Anonymous asked in Business & FinanceCredit · 3 weeks ago

Can someone tell me about credit cards and how they work?

I’m 20, a college student and I currently have a debit card and I’m interested in getting a credit card so I was wondering how they work. My 

friend says she had a $2000 limit and she already maxed it out. So my question is if I did something like this would it effect my credit score if I didn’t pay the money back immediately? She told me that if you don’t pay the money back immediately that after 6 years it gets taken off your credit anyway so it’s not a big deal but I wonder how true this is? Right now I currently don’t have any credit so I’m just looking for ways to build my credit and was wondering if getting a credit card would be smart. Can someone tell me the steps that I would have to take to get a credit card and what are the pros and cons to having one. 

9 Answers

  • 3 weeks ago

    Ignore your financially illiterate friend. Her plan would absolutely ruin your financial life. A cc is real money, so respect it. Always pay within terms every billing cycle. - Even better if you can pay in full every billing cycle. TALK to a bank or credit union about a secured card, then pledge $1,000 in a 1 yr CD to have a useful cc. All pros unless you have no will power or do not pay.

  • 3 weeks ago

    If you max out a card, it can affect your score even if you do pay it back immediately.

    The first and most important step right now is to do nothing while you are 20 and wait until you turn 21. If you try to get one while you are 20, you are likely to be rejected/denied, and you hurt your future score and your chances of being able to get one later when you do turn 21. If you do not try to get one now, and you wait to try for the very first time when you are 21, then you have much better odds.

  • Eva
    Lv 7
    3 weeks ago

    First of all don't listen to that friend. She's irresponsible and has a very poor credit score. You never want to max out a card. It is recommended that you never carry a balance of more than 30% of your limit. You are required to make at least a minimum payment every month that you have a balance. The credit card company charges interest on the unpaid balance. Get a card with a fairly low limit to start with until you learn how to handle it responsibly. Unless you have a job (income) you will find it difficult to get anything other than a secured card or student card. Talk to your bank.

  • 3 weeks ago

    If you carry a balance and have the card maxed out, yes, that is a big negative.

    She is really, really stupid. First, it's 7 years. Second, that would require you paying back none of it at all. Third, the company will still sue you for the debt, and the judgement effectively never goes away.

    Best way to do it is to get the card, spend only what you can pay back each month, and pay the bill in full each month.

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  • 3 weeks ago

    There's a lesson here, and the sooner you learn it, the better off you'll be in life:

    DON'T TAKE ADVICE FROM UNQUALIFIED PEOPLE. Your friend might be the nicest person in the world - fun to hang out with, there for you when you need them, etc. But they're not a financial expert.

    I have a rule that I don't take financial advice from people who are broke, I don't take parenting advice from people with no kids, I don't take marriage advice from people who have been divorced 4 times, I don't take diet & fitness advice from people who weigh 300 lbs, etc.Your friend is, quite frankly, a moron. Her advice is completely wrong. I highly suggest that the next time she starts talking about finances you place your fingers firmly into your ears and scream "la la la la la" as loudly as possible until her mouth stops moving - for your own protection.

    Credit card debt does not just "disappear" - they can (and will) sue you, garnish your wages, levy your bank accounts, etc.

    So, you are 20 years old and wanting to build credit and a financial foundation. I suggest the following plan:

    1. Save money until you have 3-6 months of expenses in the bank as an emergency fund. Put this in a saving account or short term CD's and NEVER touch it unless you have a real emergency.

    2. Search for student credit cards or a card with no annual fee that will approve someone in your situation. Do not apply for fancy cards with cash back or airline miles - you won't qualify, and once you have a denial on your credit history it will make it harder to get even a basic starter card. Just google "best credit cards for no credit" and you'll find a bunch of websites that compare cards.

    3. Once you pick a card, apply, and (hopefully) get approved, don't throw yourself a party and max it out. Make ONE purchase the first month totaling no more than 25% of your credit limit. for example if your limit is $500 then spend no more than $125.

    4. At the end of the month you'll get a statement showing a minimum payment, statement balance, and due date. Pay the full statement balance at least a week before the due date. The reason you pay early is so you have time to verity that the payment was applied and fix it if there are any problems. If you wait until the due date and make a typo on your account number or something you'll have a late payment fee and a late payment ding on your credit report.

    5. Repeat this every month for 6 months - make a few purchases but never more than 25% of your limit, pay it off in full every month, allowing plenty of time to verify the payment and fix any problems before the due date.

    6. After 6 months of this you'll have a credit history that shows 6 on time payments and low credit utilization, which should be enough that you'll start getting offers for better credit cards with cash back, higher limits etc. Again, don't go crazy and apply for a bunch of cards and max them out. Shop around for another card and get ONE more credit card.

    7. Keep the old card open since the length of credit and age of accounts is a major factor in your credit score.8. Continue as before - use your cards for no more than 25% of their limits, pay them off in full every month - allowing time to fix any problems before the due dates.

    Do this for a while and you'll have great credit. Then use credit responsibly. Banks will always loan you more than you can afford to repay, so don't just look at what you can get approved for, look at what you can really afford to pay before buying a car, a house, or anything else on credit.

  • 3 weeks ago

    Your friend is wrong, and heading for a lifetime of debt.

    If you get out a credit card, use it, and pay it off IN FULL every month, it will help build your credit without getting into debt.

    If you don't pay it off in full, you'll start owing money - some people get into a position where they're only paying off the interest on their debt, not even the debt amount itself. This can quickly grow and cause issues. It doesn't just get 'written off'.

  • Anonymous
    3 weeks ago

    Of course your friend can "not pay it back" but then she won't be able to buy a car, house, furniture, appliances or any other expensive item once she gets out into the real world.  She probably won't even be able to rent an apartment! It 's Cash Only world for those with no credit or bad credit.  This question is so naive that it's hard to believe you aren't a troll.

    It is time to start developing a credit score, a GOOD one by charging and paying back on time but if you don't have the income to do that, there is no point.   Your bad debt stays on your FICO for a lot longer than 6 years and it's pretty hard when you get out of school and can't even finance a used car or find a place to live!  Don't be stupid.  Develop your good credit and don't listen to ignorant friends.

  • 3 weeks ago

    It’s not hard to get a credit card if you’re a college student. You probably seen them set up shop on campus, near the busiest place, so usually the student center. 

    A credit card is like taking a loan from a legal loan shark. If you don’t pay it off immediately, you pay interest on what you own. Interest is usually 20-30% compounded monthly. So you end up paying more than 20-30% in a year. 

    Maxing out is not a good idea. If you want to build your credit, charge what you can pay off immediately. If you can afford to buy $100 worth of stuff then buy $100. Pay it off as soon as the statement arrives. Just don’t be late on a payment. 

    Your credit score changes based on what you do. Take out a loan, goes down. Make the payments, goes up. Don’t pay, goes down.  Go to collection agency, goes way down. It doesn’t disappear after 6 years. 

  • Rick B
    Lv 7
    3 weeks ago

    You do not know how a credit card works???

    When you charge an item, you typically can make minimum payments and pay the item off over time (often about 2 years) but you pay interest on the purchase.  In many cases over 20%.

    Not really sure why you want a credit card if you do not even know the point of one.

    If you get a credit card, TREAT IT LIKE A DEBIT CARD and pay the balance IN FULL when the bill arrives.  Why would a college student want to take on a bunch of debt????

    My advice would be to not get a credit card.  Stick to cash and debit cards.

    Follow Dave Ramsey and don't get sucked into debt.

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