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Establishing Credit

 
 
Craven de Kere
 
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Reply Tue 30 Dec, 2003 04:36 pm
Hmm, but if I already have an in (the Capital One card) is there an additional reason to go for a secured one?
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Dartagnan
 
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Reply Tue 30 Dec, 2003 04:36 pm
Good advice, timberlandko! I'm curious about how the early payment of a home mortgage works exactly. Say I pay an amount equaling half of what I still owe: Would I be paying my same monthly payment for a proportionately shorter period? Or a lower payment for the same period?

I ask because this something I'm contemplating doing. Thanks!
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Slappy Doo Hoo
 
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Reply Tue 30 Dec, 2003 05:03 pm
The thing I don't understand...when I entered college as an 18 year old, I pretty much off the bat got two credit cards, a discover with a $1000 limit, and a capital one visa with $500 limit, no problem. I had no job, except a summer job, and no credit at all.
Type in "student credit cards" on google, and check it out. Maybe you can lie and say you go to a college(if you don't)?
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timberlandko
 
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Reply Tue 30 Dec, 2003 05:31 pm
The advantage to a secured card is that you can start out with a higher credit limit, if you can afford the matching deposit. It reports exactly as a standard credit card. I'd get one for the biggest limit I could arrange the deposit for, if I were you.
Out of paranoia, I use a relatively low-limit secured card for internet transactions, "pre-paying" it enough to cover a larger charge as may be appropriate. The "Credit Limit" is low, but when necsessary, I add "Cash" to the account, which increases the "Available Credit" ... sorta combining the functions of debit card and credit card. They (it is a CapitolOne card, BTW) keep offering me limit increases and upgraded cards, but that's not what its there for. My "real" cards are rarely used on line, and then only with well established vendors.

D'art, "accellerating" a mortgage by overpaying the monthly statement is a form of pre-paying the loan. A major component of a mortgage payment is the interest cost, which is more-or-less "front-loaded" by the lendor. Each month, a portion of your standard payment satisfies the interest, and the remainder reduces the principal. The interest of course is calculated on the amount outstanding, so as that amount is reduced, the overall interest cost declines, reducing the proportion of the payment obligated to interest satisfaction. Not only can you pay off the loan more rapidly than the contract term, you can save substantial interst expense ... literally tens of thousands of dollars, for instance, will be saved by paying an average 15-year mortgage in 10 years, hundreds of thousands by paying off a comparable 30-year mortgage in 15 years. A mortgage is a liability, equity is an asset. The whole point of the game is to increase assets while reducing liabilities. Its called leverage. Bear in mind that a high credit limit is an asset of sorts untill used, but any debt owed is a clear liability. Given time and dilligent attention, one's assets can become essentially self-supporting.
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Noddy24
 
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Reply Tue 30 Dec, 2003 05:31 pm
My feckless stepson had maxed out three credit cards: $200, $500 and $1000. He collects Social Security disability because of schizophrenia and slight retardation and earns about $800 a month as a dishwasher.

All sorts of fools offer him credit cards--with high interest.

Doesn't Amazon offer a credit card these days?
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Dartagnan
 
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Reply Tue 30 Dec, 2003 05:56 pm
Thanks, timberlandko. I understand (and appreciate) the value of paying down a mortgage. I wonder about the nuts and bolts of it, re new monthly payments, and there are also tax issues, I suppose. Maybe I'll call the bank that has the mortgage and see what they say...
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Noddy24
 
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Reply Tue 30 Dec, 2003 06:40 pm
d'artagnan--

Useful web site: http://www.bankrate.com/brm/default.asp
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timberlandko
 
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Reply Tue 30 Dec, 2003 06:49 pm
I'd say it would be a very good idea to discuss it facve-to-face with trusted financial advisor, D'artagnan. There are lots of considerations, including tax ramifications. Any such scheme should be part ovf an overall investment strategy. And remember ... free advice, found on the internet or otherwise, is often worth exactly what it cost :wink:

Do some research.
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hamburger
 
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Reply Tue 30 Dec, 2003 07:43 pm
i wish the banks would stop bombarding us by mail and by phone to offer us their credit cards - seriously, it has become a pest ! we have a credit card that we use to purchase practically everything with (above $15 - $20). the card costs $18 a year and provides collision insurance coverage for rental cars (for any claims not covered by the rental contract - usually the first $500 - but sometimes more overseas). also it gives a 1/2 % "shopping credit", which means that we can usually shop groceries for free about once or twice a year. we always pay our balance off in full every month. we find a credit card also very handy when travelling in europe (even in russia and estonia we could use it even in fairly small shops). so far never had a problem with any "credit theft" - hope it stays that way. do some u.s. banks levy a monthly charge if the balance is paid in full - i thought i heard something on CNBC - ?. hbg
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realjohnboy
 
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Reply Tue 30 Dec, 2003 07:49 pm
re the question about the mortgage...I've heard you can save a significant about of money by making a 13th payment a year. Instead of making a payment once every month, make one every four weeks. I've also heard that you can save money by splitting your monthly payment into two semi-monthly payments.
There is a daily syndicated talk radio show hosted by a guy who is very much pro-consumer and is good at explaining things. His web-site, which I have never seen but which evidentally has a lot of answers to a lot of questions, is, I believe, clarkhoward.com

I don't see any reason, Craven, to do the secured card. Keep using your little card for mundane purchases and pay it off promptly. DO NOT BE LATE. Not only is there a finance charge but most cards also levy a late fee of $25-$29, regardless of the balance.
Before you know it you'll be receiving mailings with the headline "You've been pre-approved..." After reading the small print, you can activite one of them and cut up your current card.
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Noddy24
 
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Reply Tue 30 Dec, 2003 08:59 pm
Realjohnboy--

Actually, cancelling a credit card can damage your credit rating.

Also, any extra money that you pay on the principle of any loan whacks the interest. I have a car loan that I'm paying off--I've paid c. $700 extra in the last year and saved $1500 because the Credit Union can't charge me interest on money I no longer owe.

Craven--

Keep the card once it is obsolete. Don't use it. Also, establish a credit rating before you leave the country. I understand it is very difficult to do from overseas.
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MichaelAllen
 
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Reply Wed 31 Dec, 2003 01:02 am
For as long as you have it until you actually need credit for some reason, buy your stuff, get your statement, make one payment to Capital One a month habitually. You can't go wrong. They will eventually want to raise your limit.

I know a business owner who uses his card for everything. He says it's easier to keep track of his expenses that way. Of course, no one can live completely on $200 a month. But, you are off to a good start. Your long history of maintaining the payments, not letting your credit get ahead of you and not abusing credit will give you a great rating because you won't be considered a risk.
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Slappy Doo Hoo
 
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Reply Wed 31 Dec, 2003 10:37 am
Except remember Craven, a credit card swipe will NOT register in a stripper's asscrack.
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realjohnboy
 
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Reply Wed 31 Dec, 2003 05:05 pm
Noddy, I didn't know that cancelling a card could hurt you. Fortunately I merely suggested cutting it up and not using it when you got a better one.

One of my employees attempted to drive from VA to CT in a car with 257m on the Monday before Christmas. He got to MD and the car started misbehaving. A garage was able to solve the problem and get him on his way for about $100. He was happy that he had room on his Visa for that. If the bill had been $200...

MichaelAllen, I run a small retail business. Many of my vendors/suppliers accept credit cards and we use our corporate card A LOT. We monitor the charges at least once a day to make sure they are legitimate.
Here's the kicker. Not only do we save the 37 cents postage involved with mailing each check but also the time to do it. In addition, the card we have gives us a 2% CASH rebate at the end of the year on our purchases. (Not frequent flier miles; cash). We're running about 40m each month through, with no fees and never a finance charge. I don't understand who is making money on this other than me. No other credit card company has matched the offer so it will probably be ended tonight.
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