Someone asked me in another thread whether I'm against all secured cards, and by the time I was done writing everything below, it had turned into a serious thread-jack. So, I copy/pasted and wrote this little intro. Please understand that I know there are differing opinions (I actually address a couple in my posts) but no one has ever shown me a good reason for a BK discharged person to have a secured card or store card. The key there is "good" reason. They just aren't needed, and honestly, talk to a real analyst/underwriter, they do hurt you once you get past the score and go to a human.
Anyhow, my opinion below isn't aimed at anyone specifically... it's just added info to something I've been saying for quite a while on these forums.
Intro over.
**********
For the record. I'm against all secured cards. I don't understand the point of them AND every one of my analyst friends has told me that; all other things being equal, a credit report that has a $1000 secured card is looked on less favorably than one with a $300 limit unsecured card.
The only exception I make is for secured cards that are 100% known to graduate AND change the tradeline reporting, removing the "Secured" flag. I'm still against them, because I don't understand the need (you can buy stuff on a debit card w/ the same protections), but cards that graduate are the lesser evil and since they DO graduate, there's really no reason to be against them long term.
For people who say the "Secured" flag doesn't matter, I reply "Then why is it there?" It's there because it matters. Just like store cards are designated as such, and are horrible, completely pointless things. For the record, I am 100% against all store cards, with NO exceptions. (I define store cards as cards that do not have a Visa/Amex/Discover/MasterCard logo. A Walmart card (as an example) is a store card. The Walmart Discover, however, is a regular credit card, not a store card.)
"But I got my store card so I could not pay interest for 24 months!". Really? Rule #1 of revolving credit: Never buy anything you can't pay cash for. Math #1 of interest... your savings account gets like .5% interest right now, so $1000 held for a year nets you $5. Not worth it, just pay cash - OR - if you always pay your bill in full and on time, use your Visa/MC that will get you the best cash back - OR - (again, if you always pay in full every month) use Discover Mall (or other CC mall) and get 5% Cash Back (available at Apple AND Best Buy, higher at a host of other stores).
Of course, if you've read any of my old posts, MY credit report and score exists for 1 reason: To buy a house. I rebuild/build for that reason and that reason alone. (I also rebuild to show that it can be done, but that's ancillary). I don't need to have anything more than a single Visa, single MasterCard + 1 other account in order to show how that works (3-7 revolving accounts is the optimum # for FICO scoring purposes).
Granted, I currently have 5 Cards: NFCU Flagship Visa, CapOne Quicksilver, Discover IT, and 2 Barclays Accounts that are merging at the end of this month. I carry the Flagship and Discover (Using the Disco only for the 5 point categories), everything else goes to the Flagship.
Every card I have has zero annual fees, which is why they're still open at all (we all know not to close 0 AF cards by now). Also, every card I have is set to auto-pay-in-full (the date depends on what the creditor allows) and I have enough cash in my checking account that I literally never worry about this.
I digress... I just wanted to throw out some honesty b/c I said we really only need 3 total cards.
Back to the point... Secured/Store cards, in my opinion, are really great ways for the banks to make extra money... but in the end, hurt more than they help and aren't really needed by people doing BK rebuilds.
Cheers,
-SM
P.S. There are plenty of people (in these forums) who've done great rebuilds and used secured/store cards. I get that... there are obviously success stories that start w/ secured/store cards. That's totally great, and I'm happy for you who've done it. I wish we had the exact same baseline and tried it w/o the secured/store cards to see which way works better/faster.
Unfortunately, we can't ever compare apples-to-apples in the credit world. But, I've helped hundreds of people (in person) with BK7 rebuilds over the last 3 years and not one of them needed secured/store to get started. Just sayin'.
Extra cheers!
Starting Score: ~470 preBK(8/2010)
Thanks for answering! I totally understand that. Patience is the key for rebuilding.
@pokerpro wrote:Soulmaster
my purpose to ... finance a car at the best rate possible when needed.
There's a better plan I'd like to suggest, since you're already doing awesome: Don't finance your car. Instead of making payments to a bank, stuff $500/mo into a seperate "Car Fund" bank account. In 3 years, you'll have $18K, in 4 you'll have $24K. $24K buys a REALLY nice, low mileage, 1-2 year old BMW 328i or Mercedes e350 that's certified pre-owned (which means it comes with a great warranty). Heck, you can buy a 4 year old Porsche Cayenne for $30K and never pay a dime of interest.
Obviously, we don't all need a beemer or benz (when I bought it, my 4 year old, loaded, Jeep Liberty Limited 4x4 was $10K), but you can see how the math works. I've had my Jeep for 3.5 years now and it's still worth 8 or 9 thousand. Which means if I sold it today and got $8K, I've spent $2000 for 40 months worth of car, or $50/mo. Add in some repars and it's about $100/mo.
As Dave Ramsey likes to say: Until you can literally drive down the street and throw $10,000 cash out the window to all your neigbors without it bothering you, it doesn't make sense to buy a brand-new, new car.
What I say is that the middle-class buying brand-new cars is a huge part of why the middle-class stays the middle-class.
Cheers,
-SM
On a personal note: If you can Q for a ~1.99% rate on a late-model used car (Navy has this), it MAY make sense to finance it. This is true if-and-only-if your investements are netting > 3.5% per annum AND you have enough cash/liquid investments to cover the car purchase outright, in addition to your emergency fund. But still, 0% on a brand-new car loses you huge sums of money as soon as you drive it off the lot, so that math doesn't make sense.
@Scupra wrote:SoulMaster, how did you manage to have the NFCU Flagship with no AF? Would love to not have one on mine haha! Thanks!
Total oversight on that AF! Way to call me out! I completely forget about that fee b/c the perks of the card more than pay for it (I do alot of overseas travel).
Still... HA!
-SM
You know what I agree with you regarding the brand new car right off the lot
I justified it by putting down 10K & paying more than the minimum per month. so my daily interest accrual was severely cut down.
And in terms of the car value, I was still ahead if I sold it only few months shy of leaving the dealer
And yes 
- I also wanted to play the FICO game by showing a recent installment account, My last one was back in 08
Heck I have not applied for any new credit in over two years.
@pokerpro wrote:
- I also wanted to play the FICO game by showing a recent installment account, My last one was back in 08
This is what "credit builder" loans are for... playing the FICO "installment" loan game.
@pokerpro wrote:
I justified it by putting down 10K & paying more than the minimum per month. so my daily interest accrual was severely cut down.
And in terms of the car value, I was still ahead if I sold it only few months shy of leaving the dealer
I hope you mean you put 10K down on a used car. Otherwise you "threw it out the window". If you did sell whaever for a proft three or so months after you left the dealer (and got your 10K back and all the interest you paid and still made a profit) and you don't do this for a living, you're in the wrong line of work! ;-)
-SM
For anyone reading this... Remember: After 12 months of owning a "new" car, you've got a 1 year old used car. Certified pre-owned fixes the "but I want the warranty" problem that comes up from time-to-time. The best savings comes w/ buying cars that are around 3 years old.
