Banking and Creditcards: I need some advice

So for the first time ever I have enough disposable income and a reason to justify the hassle of opening a bank account and Credit/debit card. Before it was almost always all gone as soon as I cashed the check ans what was left could just be kept in cash form since I never really needed a credit card.

Now I realize I have absolutely no idea what to do. That is not an exaggeration, I know jack-shit about it. I grew up poorer than dirt where what little we got went immediately into paying off bills and dept, so was a little difficult to learn the nuances of credit and banking. So I'm turning here for advice.

 

USA.

And no not really. I just know that Debit draws directly from the account and Credit just bills you later. Appearently there's little nuances like hidden chargers and shit that I don't know about but the TV keeps telling me exist.

 

Credit cards are good... so long as you adhere to 2 VERY VERY VERY Vital rules.

1. Never spend more than you have. (This is a vital trap that credit cards present to those who are unused to them. They aren't free money and treating them that way is the easiest way into dept)

2. PAY IT BACK IMMEDIATELY THE FIRST CHANCE YOU GET. (NEVER wait. Credit cards are a good way of using your cash without carrying it around but you NEED to always be dilligent with how you use it. Not excuses, if you've spent money with your card you make sure that money goes back on.)

Pay attention to these two things and you will be surprised at how useful your credit card can be without ever becoming a burden. And the thing is the more you have spent on your card while DILIGENTLY paying it back, the more they will allow you to spend at once... which can be useful for things which need to be quickly purchased but you dont have the disposable cash for at the movement. Being careful not to fub your credit rating is one of those things that separates people who live hand to mouth from those who eventually see their way out of dept and into good savings.

Its Increasingly more important to do so should you create your own business. So have fun and best of luck with it. ^_^ (take this bit of advice from a business owner's son)

 

So other than helping (Or hurting if you fuck up) your credit what do credit cards have above debit cards?

 

In regards to bank accounts, there's generally two kinds (a bit of a simplification, but whatever). The easiest way to think about it is that savings accounts will increase in value by some amount of money per quarter from interest. Keep in mind that the interest rate is generally lower than the inflation rate. With checking accounts, on the other hand, you don't get paid interest, but you do generally get a debit card and checks to go along with the account.

Generally, you'll want to put some portion of your earnings into your checking account to cover expenses, and the rest into savings/investment accounts.

As far as I'm aware, there aren't any stores in the US that require that you use their credit card. There are some stores that have a store credit card. Usually they'll offer discounts on items that you buy at their store if you use their card.

In some senses, a credit card can be understood as a loan where interest isn't assessed until the end of the month. Paying with a debit card, on the other hand, is essentially the same as paying out of pocket, where instead of paying with cash on hand, you're paying with the cash you have in your bank account.

As Xicree said, as long as you're careful about how much you spend, and you make sure to pay off your balance in full at the end of each month, credit cards are much better than debit cards, since you're essentially getting an interest-free loan until the end of the month. The problem there, of course, is avoiding spending more than you can afford to pay off.

 

Also, pay attention to the APR. Something like 11-14% is good, but a lot of young peoples' first credit cards will try and soak you with 29% APR or something. A bank credit card is usually pretty good on this count.

Yeah, I set it up so my credit card gets paid automatically at the end of the month.

You'll have a credit limit you can take out that's totally different from the actual amount of money in your account. New credit card is probably only 500 or 1500 or so though. Then once you get better credit (which paying for stuff on a credit card, or taking out a small loan and paying it back timely, or just having a fulltime non-temp job helps with) you can get the credit limit increased.

Do make sure not to get credit checked too many times (loans, increasing credit limit, etc) in a year though, or that dings you.

 

Yeah but the problem is that if you are already barely finding a use for them a debit card has the advantage that you can never go into the problem of having to pay the interest rates because of a sudden downfall. On the other side the credit card is more useful if you need money now , for example for a medical bill.
And of course a credit card can depending on the limit be more costly if it gets stolen from you compared to your usual account.

