<p>I'm thinking about managing my college finances in a way so that I use a credit card whenever possible, as much as possible, and only reserve cash and check for emergencies. That means, unless the place doesn't accept my credit card(s) or I'm going to go over the limit, I'll use a card.</p>
<p>However, many people heavily recommend against this. Is there any reason why?</p>
<p>I'm thinking about using this to build my credit rating and plan to back every single one of my credit card transactions with money already set aside in the bank. This way, I'd be able to pay everything off on time and never run into late fees, so it wouldn't matter even if I get a card with 500% APR. The other part is to keep a detailed record of my transactions on my cell phone (or PDA, if I get one) so I know exactly how much I've spent.</p>
<p>A debit card can achieve the same function, but it's less secure than a credit card and doesn't go towards building credit.</p>
<p>Will this plan work out for building credit? Does anyone have anything to say from experience?</p>
<p>People only recommend against it because they are stupid and spend more money than they actually have and buy on credit. And they also never pay their dues in full and pay the minimums which leads to lots and lots of debt.</p>
<p>The way you’re using (and the way I am using) is just buying these to build a rating and using it much like a check/debit card.</p>
<p>If you can pay it off every month a credit card is a Good Thing. Some have rewards, you can build your credit, you get better buyers protection and you can track your spending easier. IF you can pay it off EVERY month you should make all purchases that you can with a credit card.</p>
<p>If you’re trying to build credit, using your credit card for everything could be a bad idea. The most important factor in determining credit scores is how much credit you use- if you’re coming close to your limit, that will hurt your credit. I’m assuming that, as a student, you’ll only be approved for a credit card that has a fairly low limit, and you could end up using too much credit pretty quickly.</p>
<p>Don’t get me wrong- it’s a good idea to build up some credit, as long as you’re good about paying it off monthly. Unless you really don’t spend a whole lot of money, though, don’t use it for everything.</p>
<p>yes.
i always use my credit card for everything. check card if i know ill go over the limit but thats pretty hard since i have a pretty high limit for a student.</p>
<p>A lot of people have the same plan as you do, and think they’ll never get into debt, but somehow they do. You may think you’re different from everyone else, but doesn’t everyone think that?</p>
<p>A decent rule is to never use credit on something you won’t have at the end of the month when it’s time to pay the bill. (Don’t use it for food, for movies, for that sort of thing. Way too tempting.) It helps some people, anyway.</p>
<p>If you don’t have money for it, don’t buy it.</p>
<p>Simple as that. I don’t buy a TV because I will have 500 bucks in my account next paycheck. I buy it because I have 500 in my account right now.</p>
<p>It’s seriously not that hard to manage your finances well.</p>
<p>Where did you come up with that rule? I’ve never heard it in my life and it makes no sense. I guess the idea is that you could sell the stuff you bought to get your money back? No, that wouldn’t work.</p>
<p>If you’ve got the money, for sure, then use the credit card. For example, I’ve got a ton of money saved up from summer work and before that, so I know beyond the shadow of a doubt I’ll be able to pay the card off when I buy food, or movies, or whatever else with it. If you don’t have that cushion maybe a credit card isn’t a good idea, but if you do, which a lot of college students do, then it is.</p>
<p>There are some places that won’t accept credit card if the total purchase is less than $10.</p>
<p>People advise using credit card all the time because you might be tempted and lose track of how much you’re spending and may not have enough money in your account at the end of the month. Also, cash and debit are the ways to really manage your money because of the smaller limit (mean you won’t be taking out $200 out of the ATM in order to pace yourself so you last).</p>
<p>Besides, it’s occasionally annoying for the next person in the line to wait for you to do the credit card transaction on something that could be paid with cash easily (like a small load of groceries).</p>
<p>Just remember your limit. I’ve had friends who have gone over their limits just by attempting to buy one quarter’s worth of textbooks (sigh texbook industry, how we dislike you)</p>
<p>Don’t approach your limit: a factor of determining your credit score is what percentage of your total available credit you use. Say you have one credit card with a $500 limit: to maximize your credit increase, I’ve actually heard to try to stay below 30% of your limit, so in this case you’d stay under $150 and pay it off. Don’t pay it off in full immediately as you’re not exactly in debt (if you pay off your $200 borrowed money right after you use it, that doesn’t show you can manage debt), but always make the required payment on time. Now say you had three credit cards with $500 limits each: your total credit usage should be under $450, and you should keep this spread out amongst your cards ($150 per card, not $450 on one card and nothing on the others).</p>
