Am I the only one who finds it stupid to use a credit card to pay off your cell phone bill just to build credit?

 

I wouldn't call it stupid. A younger person needs a way to start building credit. As long as you pay it off at the end of the month it is not stupid at all. People have to start gaining credit some how. I started using a credit card for gas and paying it off every month.

 

Proverbs 22:7

Having credit is overrated.

 

You mean it's not smart to pay my American Express off with my Discover card?

 

exactly! i quit using my debit card mostly so i can build credit and i get points with my credit card so i even get money back! plus your credit card company will usually refund any fraudulent charges incase it gets stolen or lost.

 

I put virtually everything I buy on a credit card (including my cellular bill, my monthly electric bill, etc.) and pay the balance off in full every month. The cards I use consistently pay a rebate of between 1% and 5% cashback for every transaction I make, depending on the type of purchase. By playing the different programs to my benefit every month I usually end up earning between $200.00 - $300.00 cash back every quarter -- money that goes directly into my pocket for what ever I want use it for!

Now the caveat -- I am an absolutely militant budgeter and have reached a point in my life where I earn enough money that I don't sweat paying the bills month-to-month. I would never be tempted to go out and purchase something I knew I couldn't pay off the moment the bill came in the mail, so I will never "get in over my head" with a credit card.

So for me, it makes perfect sense to use my credit cards for virtually every transaction I make.....

 

So do you just sent money aside to make sure you can pay your credit card bill fully?

 

Exactly !! you need to budget that money for your various monthly bills anyway, so instead of sending out indiviual payments to the various places, (electric, cell phone, cable etc. etc.) you put those payments on your CC and then send 1 big payment to the CC bank to pay off everything you just put on it.

 

Yep. Every paycheck I do a budget on a piece of paper where I write down the amount of my check, and then subtract out of it every expense I know I have to account for during that pay period. Whatever amount is left at the bottom is my disposable income for that pay period, and I simply keep track of what I spend so I never get caught owing more money than I have in my check book. I also keep a tally of money that has already been obligated for expenses and then simply cross that amount off once I pay the bill.

It may sound confusing, but if you do this for a few months in a row you'll probably find that you pretty much know how much disposable income you'll have to spend with each of your normal pay periods without even crunching the numbers -- but I still do the budget so I have the amount down to the exact penny.

I also tend to "bulk up" on one pay period -- that is, I take all of my normal living expenses for the month (telephone bills, utility bills, cable bill, car insurance, etc.) out of my first monthly paycheck, which basically leaves me enough disposable income for food, gas and a small amount of pocket change (usually $150.00 to $200.00?) for that pay period. The benefit of this is that it allows the bulk of my check for the second pay period to be purely disposable income that I can do whatever I want to with it! So the two weeks of living frugally is rewarded by the next two week period where I have enough money to really do something with!

I should note that I also take a set amount out of every check to provide a "cushion" for unexpected expenses that I pile-up over the course of time. For example, for every new car I buy, I subtract $25.00 per pay period to go into an account that covers unexpected repairs for that vehicle. Since most new car warranties last 3 years, that means for every vehicle I buy I have $1800.00 saved up for repairs by the time the car is out of warranty. By using this procedure I have never been caught with needing repair work done on a vehicle that I don't have the money already in hand.

Not saying this would work for everyone (my wife could never do this because she could never resist the urge to take money that was already spoken for by something else and spend it on that new purse she's had her eye one) but for someone who can create a budget and force himself to live within it, it works like a charm.....

 

I have been wanting a credit card for a while so I can start building my credit as well. I get offers in the mail all the time so I fill out all the info and send it back in and they reject me! Its kind of annoying when I am trying to build credit!

 

Total up what you spend in a month via cash, debit card or check.
This total should be at least 20% less than what you take home every month.

Find a credit card that has a cash back program that works for the bills you pay ( some focus on retailers, others focus on everyday items ).

Charge all these items on the CC, and what you normally take out a little at a time over the month, you pay in one lump sum to the CC company.

The next step in this is to find a checking account that has the best interest rate on it. You might find the better rates require a minimum balance ( or combined deposits ) to get the rate, else you get nothing.

Look at a debit card transaction, the month is pulled straight away ( or the next business day ).
The money is out of your hands.
If you have an interest generating account, that charge is made, the bill shows up at the end of the month ( the month for the CC not the calender month. Most will allow you to pick a statement date ), and is due in 22 to 28 days. Set the card up for automatic bill pay of the full amount every month.

