Two months ago, I completed an “App-O-Rama“. I applied for around 7 credit cards and got approved for 3 of them. Then last month I got approved for a retail store card, saving me 20% on my purchase AND earning me $40 in store rewards (same as ca$h rewards rock) just by making one purchase outside the store. The bank practically paid me for opening a card and I’m OK being used and abused like that.

The downside of having so many lines of credit is that supposedly your credit score bites the big one. At least that’s what I’d always heard. Customers at work, who know everything of course, tell me all the time that having lots of credit cards is the worst thing you could ever do and they’ll destroy your credit. My own experience says different.

The sky's the limit!

That screenshot above shows my TransRisk score over the past year. TransRisk is the red headed step child of credit scores. The only people who can tell you your actual score are FICO, but the credit reporting agencies like to make money by selling stuff, so they come up with their own “unique” credit score. TransRisk is good enough for me though (and 100% free at Creditkarma.com) – my actual FICO score was even higher than what Credit Karma suggested it would be. Notice that my score keeps going up, even as more cards are added. There might be a tiny drop right after I submit an application, but it recovers quickly.

I’ve never thought the “lots of credit cards equals $hitty score” logic made much sense anyway. Look at it this way: If someone has 5 credit cards and they’ve always paid on time, you probably think “Yeah, they know what’s up and are trustworthy.” Now lets say they have 10 credit cards and they’ve always paid on time. Our imaginary person is still just as trustworthy, maybe even more, so it’d be dumb to penalize them. Looks like the credit rating people got this one right.

Has your experience been different than mine? If you don’t mind sharing, tell me how many credit cards you have and what your credit score is.

In my mission to have a kicka$$ credit score that would make Suze Orman proud, I’ve opened a few OK a million credit cards in the past year. Having this many cards can get confusing. I opened each for different reasons and keeping track of them all is important!

• AMEX Blue - Carrying a $1,750 interest-free-baby balance. Not in wallet
• Chase Amazon Visa – Only used for Amazon purchases at the moment. Not in wallet
• Chase British Airways Visa – Applied for the miles bonus and no foreign transaction fees. Win-Win. Not in wallet.
• Discover Student -  Gets used if the rotating 5% cash back is on stuff I’m buying. Not in wallet.
• Old Navy Visa – Used at…Old Navy. Not in wallet
• Citi AAdvantage Visa -  Day to day spending card. $200 in purchases away from 75,000 American Airlines miles. awwww yeahhhhhh. In wallet.

That many cards means one thing: a million different payment due dates. AMEX had my due date in the middle of the month while Chase had one card due the 1st and another on the 26th. Dumb. There’s no way I was ever going to keep all the dates straight – and not knowing when stuff is due is begging for a missed payment. So I changed my payment due dates. Took about 15 minutes, but now everything is due the 1st of the month.

In most months, I’ll only need to pay charges on 1 or 2 cards but it still makes sense to have any possible bills due on a common date. Chase and Discover lets you change your due date online with just a few clicks. American Express and Citi make you call and talk to an actual person. I know, human contact: the horror.

This post comes from Mike of CreditCardForum.com, which is a forum for the best credit card reviews (or at least that is what he hopes for it to be). Most recently he wrote the Blue Cash American Express review.

Warning: Before you even read this post, I’ve got to warn you – Even if you pay little to no interest, carrying a credit card balance is definitely not for everyone! There are so many ways credit card companies can screw you over it ís not even funny. I’m not writing about this topic to actually advocate it, but rather to demonstrate how ridiculously expensive student loans are right now.

My friend, Chris, who is a few years older than me was laid off from his job last fall. His bachelor’s hasn’t exactly been too helpful in landing him a new job, so he’s decided to go for a law degree.

