This is one of the very often asked questions on both mimf and mifp.
Based on comments on both newsgroups, here is what seems to make most sense:
If you have no credit history, some people/sites may lead you into getting credit cards that have an annual fee or some sort of payment involved to get credit and establish a history. However you almost never need to go that way. You have several options depending on whether you are a student or not.
If you are a student, you can apply for student versions of credit cards. I know that atleast Citibank, American Express and Chase will give you student credit cards which as as good as the regular ones with decent credit limits (in the range of $3000, not $500 like many other banks).
If you are not a student, you can start by applying for store credit cards (e.g. the GAP card). Then wait for six months and apply for regular credit cards. Don’t apply for more than two or three cards in a six month period. This will affect your credit score negatively.
One thing to note, always make more than minimum payments on all your cards. Credit Card companies report to credit agencies one of the following (based on what I could figure from Providian’s credit manager/my credit reports)
If you have too many credit cards to manage, you can simplify things by merging credit cards that are offered by the same bank. All banks do that for you in a single call. The credit card merger will give you one card that has the combined credit limit of both the cards. This will have no significant effect on your credit history if done correctly because your total credit limit will remain the same. This makes merging your cards a much better option than closing the accounts of unused credit cards. When the banks of two of credit cards merge or one takes over another, take advantage of that to combine credit cards.
Make sure you combine the credit cards into the card that has better benefits (better rewards, lower fixed APR or whatever criteria are important to you). However if your credit history is not very long (under 5 years), my suggestion is to combine both the cards into your older card because it is generally not advisable to close down old credit card accounts.
You can get one credit report from every credit reporting agency free per year from annualcreditreport.com, however they still charge you if you want to see your FICO credit score.
Providian offers your credit score free every month if you have any Providian Credit Card, at their website. Also offered are alerts if your score changes too much in a month and a graph that traks your score over a period of time. So far Providian is the only bank that offers this.
At one time I had about 15 or so different credit cards from major banks offering all kinds of rewards including points, cashback, miles etc. Personally I have a lot of miles, and I’m not interested in getting miles from credit cards. Also most credit cards that offer miles are not great unless they have some kind of annual fee (Note: I have not used the much advertised Capital One card so I cannot comment on that).
So today I will feature the best reward programs that have nothing to do with miles. The first card is Citibank Dividend Platinum Select, which offers full 5% cash back on groceries, gas and pharmacy purchases and 1% on everything else (annual limit 300$).
The Chase Cash Plus Rewards card also offers the same benefits as Citibank Dividend Platinum Select.
The next is HSBC Cash Back Platinum. This card offers 1% cash back on everything you spend in a year upto 2500$, 2% cash back on your purchases from 2500$-5000$ and 5% on all purchases beyond that. I haven’t found this card mentioned on the HSBC Credit Cards website however.
Here I will blog about several topics, starting with finance. I am often found lurking in financial newsgroups such as misc.invest.mutual-fund and misc.invest.financial plan. Looking at the posts every week asking for advice and the same old replies and arguments every week, I figured I can blog about these discussions because there seems to be a general lack of understanding amongst people about managing their finances and credit. I don’t claim to be any sort of expert but I do know many of the options available, especially to new investors like me.
I have a page on Investing in India on my website, which is reasonably trafficked and I hope to achieve that with this blog too.
Parchayi.com - Personal Finance Simplified