first place.  To be able to build credit.  I used one coming out of college and it worked like a charm. 

While it's viewed as a credit card, the source of the card is also important. It my understanding that secured cards don't build positive credit nearly as well as a full-blown credit card.

Dio, another option is a low-limit card. Something like $500 or less. It keeps you from going nuts with the credit, and if you use the right company (Capital One is one I know of), you can almost immediately transfer money from your bank back to the credit account.

[Susquehanna Birder]

BTW...the (great) article that Cerevant gave the link to is a little dated (2000). For example:

Just recently, the U.S. House of Representatives approved a measure that could boost annual contributions for both IRAs and 401(k) pension plans. If passed by Congress, the bill will raise the $2,000 annual pre-tax IRA contribution to $5,000 by 2003, and increase the yearly salary contributions for 401(k)s to $15,000 by 2005. Currently, annual salary contributions to 401(k) plans max out at $10,500.

The maximum annual contribution for 2007 is now $15,500. So everbody bump up your contributions!

[Susquehanna Birder]

Here's something good I found on that CNN/Money site:

http://money.cnn.com/popups/2006/news/401k_anniv/5.html