His options? Well, there are 20 ABA-accredited law schools in California and of those, just about all of them cost about $40k or more per year. And I’m not just talking about the trust fund baby schools like USC and Pepperdine. Even the U.C. law schools run $38,906 to $44,244 (and even more for out-of-state residents). So here is the rough math on how much he will have to pony up over his 3 years of school:

$40k per year tuition = $120,000
$3.5k per year for parking, books, misc. school expenses = $10,500
$7.2k per year for rent and utilities ($1,200 per month split between 2 people) = $21,600
$3.8k per year for health insurance = $11,400 (most schools require this)
$4.5k per year for food = $13,500
$650 per month for car (payment + insurance + gas + maintenance) = $23,400
————————————————————————–
Grand Total = $200,400

Now I’m not accounting for inflation and miscellaneous expenses, but that figure is a ballpark range for how much money he has to come up with. You may be asking why I am not factoring in part-time income? Well, some schools like Chapman actually force students to sign an agreement where they agree to work no more than 20 hours per week (which is ridiculous). So depending on where he goes, working may not even be an option and if it is, I can’t imagine he will be able to bring in more than a few thousand a year while he’s juggling full-time law school.

For non-private loans, here is what he has been offered:

Subsidized Stafford Federal Loan – $8,500 per year at 6.58%
Unsubsidized Stafford Federal Loan – $12,000 per year at 6.58%
Unsubsidized GradPlus Federal Loan – Up to cost of attendance less other aid at 8.5%

So with the exception of the $8,500, he’s looking at paying 6.58% to 8.5% starting from day one. Please, someone tell me why the Fed can afford to loan money at essentially 0% to the banks but hard working grad students are socked with up to 8.5% interest?! I think it is outrageously high and so does he. So guess what he’s decided to do? Pay for the first year using credit cards!

The plan to use 0% credit card offers
Ryan wrote a post earlier this year about the crazy idea of balance transferring your student loan debt away. Well I have to agree it is crazy for 99% of people, but for my friend it actually might be worthwhile. Here’s why:

Since Chris is older, he has a great credit history with high credit limits. In addition, his mom has actually agreed to help out and use her credit to do this. She has a Chase Freedom card with a $32,000 limit and a Blue Cash American Express with a $44,000 limit as well as a few others.

• He’s checked and the schools on his short list don’t have caps on credit card limits. So if someone is crazy enough to do it, the school will let you pay for your 40K of tuition on plastic.
• Assuming he avoids the balance transfer fees, he will actually be netting a few hundred dollars in rewards since the cards give 1% to 1.25% cash back.

Chris asked my advice for the best way to pull this off and here’s what I told him:

Step One: Get a card that offers 0% on purchases
American Express regularly runs promos that give 0% on purchases for the first 12 months. If his mom applied for a second AmEx, it’s unlikely she would be given a credit limit anywhere close to what she has on her old Blue Cash card (which she got before the recession) but lets say she opened one of their other cards with the 0% on purchases offer and was given a $10k limit. What she could then do is transfer a good chunk of her available credit from the Blue Cash over to the new card and bam! She suddenly will have a card with a lot of spending power AND the 0% on purchases!

Step Two: Charge the tuition to the new card
This actually may be the hardest part, because it definitely takes some balls to make a $40,000 purchase with plastic! (Though most schools allow payments on a per semester basis, which would split it into 2 payments).

Step Three: Setup automatic bill pay + watch the account like a hawk
Even with the credit card reform, if you make 2 late payments with 6 months that might be grounds for a rate hike. So obviously they will have to do everything possible to avoid this. I recommended setting up automatic payments and also watching it manually, in case something goes wrong with those.

Step Four: Before the 12 months is up, transfer or pay it off
Carrying the balance past the 0% period would be insanity. So he would either need to transfer it within 365 days from the date of account opening or pay it off. This is definitely risky because who knows where the economy will be in a year? 0% offers might not be around! However lucky for Chris, his mom says if all else fails, she will tap her savings to pay it off and then formalize a loan between mother and son to pay it back.

They haven’t decided yet whether this will be a one-time thing or something they try and repeat every year, using credit cards to finance as much of law school as possible. What do you think? Is Chris insane or does this approach actually make sense for his circumstances?

