This year, shortly before turning 26, I opened my first credit card. It's a Capital One Platinum MasterCard, for which I was pre-screened. It comes with a $500 credit limit and an interest rate that almost exceeds my age.
"And it's got travel accident insurance!" I told my mother excitedly on the phone, squinting at the fine print on the approval letter. "'For loss of life or limb at no extra charge!'"
If you're wondering why I'm so excited to be the owner of what is basically a Fisher-Price credit card, you have to understand the Napoleon complex that not having any credit gave me. I was never trying to make a point by living without a credit card, like those famously responsible members of my generation. "Millennials are saying no to credit cards," a recent CNN headline reads. My problem was that all the credit cards were saying "no" to me.
The Credit Catch-22
I had been trying to get a credit card for a few years; I applied to several of the easy ones my friends promised had been their "starter" cards, but had zero luck. Companies that promised a response "in only 60 seconds" took about two weeks to let me down over snail mail.
The problem was I had what agencies call a "thin file" -- too little information about my financial history to vouch for me. I'd never had a credit card, student loans or car payments. Years of diligently paying my rent or utilities on time had never been picked up by a credit reporting bureau. All I had to my name were a handful of hard credit card inquiries. Basically, I was stuck in that awful credit Catch-22 of not having the lines of credit you need to build a credit score to obtain access to credit. It's important to hop in and say here that there were a number of options I could have taken at this point:
- Opening a secured card: These cards typically require an up-front deposit of several hundred dollars which will be used as collateral. They also usually charge some sort of annual fee. Good news is, they report to major credit agencies, getting you on the map, and after six months to a year, you can upgrade to a real credit card and get your deposit back.
- Calling utility companies: Service providers like utility companies usually only report you to the major credit bureaus if you mess up, but you can actually request that they add good behavior -- like consistently paying your electric bills on time -- to your report. This only works if the utility bills are in your name, so if you're Venmo-ing that reliable roommate every month, you're out of luck. An upcoming FICO score will include utility payments.
- Get a cosigner: Piggyback off the track record of someone else when applying for a loan or a credit card. Keep in mind, there's really nothing the other person gets out of this deal.
Instead, I just kept applying to cards that were bound to reject me and, in the meantime, getting by (more or less) without credit.
Financing Your Life Without a Credit Card
If you don't have a credit card, you have to be a little craftier about how you pay for certain things, like car rentals, hotel stays and items you can't afford.
The first two usually require a prohibitively big cash deposit or a hold on your debit card. There are, however, several ways to get around this, including the time-honored tradition of mooching off your companions. For example, if you're sharing a hotel room with a group, there's always going to be the reliable friend who will put the deposit on his credit card (he's probably the one that drove you all there in the first place). You'll Venmo him for the gas and room costs later.
If you don't want to continually be that friend, you can also try to bargain with the hotel or rental company over the phone; it's amazing what a little bit of schmoozing will get you.
That's what I learned from Cynthia MacGregor, a freelance writer and editor from Palm Springs, Florida, who's been living without a credit card since she declared bankruptcy three years ago. She told me she never missed having a credit card at all, except when she had to rent a car on a business trip. She'd previously had luck at a rental car company in Austin, Texas, that didn't require a credit card, but learned in advance of the trip that cash deposits were no longer accepted.
"But when I expressed disappointment, saying that had not been a problem last year, the woman asked me to hold on, and a minute or two later returned to the phone to tell me they would make an exception for me," MacGregor said. The "asking nicely" policy works surprisingly well for a number of the purchases that usually require a credit card. But it's not going to fly when trying to buy something you simply can't afford.
Dirty Ways to Get by Without a Credit Card
This is something you shouldn't do regardless of whether you have a credit line, of course, but if everyone stuck to only purchasing what they have the money for up front, the average household credit card debt wouldn't be almost $16,000.
