Credit Card

fabrizio
Fri, 13 Jun 2008 23:02:29 +0000

first of all, thats not true… second, the amount of credit a credit card builds is quite minimal. You are also paying more due to interest, I don’t see much benefit. You don’t pay transaction fees when purchasing something with a debit card…?



As you know from the “things to know” thread, I’m pretty biased in favor of credit cards.

A debit card doesn’t have any effect on credit history; it’s a plastic checkbook, so no line of credit is involved. By contrast, a credit card has a direct effect on credit history, and this effect can be either positive or negative.

Basically, the way to improve credit is to use credit. A card isn’t the only route; auto loans and mortgages are also lines of credit. In fact, successfully paying off auto loans and mortgages gives big boosts to one’s credit history. But, how many college students actually take out either auto loans or mortgages while in college? I would think the number is low. So, those aren’t viable options for us students seeking a good credit history. A card, however, is. “Quite minimal” is better than “nothing.” Ceteris paribus, a person with “quite minimal” credit history will get a better auto loan rate than a person with no credit history.

You only pay more with a credit card if you pay late. Paying on time is cheaper. Just think about time value of money; all else equal, paying later is less expensive than paying now. I admit that it takes a responsible person for this aspect of credit cards to apply, as many irresponsible people find themselves ankle-deep in debt very quickly. If one follows the same rule for credit cards as he would with a debit card, that is, don’t buy what you can’t pay for, then I see no reason why he would have any problems.