Sunday, October 26, 2008

How to Beat The Credit Card Bind

The Wall Street Journal has a story out this morning that addresses the pitfalls of not getting a credit card while in college -- when the gettin' is good. I'm a big advocate of starting your credit life early (link here). If you don't start early, and decide to stay away from credit altogether, it will make things a lot tougher later on.

Hat tip to LBCS (one of my readers) for pointing the story out to me. From the story: How to Beat 'Card Bind' (link here)

You're trying to get your life established. You get a job. Then you set out to buy a car, rent an apartment, maybe even you plan to buy a house -- all of which require credit.

But you resisted getting a credit card in college. So now your credit history is pretty much nonexistent. And getting a card after college is harder, since most lenders stop advertising to graduates the same generous deals that they routinely offer students.

What do you do? How do you get a credit card when you need one but can't get one because you did the right thing in college and didn't get one?

That's the credit-card bind, and here are five tips that can help you get out of it.



The Lion said...

"It might be a good time to say [to a parent or relative], 'you have to co-sign for me'"

...maybe not the best way to phrase it?

Great article, I have many a friend who resisted credit cards while we were in school, only to discover they were screwed after graduation. Couldn't rent without a cosigner, couldn't buy that new car, couldn't do a lot of what they wanted. said...

Not the way I would have phrased it, Lion.

And, yes, this is just one of the pitfalls of not getting credit early -- when it's a lot easier. This is just one of the reasons why I think Dave Ramsey is setting up many of his followers for a fall. He tells young people to stay away from credit -- forever. Unfortunately, here, in the real world, credit is a necessary evil.

Good luck to those who forgo the opportunity to establish a history early.

The Lion said...

I did the opposite. I established early and poorly. What I wouldn't do to go back to being 18 and know then what I know now. Sure would have changed some things!

DR needs to join us in the blue-skied real world. Not having credit is not an option. Not having debt? That is an option. Not having credit will screw you. said...

Exactly. I am all for being debt free. That's a great thing. But being debt free -- and having no access to credit?


athensguy said...

If I have kids, it's pretty unlikely I would be willing to cosign with them. Especially after they graduate college.

Hopefully I'll be able to teach them appropriate financial ways. said...

Athens, I'd be willing to cosign while they're in college -- to help them get established -- but they'd be on their own after that.

I still enjoy this story:

Daniel said...

I got my first credit card in 10th grade, co-signed by my dad. In GA, you can have a credit card as young as 16, in your name, as long as a parent co-signed...and the account only showed up on my credit report not his, even though he co-signed. BTW, it was a Capital One card with a 7k limit. The is was back around 96-97. said...

Daniel, now that's sweet. Just think. When you're 32, you will have had credit for half your life.

Very nice.

The Lion said...

Daniel, in my states you can have a credit card as young as 16 as long as a parent cosigns, although it is rare for the account not to show up on the parent's credit.

I am a huge supporter of teaching kids about credit at a young age. Of course, it must remain age appropriate, but it is as essential as any other form of education. I think far too many parents assume their kids will just automatically know what to do. Not always true. said...

Lion, I've talked with too many people about credit. I know that it's a bad idea to let kids learn this stuff on their own. Kids don't automatically know what to do. And eventually they learn this stuff through trial and error, which is not good.

A credit history is too important to leave to chance. Kids should be taught this stuff as soon as they're able to understand what's being taught.

The Lion said...

I agree. I am still not sure why they don't teach this stuff in school. The closest I ever got to a credit education in school was, when I was in 7th grade, I learned how to balance a check book. And that was only 10 years ago. said...

Would you trust someone at school to teach this stuff? I've seen what some of the so-called experts teach.

But I do get your point. This stuff is too important to ignore. Still, I'd have to be the teacher at my kid's school. Haha.

The Lion said...

Ok...legitimate point. If nothing else, it at least NEEDS to be a class taught to all incoming freshman at college....taught by a finance professor. I would trust those folks more than my 12th grade econ teacher.

It is just so frustrating that we are setting kids up for failure. Sure, some get it with no problems, but that is, maybe, 1 out of 10. We wouldn't be in this situation now if banks were more responsible and if consumers knew how to handle credit. said...

Lion, I am still with you. This needs to be taught. But then we run into the problem of the professor not agreeing with our philosophy. Kind of like sex education. Many of us agree that it needs to be taught. But how will it be taught? What ideas will be conveyed?

I'd like to be the professor teaching the class. But that's because I would be able to push my particular brand of education.

Anyone know if anyone is teaching this stuff in high school or college?

I'm teaching this stuff in law school (to anyone who will listen to me). But I don't have a classroom -- just my blog.

The Lion said...

So true. I just don't get how people cannot agree. I mean, it is simple. Get the credit and PIF and pay on time EVERY time. How do you disagree with that?

You will have credit AND be debt free! Yay! said...

Sounds good to me, Lion.

Maybe that's all we need to say. Get a credit card. Pay in full. Use it responsibly.

Have an easier credit life later.

Daniel said...

"Maybe that's all we need to say. Get a credit card. Pay in full. Use it responsibly."

At the same time I can't tell you how many people I have know that come back and say, "If you can afford to pay a CC in full every month...then why do you need one, just use a debit card." I have also had people call me mental for not minding extra bills by pay with a CC over a debit. I mean it takes longer for my computer to boot up all the way then making an on-line payment. Then once again, I get people who call me mental, again, for letting CC companies have access to my checking account. Some people's brains are just wired differently I guess. said...

My goal is to always give them the upside and downside of debit. And to give them the upside and downside of using credit cards. I then let them make the decision from there.

That last comment of yours, Daniel, is funny. We give the card companies our social security number but we shouldn't feel comfortable giving them our bank account numbers? That's funny.

The fox is already in the hen house after you've given up the social security number.

savemanatees said...

I attended boarding school from 1st-12th grade. I had an AMEX in my dad's name when I was 13. I also had store cards like Burdines and Macy's. My dad taught me well....he was the meanest CA I ever knew. If you broke his rules the consequences were tough.

The biggest rule breaker was my mom....we knew when envelopes with windows arrived in the mail to go hide! To this day, years after my dad died, my mom is terrible with her credit cards.

My DDs were NOT allowed to have CCs in college. After college I helped them get their first apts. I also made them AUs on low limit cards.

I am proud to say at 31 & 32 they learned my lessons well. IMO, giving plastic to 18 year olds is just plain stupid. I saw the sad consequences when I was admitted to law school. People not being able to get private loans due to bad credit histories at 18, 19, 20 et al.

IMO, it is never too early to teach children basic finances. They should be privy to the family finances at age appropriate levels.

Plastic can be toxic at young ages. The combination of being away from home for the first time AND plastic can have serious future consequences. This WSJ article didn't sway me one bit. No CCs for young college students. No income, no CCs...period! said...

If you teach the children at younger ages -- before college -- then they should be equipped to handle the responsibility. I believe it's all in the preparation. If you don't teach them anything before college, expect them to struggle. If you teach them good habits before then, though, I don't see a problem.

Granted, if you don't have a job (or don't have money in your bank account), and can't pay for your bills, then you have no business with a credit card.

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