If the charge is made just after a billing cycle, you have 28 days until the bill shows up, and another 22 to 28 to pay it in full, so the money in your account is earning interest for 45 to 55 days.

It is a given that this is not 1991, where accounts are earning 5%, but 1.1% APR on the account + the cash back program from the CC company, and you can be looking at making 2% + on your money, just for changing when in the month you pay for it.

The other nice thing, is the credit history increase.
You are paying your bill on time in full every month, and this will help build credit, which will help come insurance time ( depending on your state's ins rules ) when you have a better credit rate, and your premium drops.

Something as simple as your regular scheduled bills being put on a CC and paid off every month can net you ~ 5% on your pocket every year on that sum of money.

Having credit is overrated is the battle cry of those with bad credit, or got a CC and abused it.
The above example is a way to make or keep ~ 5% of what you transact a year.
Total it up, not too hard to see where after time you can be keeping $ 200.00 + of your money in your pocket, and down the road it will help come time to get a mortgage.
The important thing that ddellwo pointed out, BUDGET - BUDGET - BUDGET !!
Some how you are doing it today, if it is not a formal budget ( you spend what is in your account ) sit down and make a budget.
Spending what is left over is the quick way to a life of paycheck to paycheck.
Include 20% to savings in your budget.
You want 3 months take home pay in liquid accounts ( passbook savings or CDs ), that you do not use. No "loans" form it, this is not social security.
Once you have that set aside, then the 20% to savings is used for purchases that are planned out ( mods, new TV, some day new truck, etc ). If it is not there, you do not get it.

I know this went off track of the original question you asked, but it is all intertwined. If you do not think through a plan, you will be the one saying "Having credit is overrated. "

 

Generally they will provide a rejection reason, and if you are rejected for credit, you are due a free credit report ( think this is outside the 1 free per year from all 3 together ).

Could be poor credit rating, could be too many hits against your credit report, or an error on your credit history as in they crossed another person with the same name as you. Not fraud, just a clerical error.

The rejection letter should have the process listed on it for what to do next. Make time to follow it. You are the only one that is the 'buck stops here' for your credit rating, and getting it going / back on track.

Stupid stuff like not having paid your book fee from school from 5 years ago or having a 0.98 balance due on your last cell phone provider can haunt you for a long time.

Get your credit report, and find out the why.
Something as stupid as too many credit card companies doing a search on your credit history can screw it up ( getting hit 12 times per month ).
If this is the case, you need to contact the CC companies you do not want, and request to be put on their do not contact list.

Some of this might have changed slightly with the new credit card rules that the POTUS did to grab headlines, so checking the rejection notice is find out the exact procedure and what the process is now is key.

 

I have a Patelco Credit Card and USAA Credit Card. Patelco, I have no clue what rewards they have and USAA, I use Reward Points.

Mint.com always refers me to Chase to get 5% cash back on groceries.

I guess if it works for people using their credit card, so be it. I use USAA Bill Pay and just send money to my savings when before the due date. I have what I believe is an excellent credit score.

I was just asking the question because my little brother is using his credit card to pay off his cell phone to build credit, why not just buy toys on the credit card?

So, do you guys have your mortgage and car payments coming out on the credit card as well?

This is my budget plan:
1-14th: mortgage, 2xcar payments (soon to just be 1)
14-30/31: cellphone, water/electricity, internet, insurance

 

Yes -- an important point.

You need to account for savings in your budget as well. I do this in two ways -- for expected expenses (like the car repairs I mentioned) you need to set aside a certain amount on your own unless you like being blind-sided by unexpected obligations that destroy your budget. For longer term issues like retirement savings it is typically best to have them deducted automatically from your paycheck if your employer provides such a service.

The critical thing is to PARTICIPATE in the program from Day 1 -- if you do so, you'll never miss the money because it's been taken out of your check or budget from the get-go and you never "had it" to begin with. Believe me, the day you retire you will be glad you saved the money you did rather than dithering it away on things you threw away decades ago!

 

No. Add me in.

I think the cell phone would do the job on its own.

Who knows. My income solves the issue of not having a credit card since 2003. I got a pretty decent % rate on my F150 through my credit union without a credit card, yo...

Oh, and I like Googling unknown numbers that call my cellphone and find out that they are from those scammer "debt reduction" callers.