 

Make sure to keep an up-to-date record of how much you have, and how much you spend, as well.

 

Is there any reason not to get both? Or would that simply screw me over with some kind of increased risk of something or other.

Also, does anyone have any advice for opening a banking account for the first time?

 

Not really. A banking account with a checking account and buying a stack of checks is nice. I don't use checks often (pay bills online) but I like having the option. And some will charge you a monthly fee of about 10 bucks and some won't. If you're a student, student accounts are usually free.

 

If you follow both these rules then there's no point using a credit card for daily stuff.

if you don't want to spend more than you have, then spend your own money instead of borrowing, if you want to pay it back immediately, that you might as well just pay with your own money instead of borrowing.



that said, Credit is good for emergencies, have one, keep it around for when you are broke and desperately need to pay for something that you can't afford until your next wage comes in food, rent, fixing the broken boiler, or medical bills, (you-poor-pitiable third-world-no-healthcare-american's) for everything else, use Debt.


that said, keep in mind that i'm a 21 year old man(boy!) with a debt card and no credit, who still lives with his mother.


I barely know more about this than you do, but I know that the whole "everyone owns a credit card, its completely normal" is a trick.

The banks automate everything so you don't realise how easy it is to spend more than you have.

the moment you start borrowing money, they have their hooks in you, its fine for a while, but intrest piles up until you miss a payment and you get a charge for not having enough money, if you can't make the normal payment, then making a normal payment AND a fine is impossible, then all of your "disposable income" ends up going into paying interest and keeping debtors off your back.


basically, get both credit and debit, then use Debt (your own money stored electronically) to buy everything when you can.

If your washing machine explodes or something, and you need a new one ASAP, then credit, but make a note and pay it back as soon as you can. cut your spending if you have to, stop using your "disposable income" for anything until you have paid off your credit purchase. then you can go back to spending your extra income however you like.

If you catch yourself using your credit card more than once or twice a week, make a note of it and cut down on your spending. The long and the short of it is that you are now spending more money than you make.

obviously you need to stop.

Keep in mind that every time you use your credit card, you are taking out a very minor loan from the bank.

do everything in your power to make sure you never owe anyone anything.

all loans/credit charges/debts are to be paid off the very second your wage comes in.

They pile up faster than you would ever believe possible.


Very clever people with decrees in economics specifically designed it to work that way, after all.


edit: yeah, this is coming from an english man. so... things might me slightly different.



as for advice for setting up your first bank account...


is there any older member of family who could go in with you?

it might feel embarrassing having your mom go in with you, but its not uncommon enough for the bankers to laugh at you behind your back.


It's just... if you go in with no idea what you are doing, and looking overwhelmed, then you might get taken for a ride.

Try and keep in mind that no matter how friendly these bankers act/look, it is their job to make money from you.

I know I sound a little paranoid, but there a reason the TV is full of adverts telling you how bankers have been fucking people over with PPI for years.

Granted, the lawyers offering to "help" with that are also looking to take us all for a ride, but hey, everybody knows not to trust a lawyer, right?


Just having someone who LOOKS like he knows what he's doing would be a huge help.

obviously a family member is better than a friend for this, but if needs must...

 

doublepost

 

From what I've heard spending responsibly like that isn't actually beneficial for your credit score. You need to borrow money and spend it responsibly to show you are responsible, instead of just being responsible.

 

If you want to be able to take out bigger and bigger loans - car loans and eventually house loans - it does help to take out a few little loans and pay them back responsibly with a little interest.

 

yeah, the bank wants to know that you can play along, before they let you borrow the big bucks.
still I think its better to not borrow at all, unless you need emergency cash.


obviously this makes buying a car/house difficult, but...


The idea of taking out a loan for a house, then spending the rest of my life trying to pay it if feels...wrong, to me.

I don't want to owe anyone anything.

going through life never owing anyone anything is a nice dream, but hell if i know how to do it practically.