As a post-grad with a studio apartment, part-time job and no emergency fund, I didn't have a credit card to rack up charges I couldn't pay. But I did make a harmful financial move from time to time when I needed a little float. Instead of sitting down and figuring out what I could live on, I would make it to the end of every pay period with $0 in my checking account. Then, I would make a calculated overdraft. Overdrawing my account never hurt my credit (since a fresh direct deposit always wiped away the deficit), but it took a hefty chunk out of my budget each month.
It's basically the equivalent of treating your checking account like a payday loan, and it'll get you in the exact same cycle of always being in debt to yourself. The Consumer Financial Protection Bureau estimates that the interest you'll end up paying on a single overdraft is about 17,000 percent APY. It was a hard habit to break. And it taught me something important: I probably don't deserve credit.
Why People Like Me Probably Shouldn't Have Credit Cards
Recently, I've been talking to people who also lived or are currently living without a credit card. In most cases, on their end, it's a choice - it's because they weren't responsible back when they had credit.
Have you heard about the Stanford marshmallow experiment? It was a study done in the 1970s that measured how well a bunch of kids were able to delay gratification. Young participants could either eat one marshmallow now or two in 20 minutes; years later, they found those who were able to wait the 20 minutes for a 100 percent return on marshmallows had higher GPAs, better graduation rates -- and, unsurprisingly, higher credit scores.
My natural resting state is as a one-marshmallow kid. And that's true for a lot of people. Overspending is classified as an impulse control disorder by the Diagnostic and Statistical Manual of Mental Disorders, just like alcoholism or an eating disorder. It affects about 6 percent of women and 5.5 percent of men, according to a 2006 Stanford University study published in the American Journal of Psychiatry.
"Basically, I treat myself around credit cards the way an alcoholic treats themselves with booze," Allyson Whipple, an adjunct professor at Austin Community College, told me. "I just need to stay away from them!"
Well, I have one now, along with a rough budget, a fledgling credit score and a great respect for how much trouble credit can cause. I diligently pay off my balance every month, because I know what a slippery slope it can be if I don't. I'm working on budgeting, saving and investing (I opened a 401(k) last year and contribute the most I can for a full employer match). Basically, for the first time in my life, I'm living like I don't have credit -- with my first credit card.
Freebies are among the many benefits of having a credit card. Some typical perks include car rental insurance, extended warranties on purchases and free credit scores, but many issuers have a collection of more luxurious offers, available to only some of their cardholders.
Rewards and what we're calling "perks" differ -- rewards are generally redeemable through points or miles you accumulate by spending money on the credit card. A so-called perk is an exclusive item or discount only available to card-members.
Even if you don't have an account branded as a "rewards card," you may have access to some special deals your issuer arranges for its customers. Be careful to read the terms and conditions, and know that it's usually not worth financing purchases just to get the associated rewards, because interest rates on such cards tend to be quite high.
When choosing a credit card, focus on what's most important to you, and make sure you only apply for cards you think you're qualified for. Check your credit before applying for a credit card, to see if your score meets the credit issuer's credit score threshold for the approval process.
1. Free Monograms
The L.L. Bean Visa credit card allows cardholders to have their merchandise monogrammed for free. It's not a huge money saver, but it's unusual.
2. NFL Sideline Access
The NFL Extra Points card from Barclaycard gives fans a slew of offers, like visiting a team's training facility or access to the post-game press conference. "I was on the sidelines of the Denver Broncos game during the warmup, and when the warmup was over I went to the tunnel where all the players come out," said Jason Steele, an expert on credit card rewards and a frequent contributor on the topic to Credit.com. "It differs by team. These are generally things you couldn't get -- it's not something they just offer to everyone."
3. Pow-Wows With Celebrities
Citi Private Pass is a program for Citi cardholders that gets them into some ticketed events for free. The most recent free event is a talk with actress Claire Danes, tickets for which cost $40 but are complimentary for Citi cardholders. PrivatePass also allows cardholders to purchase various event tickets before they go on sale to the general public, including concerts, sports camps, restaurants and more.
