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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308782  
Subject: Re: New here! Have questions! Date: 5/5/2013 4:34 PM
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Welcome back.

My husband and I have 5 credit cards between us. He has 3, I have 2. One of his has a zero balance (limit $400), one has a $56 balance (limit $500) and one has a $200 balance (limit $500). I have two... one is almost maxed out at $390, with a $400 limit, and the other has a $50 balance with a $400 limit.

So, my questions are... we have scheduled payments so that we can get
the three cards with high balances near zero in the next two months.


See, this is kind of worrisome. Why do you have balances on the cards that you were not able to pay off immediately, and have to take the next 2 months to pay it off? While you don't have a lot of debt (yours is $440, and DH's is $256, for a total of $696) - the fact that you are carrying balances at all, only a couple years out of BK is not a good thing.

Once we're at that low or no balance, what is the best thing to do?

The absolute best thing to do is to NOT charge anything to the cards unless you actually have money set aside to pay the card before you make the charge. After you get to that stage, you can start figuring out if you want to keep or ditch cards, and if you want replacements.

They don't have very high limits, and the interest rates are miserable, I think all of them are over 22%. except one at 18%.

First, check your cards to see if they have grace periods. Assuming there is a grace period, the interest rate doesn't matter, if you pay off the card each month. So don't ditch the card just because it has a high rate.

If the cards don't have grace periods, then that is a reason to start looking for replacements, and ditch the cards without grace periods once you get replacements. In the mean time, if you need to use the card, then make payments to the card before they even send you the bill, so that you can minimize the interest you pay.

The zero balance card for my husband is awful. They charge a high annual fee and the interest rate is 23.9%.

Assuming he can get a fee-free replacement card (possibly at a credit union, like Fuskie suggested), then an annual fee (or a monthly fee) is definitely a reason to ditch the card. If he can't get a fee-free card and feels like he needs more than 1 credit card, he may need to keep this one for a little while longer. He should be sure to have money to pay the annual fee set aside before it gets charged, so he won't have to carry it as a balance.

Also, is it a good idea to pay my utility bill with my credit card, and then pay off the card? In order to show activity on the card, Assuming of course, that I do pay it and not leave a balance on the card?

Assuming that the card has a grace period, and no annual fee, and the utility bill and anything else you charge to the card combined won't exceed 50% of the credit limit on the card, making a regular monthly charge and paying it off in full on time can be a good way to show responsible use of credit.

I want to build our credit UP as best as possible. We just re-fi'd our house from a land contract to a regular mortgage and we want to be in a good position to buy some investment property soon. So we're wanting to make our credit as good as possible.

Well, I would say that you need a lot more in savings before you start looking at buying investment property. In your position, with little available credit, I would say that you need at least 6 months of your monthly expenses (and 12 months would be better) in an emergency fund. And then you need to save for the down payment - generally at least 20% - 25%, sometimes 30%, because it's an investment property. Additionally, you should have at least 6 months of those expenses (apart from your other e-fund) set aside as your investment property e-fund, plus you will need to have money set aside for any changes/updates you want to make to the investment property. So, I think you will probably have plenty of time to build up your credit.

Lastly, one of my cards offered me an increase in my credit limit of $100, but there was an associated fee. Is this normal?

For sub-prime cards, it's actually quite common to charge fees for lots of things, including credit limit increases.

From their website, it seems like a card for suckers (no offense intended to anyone)

It's a sub-prime card. People who sign up for sub-prime credit, with the associated costs and horrendous terms, are generally either desperate or foolish (without the capital f).

AJ
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