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[BFEL]

So I've just started getting my first mails where people want me to take up their credit cards. Today I got one for Chase "Slate" which looked like a pretty decent one, at least according to my mom.

So background info: I'm just about 23, have lived with my mom forever, and have had no credit card of my own. Live in US. I have a pretty good education on the possible perils of such things because America and fairly low income.
Currently the only "credit" I suppose I have to my name is I co-signed on a loan with my mom to buy our second van (driving job, and bought from my grandmother so it was pretty cheap) though the loan probably won't be payed off for another year or so.

My real question is: what would be a good credit card to start off with? The one which I was offered had no interest for 2 years then variable interest at 17% (mom said its usually around 19 to 21% to start)

For those who don't know, building credit is sorta important in the US, and I would like to have an avenue to start doing so.

I'm not looking for things like travel rewards or whatnot, just something with low interest (preferably without the "variable" part, though I suspect such things might not exist)

What are "normal" interest rates according to you guys' experiences? I trust my mom, but always helps to have a second opinion on things.

[gimlet]

The interest rate shouldn't matter *too* much, because you really really really REALLY want to get in the habit of paying it off in full each month.  Yeah that will "build your credit" slightly less rapidly than running a balance, but the way I've been told the scoring works now, just *having* an open line of credit like a credit card counts for far more.  And using as little as possible of your "total available credit" is another positive addition to your score.

So I'd say look for one with no annual fee, ideally with cash back or something (shouldn't matter much because you won't be buying THAT much stuff), and then yeah a low interest rate is nice just in case you do need it for an emergency and can't quite pay it all.  And basically use it like cash - only buy stuff you were going to buy with cash anyway.

Oh #1 by far is make sure that you are not charged interest on purchases if you pay the full balance by the payment due date.  There *are* credit cards out there that will charge you interest from the day you make the purchase until it is paid - definitely avoid those.  Also beware on most cards that if you do carry a balance over to the next month, even if it's only $1, then you will be charged interest on new purchases from the day you make them - this sucks.

[BFEL]

Yeah, I figured most of that, though I didn't know about #1
That's pretty low.
How does one check for that?

[Parsely]

Best way to build credit is to buy little things with your card and pay it off straightaway.

[gimlet]

How does one check for that?

It *should* be in the offer material they send you, near the part where they list the interest rate and stuff.  I don't have one handy and the language on those things can be kind of hard to interpret.  OK looking on  https://creditcards.chase.com/credit-cards/slate.aspx I see this language under the "Pricing and Terms" for the Slate card:

"How to Avoid Paying Interest on Purchases: Your due date will be a minimum of 21 days after the close of each billing cycle. We will not charge you interest on purchases if you pay your entire balance by the due date each month. We will begin charging interest on balance transfers, cash advances, and overdraft advances on the transaction date."
-- so this means they are OK for the "grace period" for purchases.

"How We Will Calculate Your Balance: We use the daily balance method (including new transactions). "
-- and this means that if you do carry over any balance, you will be charged interest on new purchases during that month.  http://www.investopedia.com/terms/a/averagedailybalance.asp or even better with example http://credit.about.com/od/creditcardbasics/qt/dailybalance.htm

Of course, make sure that the little booklet of terms they send you matches this, I know that companies can give different terms to different people.

[Thief^]

My advice would be to ignore special offers, and look at the interest rate alone. Some banks offer "simple" cards which have no random crap like interest free balance transfers (irrelevant for a first card, and if you need it you're already in trouble) or collecting cashback or points on purchases (largely worthless and obliterated the first time you miss a payment due to the interest), but have a really nice low interest rate. My current card (also my first) is only 7.9% interest rate. Importantly, it also doesn't charge interest unless I miss paying the bill.

When you sign up you should be able to choose to have the card to be paid off automatically each month from your bank account by direct debit. Choose this option.

I try to live a debt-free life as much as possible, so I generally prefer to pay for things up-front once per year than take credit and pay over a year (it's also often cheaper). Despite this I still had a high credit score, because I'd never defaulted (failed to pay) on credit. Missing a credit card payment or few is much worse than not having the card at all.

Any kind of contract payment (like a mobile phone) also counts (positively) towards your credit score, so you don't actually need a credit card to give you a good credit score.

[BFEL]

Awesome Thief^
That is pretty much exactly what I was looking for.

So from what you said I should just head to my bank and ask what they have available in credit cards?

[Shazbot]

Accept the shiniest piece of plastic offered to you with the largest string of numbers entrusted to you, put it in a cheap glass picture frame with a "In Case Of Emergency, Break Glass" post-it over the card, and never touch it unless you are willing to literally break the glass. Then get a debit card, disable the overdraft 'service', and proceed ahead.

