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Using credit cards does not preclude being able to afford the thing you are paying for. I regularly use my credit card for every day purchases despite having am

by webkike 10y ago

Using credit cards does not preclude being able to afford the thing you are paying for. I regularly use my credit card for every day purchases despite having ample money in my checking account. The regular payments allow me to develop a good credit history without much worry.

josefresco 10y ago
Bingo. Unfortunately the common assumption is that you're not paying it off monthly and paying high interest.
- fwn 10y ago
  Which, by the way, sounds like an awful concept of how creditworthiness is created. Signing into some unnecessary additional financial product with comically obsolete interest rates, just to manually repay it in the random timeframe in which the (still unnecessary) credit is free sounds like a bad idea. It's probably only there to nudge people into paying interest on money they already have.
  - josefresco 10y ago
    Credit history is just a history of making payments on-time. You can build a history by making student loan payments, car payments, health care payments etc. Obviously it's only one factor in someone's credit worthiness, however it's not a bad metric. If you pay your bills on-time, it makes sense that a lender would value you higher/safer than someone who does not.
  - hx87 10y ago
    > the random timeframe in which the (still unnecessary) credit is free Are you talking about the 0% APR period, or the monthly revolving cycle? The latter is absolutely predictable, and if you dislike manual payments you can always set up automatic ones.
kriro 10y ago
Why can't you use a debit card for that? Isn't having enough money in your checking account to reasonably afford all stuff you need to live basically proof of a good credit history? Isn't the best credit history one where you never need credit in the first place?
- ethanbond 10y ago
  Not according to the credit rating agencies, no, it's not. Handling debt responsibly is a different skill from handling cash responsibly. When it comes time to buy a home, for example, which 99% of people will need credit to do, the banks want to see that you can handle debt responsibly, since that's what you're taking on. Edit: Also, see my reply to GP comment that explains some of the other benefits of using a credit card.
- nommm-nommm 10y ago
  You would think, wouldn't you? It's an interesting concept. If I'm going to loan you $1,000 I'd like to get references, talk to all the other people you've borrowed money from and ask them if you paid it back to show you are able to handle debt. You get other people to vouch for you that you are good on that $1,000. If you have nobody to vouch for you I'd be more hesitant to loan you money. Or ask you for a higher interest rate. This gives you an incentive to borrow money and always pay it back. In fact just having an open line of credit you aren't using makes you look better. "I have the opportunity to max out my cards but I am not." Its perverse but it does make logical sense. Its a different kind of responsible. The other reason people use cards is many cards, as an incentive to get you to use them, give you perks. For example, airline miles, hotel points, cash back, warranty extension, price protection, purchase protection, rental car insurance, etc, etc.
- hx87 10y ago
  "Best" for what, exactly? The only use for a credit history is getting credit, and having none means you're a risky person to lend to.
- bzbarsky 10y ago
  > Why can't you use a debit card for that? In practical terms, because in the US the handling of debit card fraud and credit card fraud is vastly different. In the case of debit card fraud the money is gone from your account and you then spend some months trying to get it back. In the meantime, you don't have that money. In the case of credit card fraud, you contact the credit card company, they reverse the charges, and then it's their problem after that point, not yours. Assuming you have any self-discipline at all, a credit card is a _much_ better idea than a debit card in the US. > Isn't the best credit history one where you never need credit in the first place? The best credit history, if being used for the sane "will this person make timely payments on this loan?" reason, would consist of a history of timely payments on exactly this type of loan, with no debt outstanding right now. Never needing credit before may mean you always had lots of money, or that you simply never tried to do anything that involved any large amounts of money and now you want to do such a thing....
ethanbond 10y ago
Also worth pointing out that some credit cards carry huge perks if used as your daily spending method. For example, the Chase Sapphire Preferred card extends some warranties by a year, also covers purchases for 120 days against damage/theft, also will pay back the price difference on an item if the price goes down within 90 days of purchase. Similar cards carry similar benefits, I'm sure. All you have to do to reap them is get the card, use it instead of your debit, then pay it off appropriately.
- SyneRyder 10y ago
  Yup, I always pay off my credit card in full each month, and I earn Frequent Flyer points (especially on AmEx). I've earned enough for multiple Round The World tickets. Those are worth far more than any small annual fees I paid on the cards. And in the event that your card is stolen, a credit card is always better than a debit card, because then money isn't stolen from your own personal bank accounts.