4. United Virtual Airlines Flight Simulator
Some credit card issuers auction rewards to their cardholders -- instead of bidding money, cardholders bid miles or points for the prizes. In an auction through United Airlines and Chase for their Explorer cardholders, Steele got the opportunity to go to the United Airlines flight simulator center. "This is where airline pilots travel from all over the world to train," Steele said. He got to use the simulator and other equipment in the facility. "I got to jump down the emergency exit slides -- it was pretty fun."
5. BMW One-Day M School
One of the items on the InterContinental Hotels Group auction site -- associated with the IHG Rewards Club Select Credit Card -- is a class for two people at the BMW Performance Center in Thermal, California. The winner gets to exercise his or her driving skills in M model BMWs, just like professional drivers.
At publishing time, the NFL Extra Points card from Barclaycard, IHG Rewards Club Select Credit Card and United MileagePlus Explorer Card are offered through Credit.com product pages, and Credit.com is compensated if our users apply for and ultimately sign up for any of these cards. However, this relationship does not result in any preferential editorial treatment. It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
If you ask me, shopping online is the way to go. No need to pack the kids in the car; no need to fight the crowds in the store. All you need is yourself, your computer and a piece of plastic. And in some cases, you may even be able to do without the plastic.
In fact, paying without plastic is No. 10 on our list of ways to get a discount on everything you buy online. Keep reading to see what other strategies made the cut.
1. Chat with customer service. Even people who regularly haggle for purchases in person forget they can negotiate online. The best way to ask for a discount is to open up the chat box on the retailer's website.
Sometimes, if you leave your shopping window open long enough, a chat box will pop up asking if you need help. Other times you may need to unearth the chat option from the contact page of the site.
Once you get a representative online, tell them you're shopping on a couple sites and looking for the best deal. Ask if any discounts are currently available. If none, ask if the company ever does free shipping. There's no guarantee of getting a discount this way, but it's a tried and true method that has worked in the past for me.
2. Give the retailer a call. Maybe you're on a site that still lives in the dark ages and doesn't offer customer service via chat. In that case, the phone is your new best friend.
It's the same routine as when you're chatting. Explain you're shopping for a deal, and ask if they have any discounts available or if free shipping is offered. The worst they can say is "no."
3. Check out coupon code sites. RetailMeNot is the very first place I look before shopping online. I find it tends to be the most comprehensive and accurate source of coupon codes on the web. You can also check out ShopatHome, CouponCabin and FatWallet for savings codes.
If you're not familiar with coupon codes, they're usually a phrase or a string of numbers and letters that you enter on the checkout page for an instant discount.
4. Install an extension on your browser. When it comes to using coupon codes, you can save time by installing an extension on your browser that will automatically search for savings. Honey is the most popular option, but there are others such as Coupons at Checkout.
You could also add an extension that will search for better deals while you're shopping online. InvisibleHand is one example. It will comb through 600 retailers to see if a better price is available elsewhere.
5. Abandon your shopping cart. It may not surprise you to know that online retailers are tracking your every move. And it's undoubtedly distressing to them to see someone with a cartload of stuff close the tab and move along. That's probably why you may find a coupon code landing in your mailbox a day or two after you leave your cart.
To get this trick to work, you need to be logged into your account so the retailer knows who abandoned the cart. Then put your items in the cart and leave the site. The list of retailers who offer codes to those with abandoned carts is likely fluid, but RatherBeShopping has a list of 17 stores that have been known to dole out the discounts.
6. Sign up for the mailing list. With sites such as RetailMeNot, shoppers can easily share codes with others. However, some stores have made that difficult by issuing one-time use codes.
To get these, you need to be on the VIP list, aka the mailing list. Sign up to receive newsletters from your favorite retailers so you can get discount codes and sales announcements delivered straight to your inbox. Just be sure to use a secondary email address so your primary account isn't overwhelmed by these messages.