[Meph]

As a non-american, could somebody explain to me what "building credit" means?

[Arcvasti]

From what I understand, its a very silly form of loan security. Credit card companies and other people like that don't like to make loans they won't get money back on. So paying off credit interest builds "credit" which basically says that you probably WILL be able to pay back any loans made to you, because you've don it consistently in the past. Can sometimes be a bit of a Catch-22, because many credit card companies won't give you a card until you have some "credit" and you need a credit card to build credit.

[Meph]

But that only applies to people that have debt, no? Those who want to spend money that they currently do not have?

[acetech09]

But that only applies to people that have debt, no? Those who want to spend money that they currently do not have?

No? If you have no debt, but do use a credit card/loans, that means you pay it off in full, which establishes a high credit score. A low credit score typically means the person's in debt.

[Sappho]

But that only applies to people that have debt, no? Those who want to spend money that they currently do not have?

Essentially, yes. . America is a nation of debt. It's considered 100% normal to have debt in the USA, and it's unusual for someone to have none. This is why Americans all have big houses and cars and whatnot. The high price of university education, which is normally paid using loans, probably has a lot to do with this. When you start out your adult life with 10 years worth of loans to pay off, it's no big deal to get a credit card and just continue buying things you can't afford. What's the harm at that point... (I tried to explain what a credit card is to some of my Czech students and I couldn't get them to understand. They know about debit cards, but this "instant loan" concept was new to them.)

Your credit rating is essentially a nationwide reputation rating system for how likely you are to pay off your debts. So when you decide to buy something you can't afford (usually a car or house, but Americans tend to buy other things they can't afford as well), you can get a loan for it. If you have low or no credit, it's hard to get a loan, or if you get one, the interest rate is really high.

acetech09: you can't get credit without debt. Credit cards just create instant small loans every time you use them. Paying off your debt right away is a good thing, but if you don't have debt in the first place, you can't pay it off, so you can't get credit. You have to owe someone money, then pay it in a timely fashion, in order to build credit. Whether the debt is short-term or long-term isn't really a big factor.

BFEL, as others have said, you don't need a credit card to build credit. Just get a phone plan and pay your bill every month and you'll be fine. Whatever you do, NEVER EVER EVER buy something you can't afford to pay for right away, unless in case of a real emergency. Just because most Americans have debt, doesn't mean you have to have it as well. If you decide to get a credit card for emergencies, make sure you get one with no mimimums on it, and really save it for emergencies only. Future you will thank you.

[Meph]

Great, two answers, one says No, the other says Yes.

I do have 3 credit cards myself, one for Europe and two for worldwide, the second one of those as a backup if something happens to the first one, like getting stolen/lost. At the end of the month the money I got from ATMs by using the credit card gets substracted from my account, with a maximum of 2000€. This is preset, and I knew the amount before I got it, different credit card companies offer different amounts. So in America this amount could be higher or lower depending on how often/how well you pay off debt?

[Sappho]

Great, two answers, one says No, the other says Yes.

I do have 3 credit cards myself, one for Europe and two for worldwide, the second one of those as a backup if something happens to the first one, like getting stolen/lost. At the end of the month the money I got from ATMs by using the credit card gets substracted from my account, with a maximum of 2000€. This is preset, and I knew the amount before I got it, different credit card companies offer different amounts. So in America this amount could be higher or lower depending on how often/how well you pay off debt?

That doesn't sound quite like a credit card... Are you sure it's not a debit card? The difference is that with a credit card, you can spend more money than you have in your account, and it's not automatically deducted (subtracted) from your account at the end of the month. It's really a loan that you have to pay off each month. Debit cards are linked to your bank account. You use them at the same machines, but you can only use the money you actually have.

In America, depending on your card, you can get a very high limit on how much money you can spend. And it can be much, much higher than the amount of money you actually have. I've seen cards with $25,000 monthly limits, and they can go higher (though most people keep them lower than that). You can use a credit card to, for example, buy a bunch of plane tickets or electronics that cost $5000 total, even if you have no money in your bank account. You then slowly pay back the money each month, with interest, until it's all paid off. You can just use it for normal purchases and pay it all back at the end of the month, but there is always the option of buying more than you can afford and paying it back later.

Edit: Also, your credit rating determines several things. First, whether you can get a credit card or loan at all. Second, what your limit will be (how much money you can spend at once). Finally, what your interest rate is. If you have good credit, you might pay 5% interest each month. If you have bad credit, it might be 20%.