<p>The percentage varies depending on who you ask, but once you start pushing 60-80% you really should back off. You’re seen as high risk if you do that. If you have a car, it might keep you in check pretty well to always use the card on gas and very little else.</p>
<p>I would definitely recommend carrying around cash (for example, $60 cash a week) if you’re going to use it on fast food and small purchases. Debit/credit card for online and more expensive purchases. You might be in a situation where the store or seller only accepts cash. Always carry some cash with you at all times.</p>
<p>I’ve been charging everything on my credit cards and only using cash/check on rare occasions when they don’t take credit, or I use debit for the silly $1 purchases.</p>
<p>And I’ve been doing that for oh… 5, 6 years? I got my first credit card when I was 15. I’m FAR from being in debt, and actually feel that I’m saving money by using my credit cards (1% cashback on all purchases is a common reward available - some cards are more) and it adds up over time… I’ve probably gotten back $500 ish total. I’m smart with my cards though.. I don’t charge more than I could afford with cash, and I pay my bills in full every month.</p>
<p>As always.. don’t buy anything you can’t afford, and keep a mental tally of approximately how much you’ve charged - you can check it online when you remember.. don’t go over your limit, pay on time, etc.</p>
<p>It’s bad to hold a balance over 50% of your limit. My credit report says that it is one of the deciding factors on the credit score. </p>
<p>ExcelBlue, I’m actually buying everything using my credit card based on how much money I have in the bank. I’ve built up enough credit that they’ve raised my limit to 2k. I started at $500 a year ago. The best thing to do is hold a low balance under 50% of your limit and pay it off on time every month.</p>
<p>Your approach is fine, as long as you maintain discipline. The credit card companies are giving you a free lunch in terms of a rebate (or discount) and free float. They figure that on average, they will make money from their customers, whether from the fees they collect from merchants, late fees from some of their customers, interest charges from some of their customers, or fees in the securitization of credit card debt. If they didn’t make money doing this, then they would be go out of business. So they’re making money off of someone and you’re enjoying the benefits of that.</p>
<p>Just so you know, in terms of credit scoring, the only thing that matters is whether or not you are using the card. FICO credit scoring does not care about whether or not you use $10 or $1000. Usage is usage, and keeping an account active in FICO scoring is important especially if you are first establishing credit. So to the OP: in this regard, you should not feel forced or pressured to always use your credit card for every purchase possible. As long as you put something on it every month, it will show that you are able to handle and manage your credit responsibly. </p>
<p>In another aspect, many credit card programs offer rewards for using the card. Some of these programs are a flat 1% cashback, for instance. So in this regard, using your credit card instead of cash or check would get you the most amount of cashback. Now, I presume you are just getting started with credit, so the first credit card you get will likely not be one with a very high limit or with a great rewards program. As you build your credit you should be able to get some of the more Prime credit cards after 12 months, and these cards usually have much better rewards programs. Some offer as much as 5% cashback for certain categories of purchases! My advice would be to shop around and see which cards fit your spending habits to get you the most rewards. </p>
<p>As others have said, you have to be very responsible with credit. It’s not usually the best idea to revolve a balance because of all the interest you would get charged, so you really have to keep a tab on how much money you have and not get too carried away with just swiping your card every time to make a purchase. </p>
<p>As far as FICO credit scoring and utilization goes, 90%, 50%, 30%, and 10% are some of the major cutoffs for FICO scoring. You really get dinged for using over 90% of your available credit; it’s a very good idea to keep your balance under 50% of your available credit, etc etc. Basically, the less credit you make use of, the higher your credit score goes. Keep it less than 10%, or even 5% to get the most points.</p>
<p>Let me know if you have any other questions about credit cards or anything else credit-related.</p>
<p>The downside to using debit cards is that they don’t offer as much protection as credit cards do, whether the merchandise you bought was defective or your card is stolen. Additionally, the rewards programs on debit cards are usually not as great as those on credit cards.</p>
<p>On the other hand, it can be much easier to manage your finances with a debit card since the money comes straight out of your checking account, and so you know exactly how much money you have remaining.</p>