7. Use discounted gift cards. Another surefire way to save money, even when there isn't a sale or coupon code in sight, is to use a discounted gift card.Timing Your Spending
Why would anyone ever sell a gift card for less than face value? In many cases, they come from people who've received them as gifts and want to convert them to cash. Having $40 in their pocket can be more valuable than having a $50 gift card to a store they'll never visit.
While some people sell discounted gift cards on eBay and Craigslist, I'm wary of handing over my cash for cards that haven't been verified. Instead, I prefer to purchase through websites like CardCash or CardPool, which offer some buyer protections. To compare the discounts offered on gift card sites, go to GiftCardGranny to quickly see what's available.
Finally, warehouse club members can look online or at their local store for discounted gift cards. Costco, Sam's Club and BJ's all have a selection of discounted cards that cover everything from dining to travel.
8. Shop through a cash-back website. Using a coupon code and paying with a discounted gift card is a great way to double dip on your savings. On some sites, you can triple dip by shopping through a cash-back website.
Ebates is my favorite cash-back site, but other sites, such as ExtraBux, are popular, too. Cash-back amounts can range from a fraction of a percent to up to 30 percent for some retailers. You simply need to create an account and click through it to the retailers. After you make a purchase, the cash-back site will credit your account, usually within 30 days. Once you reach a certain minimum amount, such as $10, you can cash out via Paypal or opt to receive a check in the mail.
Similarly, you could use a site like MyPoints to earn points that can be redeemed for gift cards. And don't forget about the shopping portal for your favorite credit card, which can be a way to earn bonus points or miles.
9. Share on social media. Companies like Social Rebate and ReferralCandy are in the business of setting up companies with referral programs that let customers gain discounts simply by sharing their purchase online. While not standard on most major retailer sites, you can find the option to share for a discount at some smaller stores.
Speaking of social media, sending a message to a company on Facebook or Twitter can be another option to request a discount code if you strike out on chat or over the phone.
10. Pay with points. Our final way to get a discount on everything you buy online is to leave the plastic behind and pay with points or rewards instead.
This option is one that is just starting to gain traction, but I wouldn't be surprised if more rewards programs and retailers jump on board in the coming years. Here are a couple of programs currently available:
- American Express Membership Points can be used to pay on Amazon.
- Etihad Guest participants can use PointsPay to redeem points at 30 million merchants worldwide.
- Discover Cashback Bonuses can be spent on Amazon, iTunes and Overstock.
NEW YORK -- If learning how to save and master financial literacy is something people should learn young -- the future may be bleak.
A study looking at what first-year college students know about finances shows most can only answer about a third of general financial questions correctly. The questions -- ranging from topics like the right amount of money to set aside in case of a financial emergency, to how long a late payment remains on your credit history -- were part of the "Money Matters on Campus" survey sponsored by education finance site Higher One and education technology site EverFi.
"The results of the survey are disappointing, but not unexpected," said Tom Arnold, professor of finance at the University of Richmond. "Most money habits come from experience and example. Incoming freshman are not very experienced and have more than likely relied on their parents for financial guidance and financial support."
"Consequently, prior to college, many students do not have to budget their money nor be concerned about paying off debt," he added.
While not knowing the correct answers to questions is one thing, actual risky financial behaviors are much worse. The research showed 12 percent of first-year students at four-year schools do not check their account balances because they are "too nervous," and only 39 percent use a budget.
The study also found while students were more financially literate if they took financial literacy courses in high school, those that had checking accounts were even more so. Also, students attending two-year schools proved to be slightly more knowledgeable -- possibly because they may have a higher degree of personal financial knowledge due to their "age, financial experience and general lifestyle differences," the study suggested.
Kelly Gardner, a 21-year-old senior at San Diego State, said experiences have contributed most to her financial development. Ten months ago she started work at a public relations firm, which has given her even greater insight into the financial habits and missteps of college students.
