This is an excellent thread -- thanks, SnackTrader, for your well articulated post.
I agree with this. We do get excited about approvals, but it's vital that we also remember to use our credit wisely. I spent way too long a period of time with my cards maxed out, and it took me the better part of a couple of years to dig myself out of the hole. It's not a position that I ever want to find myself in again. As a result, I've changed the way that I view credit. I've mentioned this before, so please bear with me for repeating myself. I've come to view credit cards as tools. As such, they can either be used properly and with care, thus bringing convenience and benefit to their users. Conversely, if used carelessly, they can cause damage. It's important to learn to spend within one's budget and not view the nice, large CLs as extra money that's sitting around -- it's not extra money, it's debt that needs to be repaid.
And SnackTrader makes a good point about the temptation of 0% intro rates. I will admit to carrying a balance on such a card, but the charges are for major dental work. I have the money in savings to cover it -- I could pay the balance in full at a moment's notice if Citi required it of me -- but I'm chosing to their money interest free and allow my savings to continue to accrue interest, paltry APY though it may be. But I take comfort in knowing that I can pay the card off immediately if need be.
The problems arise when people use these cards for purchases that are beyond the budget, hoping that somehow they'll be able to pay the card off before the intro period expires. Or barring that, simply keeping up with monthly payments without a clear end point in sight. That's a big red flag, as so much money then goes towards paying interest that original purchase winds up costing far more than just the purchase price in the long run.
Can emergencies happen and funds not be readily at hand? Yes, and credit cards can be a great help under such circumstances. But then the emphasis needs to shift towards paying off those emergency expenses and not simply continue to charge unnecessary items. Sometimes life does require a period of belt tightening, and it's important to avoid the temptation to continue using credit cards for discretionary spending when they need to be paid down.
These are things that I've learned since joining myFICO. My credit was a mess when I first came here, but I had already taken the very first steps towards getting my credit life in order. I like to think that if I could manage to get my credit back on track, anyone can. But the best way to maintain good credit is to avoid the pitfalls that lead to bad credit. So enjoy your cards everyone, but use them well!
I usually buy something nice on the 0% APR card and the rest of the card PIF. I keep about 1-2% total UTILS reported. and about 10% reported on that card with 0% APR. So far it has work wonder for me. Even the Amex EO office said that I paid my card off right after the charge post. She gave me kudos!
Great advise and congrats on 1000th post. This forum is awesome and thanks for your contributions
A very informative and spot-on post SnackTrader! Your contributions to the forums are always appreciated... great milestone indeed!