Credit Cards - Which one for me?

[soj]

Alright so Im in the market for a new credit card, but im running into quite a few problems. I am 22, currently a student at university looking to finish at the end of 2009 and i only work for my own business. I have a very minimal wage from the business and the rest goes back in for developing. So therefore my income to credit card companies is very low, and im therefore finding it hard to get a half decent credit card anywhere.

I hold an additional card to my parents, which is what ive been using to run Adwords and paying for other things online, etc. And thus i am spending quite a bit of money (repaying it before interest charges of course) and would like to capitalise on rewards points (preferably frequent flyer).

Seeing as im a student and im currently a "low income earner", would the best choice to be apply for a student credit card with a tiny $500 limit, and max that out each month, paying off the money each month, and therefore building a good credit history. Would i then be offered a card with a higher limit and move up from there, or would they limit my credit to the $500 as im a student and therefore am still a low income earner?

Its just frustrating looking at all these applications of cards im more than capable of using and paying off, with minimum incomes of $65,000 a year.

Any suggestions?

 

[Wade]

Have you applied and been rejected for any yet, or are you just assuming you will be rejected based on their published criteria?

Do you have an accountant and do you have a few years of tax history for yourself and your business? This would be helpful when making an application, once you nominate yourself as "self employed" they will usually ask for your accountants details. I've never had them contact my accountant but I think it makes your application look legitimate.

It is definitely advantageous to take advantage of reward points if you are spending a lot to build your online business, they can accumulate quickly.

Other considerations when choosing a card is the annual fee (its higher when a rewards program is involved) and how much they charge for foreign currency transactions.

In regards to credit history, it will show the credit you've been approved in the past and any defaults, however the ones I've seen have never showed if you pay your bills on time, they basically just advise if you're a credit risk.

I do not reccommend the student card as you wont get any points.

I would apply online for the card/s you want most and see what happens, the limit is not particularly important, you can always raise it later (once you've paid it off a few months in a row they will start sending you letters pre-approving you for more credit). You just need to get approved. If they reject you, you can always call up and try to resolve any issues they may have.

Good luck!

 

[soj]

I am yet to be rejected, though i don't have a few years of tax history with my business, its only quite new. Ill apply to a couple of cards and see what happens. I have never defaulted, or not paid a bill so i guess that is in my favour. Ill stay away from the student cards if theres no chance of rewards from them too. Ill let you know how my efforts turn out. Thanks a heap Wade

 

[OzNick]

Soj, Best thing I ever did was get rid of ALL my credit cards. Interest was always too high and we got to the stage that we were working to pay for the credit cards, then living off them. Now we don't have and don't miss them. Visa have a debit card which works just like a credit card only the money comes out of your normal every day account.

GET RID OF YOUR CREDIT CARDS MAN!!!!

 

[Wade]

Nick, good for you for being responsible, if you are not able to pay off the balance in full each month then its not worth it.

On the other hand, if you are able to pay off the balance in full every month, and you are spending a lot of every year to grow your business then you may as well pick up the reward points along the way.

A credit card is sensible from a cash flow perspective as well, lets say you're spending $10k a month on adwords for example, and google is charging you every few days, the credit card will have around 45 days interest free.

So instead of YOUR 10k tied up in adwords from a debit card, the banks money is tied up, YOUR 10k is in your account earning interest (8%+ if you're doing it right). That gives you time to bring in your affiliate payments, keep the profit, earn some interest on the full affiliate payment and then pay the bank back without being stung by high interest fees.

Credit cards are not evil, but there are ways to use them to your advantage, rather than the way the banks prefer you use them..