"I am not the standard when it comes to college students and financial habits," she said. "I began investing my money when I was a senior in high school and have become knowledgeable about investing through my own trials and errors, and now through the experience of my clients."
She added her ability to manage finances has come specifically from the advice of her parents and clients.
"Unfortunately, I cannot credit my public school education for any of my financial knowledge and skills," Gardner said.
The lack of schooling around money and finances doesn't come as a surprise.
"It's amazing that our educational system prepares young adults for math, reading, science, sex education and more, but it doesn't prepare them for the one thing that they'll be forced to make life-changing decisions on -- money," Herman said.
He added the burden of educating kids on finances falls on the parents.
"It all starts at home," Herman said. "And that's OK, because there are tons of free resources to help parents." He added that the Internet has made it easier than ever to find detailed information on budgeting for college students, smart spending tips and college loans.
"It's just a matter of placing a high priority on financial education and respecting money," Herman said. "Parents need to have 'the talk' about finances. Most talk with their kids about the birds and the bees, and let's face it, that's uncomfortable. But when it comes to money, mostly silence."
While everyone agrees good financial habits are important, Arnold said educating kids about finance is just like having a proper diet -- it is just too easy to ignore it until it becomes a problem.
"Given the general lack of savings for retirement and for unexpected needs by many households, college students do not really have very good examples to follow either," he added.
Swipe? I Don’t Think So: If the thought of being hacked or losing your plastic triggers insomnia, good news awaits: In 2015, U.S. credit cards feature the chip-and-pin technology that’s been around for decades overseas, says the Wall Street Journal. You won’t have to destroy your old cards, but if you long for safer, hack-proof plastic, it’s set to debut in the year ahead—in October 2015, specifically. Visa and MasterCard are already begun issuing new cards devoid of black magnetic stripes and signature lines. Business Insider analysts say the U.S. is currently 10 years behind the rest of the world. Expect a speedy catch-up in the year ahead.A Little History: After the Target data breach affecting 70 million people in 2014, the Policy Counsel for the Consumers Union gave notice to credit card issuers that the time had come to catch up with other countries. Chip and pin—also known as EMV for the company that invented the technology–thus became the name of the game as financial institutions moved briskly to implement the switch. Multiple layers of security are built into these cards, but proof of their effectiveness is undeniable: in France, hacking and theft decreased by a whopping 78-percent in the first year of using pin-and-chip cards.Will That Fix Everything? Probably not, but pin and chip is a great bandage on a system that’s grown increasingly corrupted thanks to imaginative hackers and diabolical schemers operating around the world. The credit industry spent 2014 defining migration strategies and while conversion from swipe-and-sign protocols adds safety measures to purchases, it’s not considered a permanent fix. Even the most optimistic industry experts admit that a completely operational EMV environment is still down the road. Less than 60-percent of credit cards and only 26-percent of terminals required for new card transaction processing will be operational by the end of 2015. This is a huge undertaking and bugs (e.g., pesky criminal types intuiting penetration strategies) are likely already at work on the challenge.
All On Board? For the most part. Credit card issuers and merchants are committed to changing the way credit cards are used and supportive of EMV, but that doesn’t mean that looming regulatory issues are moving along at warp speed. Rumors are already swirling around the issue of liability shift that could pit merchants against financial institutions offering chip-enhanced cards. Competing forces within the credit industry plus unknown future regulations, potential customer service problems—even the potential for limited EMV card supplies—lurk beneath the surface. For these reasons and more, you owe it to yourself, your budget and your peace of mind to choose wisely in 2015 as you confront the sheer variety of credit card choices that come your way.
How it Works: You won’t have to learn new behaviors to use plastic in 2015. Outward-facing terminals are at the nexus of the process. You slide your card in, key in your pin and that’s it. Nobody else is party to your transaction. Concludes the Wall Street Journal: Your merchant may still accept your “old” card, but liability issues kick in once EMVs are available and mandated after October. No bank or merchant wants to pay damages for refusing new technology, so expect pressure to use EMVs. Perhaps the biggest difference you’ll experience is that your card never leaves your sight! Say goodbye to wait staff disappearing to run your bar or dining tab. In the future, a terminal will be brought to your table so nobody else touches your plastic but you.
