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Credit card vs loans


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Hey, 

 

starting pa school soon, and planning on surviving off loans but also applying to get a credit card (specifically Discover It for Students) to improve my credit score. Is this a smart thing to do or do people usually just use their loans and pay off everything.

I was thinking of using my credit card for small things like food, gas, etc and pay off the balance with my loans every month, while using my loans to pay for the big things like tuition etc.

 

I am a noob with credit cards (only been using debit thus far), so seeking some help. 

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The BankAmericard Cash Rewards offers 3% on gas, 2% on groceries, and 1% on everything else. Not sure what your credit score is...but you can't really beat the cashback. 

 

 

If you know you wont be able to get it, I guess the Discover IT will suffice.

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First off, if you want to have a good credit score, get a secured credit card when you turn 18, and pay it off monthly.  No need to wait for PA school to try this.

 

Second, yes, if you can CONSISTENTLY (read: ALL THE TIME) pay off your credit card every month, then by all means use one which matches your needs.  I still use the same airlines affinity/reward card I've been using for over 20 years.  We used it through school just like we did beforehand, for convenience and to rack up rewards points, paying the balance off in full monthly and never incurring interest charges.  If you can't do that... credit cards are a trap.

 

Oh, and no college or university I'm aware of will let you pay via credit card without paying the 2-3% surcharge, so that's not even really a question.  Otherwise, I'd be able to fly wherever I wanted in the world by now...

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First off, if you want to have a good credit score, get a secured credit card when you turn 18, and pay it off monthly.  No need to wait for PA school to try this.

 

Second, yes, if you can CONSISTENTLY (read: ALL THE TIME) pay off your credit card every month, then by all means use one which matches your needs.  I still use the same airlines affinity/reward card I've been using for over 20 years.  We used it through school just like we did beforehand, for convenience and to rack up rewards points, paying the balance off in full monthly and never incurring interest chargesIf you can't do that... credit cards are a trap.

 

Secured credit cards = no rewards = no real value. I'm assuming the OP is over the age of 18 so a secured card will do him no justice unless he has absolutely 0 credit history.

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PA-S LP if you do get a credit card I definitely recommend it has rewards associated with it. I recommend either the Discover card like you stated or Freedom by chase (I think they both do 1% cash back on all purchases and then 5% cash back on the "category" for that month). I know the freedom card this quarter is for grocery stores so it is nice to spend what I already would on groceries and get some money back from it too. I agree with Rev Ronin though to make sure you pay them off each month. This will greatly help your credit score as well as save on interest (luckily a lot of the credit cards have an introductory offer of 12-15 months of no APR though). I have gotten a lot of cash back just from using my credit cards on purchases I would already have made in cash so I think it is definitely a benefit if you are able to manage them though and pay them off. 

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If you are going to possibly need PLUS loans, you need to have a good credit score.  Get a card ASAP before  you start school and start using it and paying it off.  Start building credit (good credit!).

 

And I'll echo the rewards cards.  Love my chase freedom.

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Oddly enough, you can start building credit history BEFORE you are 18.  I had Discover cards issued to two of my teenagers to use for emergencies if I was traveling.  When they went to open their own credit accounts when no longer minors, the Discover cards were listed on their personal credit reports from the time the cards were issued in their own names.  

 

But to the OP's question, yes, having a credit card IF used judiciously - as Rev said, pay it off EVERY month, do not get into credit card interest debt! - will be beneficial.  Your student loans are accumulating on your personal credit.  Having at least some other credit, with a spotless (KEY!) payment history will be good.

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Thank you for all the valuable information above. So theoretically, since I wont have an income during my 2 years in PA school, I can use my loan money to pay off my credit card each moth, am I correct? (this is my main question)

 

To correct myself, I actually do have a credit card (BofA cash rewards), but I never religiously used it because I havent done research on the benefits of using and how to use a credit card. Always been using my checkings or debit card, but I recently read an article about the benefits and necessity of having a good credit score, and it made me look for more advice, especially from PA students.

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Yes, you can use your loan for "cost of living expenses." This includes CC payments, especially if the only reason you have a balance is because you are using it for your regular purchases like gas, grocery, utilities, etc. Be very careful though... it is very easy for the balance to get out of control unless you budget very carefully. You only get loan money once per semester so planning ahead is key.

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  • 3 weeks later...

I was just accepted to PA school and start this August. Yay!!!!!

 

In my life before the PA journey began, LOL, I have had several credit cards.  Most I don't use any longer but they remain open (without balances) because it looks better on your credit report for some reason.  I still don't understand why.

 

Now I currently have 3 cards that I use.  I will say that it is a balancing act and it is not for everyone.  The 3 cards I have are:  Chase Sapphire, Chase Freedom, Chase Amazon.  Each one has its own benefits. 

  • Chase Sapphire - I use it ONLY for dining and travel (this includes parking garages and Uber and airport shuttles).  This card also gives you an initial reward of 40,000 or 50,000 points for spending a certain amount of money in 3 months. 
  • Chase Freedom - This card I use for almost everything EXCEPT dining and travel.  You get 1.5% cash back on all purchases.  As mentioned in a post above, they have also have special categories that will give you 5% cash back (Jan-Mar, Apr-June, etc.).
  • Chase Amazon - I obviously use it for Amazon purchases but I also use it for gasoline because it gives you 2 points for every $1 spent on gas.

The best thing about these cards is that all of the points and cash back bonuses can be combined and used together.  For example, I took all of my Amazon and Freedom points/bonuses and moved them to the Sapphire card.  Now I have over 70,000 points and can book a flight and hotel, using their website, and it won't cost me anything. 

 

Juggling 3 cards takes a little getting used to but once you get the hang of it, it really is worth it.  I suggest doing a Google search about the best reward cards.  It took me a while to decide on these.  I knew I didn't want an airline or a specific hotel card b/c I didn't want to be limited.  With the Sapphire card, I can use almost any airline and hotel chain.

 

If you have to spend money to pay bills, you may as well earn some type of reward (points or cash back) while you're doing it.  Just be careful not to get spend happy and get into a mountain of credit card debt.

 

I also use an app called Wallaby.  It will tell you which of your cards to use for certain purchases that will give you the maximum rewards benefits.  For example, I forgot that the Amazon card gave me 2 points per $1 spent on gas.  I checked Wallaby and it reminded me.

 

I should also tell you that I NEVER CARRY A BALANCE on my cards.  I pay them off every month!!!!!!

 

I hope this helps some of you out there.  But remember, before you do anything, do your research about which card(s) is right for YOU.  And NEVER, NEVER, NEVER carry a balance on your cards.

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If you are going to possibly need PLUS loans, you need to have a good credit score.  Get a card ASAP before  you start school and start using it and paying it off.  Start building credit (good credit!).

 

And I'll echo the rewards cards.  Love my chase freedom.

Actually, for plus loans you just need to NOT have an averse history. No credit is not a barrier.

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