by webkike 10y ago

josefresco 10y ago

Bingo. Unfortunately the common assumption is that you're not paying it off monthly and paying high interest.

fwn 10y ago
Which, by the way, sounds like an awful concept of how creditworthiness is created. Signing into some unnecessary additional financial product with comically obsolete interest rates, just to manually repay it in the random timeframe in which the (still unnecessary) credit is free sounds like a bad idea. It's probably only there to nudge people into paying interest on money they already have.
- josefresco 10y ago
  Credit history is just a history of making payments on-time. You can build a history by making student loan payments, car payments, health care payments etc. Obviously it's only one factor in someone's credit worthiness, however it's not a bad metric. If you pay your bills on-time, it makes sense that a lender would value you higher/safer than someone who does not.
- hx87 10y ago
  > the random timeframe in which the (still unnecessary) credit is free Are you talking about the 0% APR period, or the monthly revolving cycle? The latter is absolutely predictable, and if you dislike manual payments you can always set up automatic ones.

kriro 10y ago

Why can't you use a debit card for that? Isn't having enough money in your checking account to reasonably afford all stuff you need to live basically proof of a good credit history? Isn't the best credit history one where you never need credit in the first place?

ethanbond 10y ago
Not according to the credit rating agencies, no, it's not. Handling debt responsibly is a different skill from handling cash responsibly. When it comes time to buy a home, for example, which 99% of people will need credit to do, the banks want to see that you can handle debt responsibly, since that's what you're taking on. Edit: Also, see my reply to GP comment that explains some of the other benefits of using a credit card.
nommm-nommm 10y ago
You would think, wouldn't you? It's an interesting concept. If I'm going to loan you $1,000 I'd like to get references, talk to all the other people you've borrowed money from and ask them if you paid it back to show you are able to handle debt. You get other people to vouch for you that you are good on that $1,000. If you have nobody to vouch for you I'd be more hesitant to loan you money. Or ask you for a higher interest rate. This gives you an incentive to borrow money and always pay it back. In fact just having an open line of credit you aren't using makes you look better. "I have the opportunity to max out my cards but I am not." Its perverse but it does make logical sense. Its a different kind of responsible. The other reason people use cards is many cards, as an incentive to get you to use them, give you perks. For example, airline miles, hotel points, cash back, warranty extension, price protection, purchase protection, rental car insurance, etc, etc.
hx87 10y ago
"Best" for what, exactly? The only use for a credit history is getting credit, and having none means you're a risky person to lend to.
bzbarsky 10y ago
> Why can't you use a debit card for that? In practical terms, because in the US the handling of debit card fraud and credit card fraud is vastly different. In the case of debit card fraud the money is gone from your account and you then spend some months trying to get it back. In the meantime, you don't have that money. In the case of credit card fraud, you contact the credit card company, they reverse the charges, and then it's their problem after that point, not yours. Assuming you have any self-discipline at all, a credit card is a _much_ better idea than a debit card in the US. > Isn't the best credit history one where you never need credit in the first place? The best credit history, if being used for the sane "will this person make timely payments on this loan?" reason, would consist of a history of timely payments on exactly this type of loan, with no debt outstanding right now. Never needing credit before may mean you always had lots of money, or that you simply never tried to do anything that involved any large amounts of money and now you want to do such a thing....

ethanbond 10y ago

Also worth pointing out that some credit cards carry huge perks if used as your daily spending method. For example, the Chase Sapphire Preferred card extends some warranties by a year, also covers purchases for 120 days against damage/theft, also will pay back the price difference on an item if the price goes down within 90 days of purchase. Similar cards carry similar benefits, I'm sure. All you have to do to reap them is get the card, use it instead of your debit, then pay it off appropriately.

SyneRyder 10y ago
Yup, I always pay off my credit card in full each month, and I earn Frequent Flyer points (especially on AmEx). I've earned enough for multiple Round The World tickets. Those are worth far more than any small annual fees I paid on the cards. And in the event that your card is stolen, a credit card is always better than a debit card, because then money isn't stolen from your own personal bank accounts.