What’s a special offer? The definition is unique to a situation, but if you’re a first-time credit card seeker, you might belong to a rarefied credit class that comes with special benefits. Oftentimes these special offers can be very enticing, and provide awesome benefits. Check out these special offers:
The Discover it Card offers an introductory rate 0-percent for 18 months balance transfer introductory rate that can give you a long bit of breathing room, taking you to the end of 2015. The Discover it card is rated 4.8 of 5.0 stars by thousands of card members plus there’s no annual fee. Enjoy late payment forgiveness the first time you forget your due date. Free FICO scores on statements help you keep tabs on your credit in 2015 and beyond.
Capital One Venture Rewards Card piles on the benefits once you’ve said yes to their offer. Perks are twice as nice as most mileage travel offers! Spend $3,000 using the card within three months and grab 40,000 miles, then get unlimited 2X miles on all future purchases. Blackout dates? Airline or hotel restrictions? No way—and miles never expire, so go abroad and forget foreign transaction fees because your card has you covered on both fronts.
Capital One Quicksilver Cash Rewards Card. Consider Quicksilver if you’re working to build your credit history on the road to success. Receive 1.5-percent cash back on everything you buy, request the rebate any time you like, enjoy 0-percent interest until May 2015 and enjoy knowing that this cash back deal won’t expire– nor will you be subject to rotating reward categories that leave you dazed and confused. Build solid credit with this card and earn a higher credit limit by making five on-time payments. Additionally, fraud coverage is free.
Gold Delta Skymiles from American Express. It’s still the ultimate plastic icon and these days, it’s easier than ever to get special offers through AmEx, particularly if you’re a patron of Delta and want a card that piles on extras as you travel throughout 2015. Make $1,000 in purchases in three months and rake up 50,000 in bonus miles! At that point, more benefits accrue: Get 2X Delta miles with purchase and 1X miles for other transactions, plus a free checked bag on a Delta flight, priority boarding and zero annual fees for your first year.
Discover it Card. It doesn’t matter how many websites you visit looking for the best balance transfer deals in 2015—you’ll find the Discover it card at or near the top. This card never met a person with excellent credit it didn’t love, so enjoy 18 months of interest-free relief following balance transfers and you won’t be penalized, even if you exceed your credit limit. Discover is entirely U.S. based, so if you pride yourself on dealing exclusively with U.S. companies, this card has your name on it. Besides, if you’re late with one payment, you are forgiven. A little math should convince you that the Discover it card can make 2015 a better year for your fiscal health.
Chase Slate. There’s a reason Forbes Online declared this card one of the best balance transfer offers back in 2013 and the status of this card is expected to remain high into 2015 and beyond. Make a balance transfer during the first 60 days and there’s no balance transfer fee, plus you pay less interest with this card once the account is seasoned. Enjoy a 0-percent variable introductory rate on purchases for 15 months, at which point, this account reverts to as low as 12.99-percent, depending upon your credit, and there’s no annual fee. If you are already an excellent risk, this could be the card for you.
Lake Michigan Credit Union Prime Platinum. If you like to patronize small businesses and avoid big corporations, you may wish to explore one of the best balance transfer credit cards via The Lake Michigan Credit Union. This Prime Platinum has one of the lowest APRs on the planet: 6.25-percent variable APR. You read that right. Your long term-debt could come to a crashing end in 2015 if you take advantage of this institution’s no transfer fee and then enjoy 0-percent interest for 15 months. Analysts like to use Chase Slate as a point of comparison if you’re considering a balance transfer card backed by a smaller institution. Do you have to be a member? You do, but you can become one simply by making a donation to the Michigan branch of the ALS association. When last were you offered a great credit card choice that also assists a worthy charity?
