Personal Finance Blog by Debit versus Credit

Choosing Your First Credit Card

June 11, 2008 | Filed in: Loans and Credit | No comment

If you like this post then please consider subscribing to my RSS feed. You can also Subscribe to Debit versus Credit by Email and have new posts sent directly to your inbox.

It’s not always easy starting out on the road to great credit. In fact, there are plenty of things that can mess you (and your credit score) up along the way. Choosing a financial institution to do business with is important, but equally important is choosing a first credit card that’s going to be right for you. As I mentioned in my Credit Cards 101 post there are several things that you should look for when researching credit cards. If you choose the wrong one you may end up not getting any sort of cash-back or points rewards, or more importantly you may end up with an excruciatingly high interest rate which can be a difficult thing if you carry a balance. Naturally my recommendation is to never carry a balance, and only purchase things with your credit card that you can pay off within the month, but if an emergency ever arose that you are ill-prepared for you don’t want to be stuck paying it off with a 25% rate on your card.

Several Cards to Choose From

Anyway there are several options which you have when looking at different credit cards. Of course you have the more well-known card issuers such as Capital One, Citibank, Bank of America or Chase to choose from, but you shouldn’t discount your local Credit Union or any other local banks. These smaller institutions sometimes offer better rates and better service. A great place to compare cards is at BankRate.com or CreditCards.com but to save you the hassle I’ve done a little research of my own and I’m going to recommend a few cards that I think might be a good choice for a first credit card. I’ll list the cards which require some form of good credit already in place and then those which don’t require any credit at all to be approved.

No Credit? No Problem

If you don’t have much (or any) credit your choices will be limited, even as a student. My recommendation is to first drop by your local credit union and ask them if they offer any student credit cards. If you live in Phoenix I can recommend a good one, just shoot me an e-mail. Don’t apply right away unless you know real well about all of the credit card terms and you feel comfortable with the terms that your credit union might be offering. If you’re unsure, just bring it home and e-mail me… I’ll help you out! Anyway if your credit union doesn’t offer anything for students (basically this means for young adults with no credit) then you might also consider the Capital One Standard Platinum for Young Adults.

Good Credit Required Here

There were several cards which I saw online that are catered to young adults and also offer rewards, but of course these require at least decent credit in order to get an approval. Again I recommend checking out your local credit union to see if they can offer a great credit card, but if not then here are three cards to choose from: The Citi Dividend Platinum Select Card for College Students; The Citi mtvU Platinum Select Visa Card for College Students and the Discover Student Card. These three cards all offer great rewards and competitive rates and include a 0% introductory rate for at least six months. Not a bad deal. Good luck on your search and if you have any questions about cards definitely contact me!

Tags: choosing a credit card, Citi, credit card rewards, credit cards, Discover, phoenix, student credit card

The Worst Years of My (Financial) Life

October 26, 2007 | Filed in: Debt | No comment

I have a confession to make. It wasn’t very long ago that I experienced the worst few years of my life, financially speaking. In the latter-half of 2004 I began my adult life full-force, and I hate to admit, but I began it quite poorly. In not very much time at all I managed to get myself in thousands of dollars of credit card debt, which I discovered was a debt that would not easily go away. In my defense I was a full-time college student working part-time jobs to try and pay the bills, but playing the devils advocate it is obvious that I could have done more with the little money I made. I managed my money poorly for a time, but thankfully I’ve been able to learn from those mistakes. I’d like to share just a little bit with you on what I did wrong and, as cliché as it sounds, what I would do differently if I could do it all over again.

It happens before you even know what’s going on… one minute you’re sitting on the Titanic, and the next minute you realize the ship is sinking and there’s not a single lifeboat in sight.

It all actually started out pretty ironically. I told one of my friends in early 2004 that I wanted to save $30,000 by the end of the year 2005. In fact I almost did quite the opposite; I do believe by the end of 2005 I had around $15,000 - $20,000 worth of student loans and credit card debt. It happens before you even know what’s going on… one minute you’re sitting on the Titanic, and the next minute you realize the ship is sinking and there’s not a single lifeboat in sight.

Let the reckless spending begin

I started my freshman year of college in August of 2004 and due to certain circumstances I had no money to pay for my tuition. Doing what I figured was absolutely normal I borrowed some money from my brother to pay for my tuition. I started looking for a job at about that time also, realizing the need to repay my brother, but didn’t find anything steady for a few months. At that point I had applied for and received a credit card which I used to pay for my basic living expenses: gas, food and the like. I expected to pay off my credit card and my brother within a few months from the time I got my job, but instead I kept using my credit card and accumulating debt. I hadn’t done any budgeting and figured out how much I could afford to spend a month, and so I did what so many Americans do; I spent more than I made every single month. Within no time at all I had accumulated around $5,000 dollars worth of credit card debt, and I was beginning to feel as if I were drowning in debt. It was at this point that I began looking for a solution, but the solution I found was not a permanent one.

I wanted to cut down my credit card debt and figured I could take out some student loans to pay it off and then I could start fresh. This worked for a few months, but I still had not disciplined myself to live within my means, and when my lack of discipline was combined with the cost of tuition and books my credit card debt quickly climbed back up to its previous levels. This is when I decided to take on more student loans to pay down my credit card debt again, only this time unsubsidized loans with a higher interest rate. After I had racked up credit card debt and taken out student loans to pay it down a few times I finally realized the error of my ways and decided it was time for me get serious about my finances. To my credit I did fairly well with this at first, but eventually I managed to slip up again… and this time for even more than all of my student-loan debts combined.

New cars are great… if you want to throw your money away

I gave up a lot when I signed those papers, but one thing I regret the most is the amount I could have saved if I had kept my previous vehicle and put the difference between its payment and my new car’s payment into a savings or an investment account.

Yeah I did it, I bought a new car. Not just any new car though… I bought myself a 2006 Mitsubishi Eclipse back in March of the same year. Even though I had managed to accumulate a significant amount of student-loan debt at this point I had not yet made such a large financial mistake as I did when I purchased this car. Once all was said and done I had a loan in the mid to high 20’s and a car worth barely 20 thousand dollars. Viola! Instant 36% depreciation. I gave up a lot when I signed those papers, but one thing I regret the most is the amount I could have saved if I had kept my previous vehicle and put the difference between its payment and my new car’s payment into a savings or an investment account.

After this mistake I had had enough of my idiocy. I realized how poorly I had been managing my finances for the two prior years and I resolved to shape up. I concentrated on spending less so I could pay down my debts and save a little each month. I paid just a little extra on my car each month to try to get the principal balance down. I married a woman who knew how to save. I am proud to say that other than my student loans and my auto loan I am debt free. My wife and I have also managed to save between our 401(k)’s, a brokerage account and an emergency fund enough to almost completely pay off either my auto loan or my student loans.

If I could do it all over again I would have made myself a budget and stuck to it. I still would have had some student loan debts, but looking back I realize I could have avoided most, if not all, of my credit card debt and I could have my original auto loan almost completely payed off by now, had I not traded it in for a car two and a half times more expensive. I believe I would have been able to save a decent amount during that time. I would not have accomplished my goal of $30,000 in savings, due to my small income, but I would have accumulated some wealth if I had done these things. Mistakes are meant to be learned from, and I do believe that I have learned my lesson from these mistakes in my past.

What about you?

What financial mistakes have you made that you are not proud of, and what have you done to learn from them and/or correct them? I’d love to hear what you have to say!

Tags: Accounting, affordability, Budgeting, Debt, Discover, funds, Investing, wealth