Editor’s Note: While balance transfers allow you to pay down a balance without interest, they still require minimum payments. Most cards have minimums of 3% or 5%. A 3% minimum payment on $40,000 is $1,200!

Confession time. I’ll be carrying credit card debt for at least the next 4 months. Probably longer. The amount is high for a college student too – $1,800. Like I said, it’s a big number. Thanks to a good credit score though, I’m not paying a cent in interest.

How did I manage that? I mentioned in my App-O-Rama post that I had a few different CC benefits I was looking to cash in on. One of those was a no interest promo offer. I knew I’d be buying airfare to Italy and let me tell you  – that ain’t cheap! I also had to pay an $800 deposit for the study abroad program. In the same month.

Faced with those expenses but not wanting to eat up most of my savings and blog income all at one time, I turned to the credit card companies. They aren’t usually the 1st place you think of when you want better finances, I know. But they’re kind of like your in-laws. You don’t really like them, but then they offer you gifts and you can’t really say no to gifts so….what the hell you at least put up with them to keep getting free stuff.

I applied for the American Express Blue card since I was confident I’d be approved and they offered a full year of no interest. Any card would have worked though – they just need to offer a 0% interest promotional offer on purchases. “On purchases” is important. You might see “0% on balance transfers” and that’s def. not the same thing. Balance transfers are for the stuff crap you couldn’t afford and already bought on another card.

Now I have until May 2012 to pay off my flight. Depending on how much I earn this summer, I’d like to have it paid off by September/October. Worst case scenario is I pay whatever amount is remaining in April 2012 with my student loan refund – 7.9% interest is better than the 15%(!) that AMEX will charge.

*Carrying a balance, even without interest, isn’t for everyone. I still have to make at least my minimum payment ($36.00) every month. If I’m late or miss a payment, my promo rate disappears and I’m in for a world of hurt. This is a game and the rules are made up by the credit card companies.*

I’ve said it before and I’ll say it again: I love credit cards. I know some people hate ‘em with a fiery passion – and that’s completely cool with me. You gotta do what’s best for you. Me though, I love all the benefits I receive. They make tracking my spending easy like the 4th grade. Whipping out that Visa or American Express is also safer than carrying around wads of cash.

Last July I got my first credit card – a Discover® More Card. In December, I opened up a Chase Amazon Visa because I saved $40 on a $100 purchase. 40% off is a great deal in my book. While both of these cards suit me current needs just fine, I wanted to explore what else was out there and see if I could get in on any good deals or bonuses.

With that in mind, I set off on an App-O-Rama. If you’re not in “the know”, an App-O-Rama is where you apply for a bunch of credit cards all at once. The timing is important because most banks won’t approve your application if you’ve recently applied for a lot of credit. It looks all kinds of shady. You need to submit all your apps on the same day.

Each person has their own reasons for an App-O-Rama. The popular thing to do a few years ago was to use balance transfer checks to borrow tons of cash - I’m talking like $30,000 or even 3X that – and sock it away in an online savings account earning 4 or 5 percent. Me? I was only on the hunt for: frequent flyer mile bonuses, no fees on foreign transactions, and a promotional no interest period. Finding all that in a single card wasn’t gonna happen. So I knew I’d be applying for at least 3 cards, probably double that since you have to assume at least one or two will get denied. I ended up getting approved for:

• AMEX Blue - No interest until May 2012! $2,000 credit limit. I booked my flight to Italy on this card so I can pay over time. I don’t like carrying a balance even at 0%, but sometimes the flexibility is worth it.
• British Airways from Chase - No foreign transaction fees & a $7,000 credit line! I’ll receive 50,000 BA miles after my 1st purchase. There is a $95 annual fee with this card – to be honest I didn’t read carefully and thought it was waived the 1st year. It’s. Not. But I still think it’s worth it for the miles and no transaction fees.
• AAdvantage from Citi – 75,000 American Airlines miles after $1,500 in purchases. $4,000 credit limit. There is an annual fee with this card but it’s waived for the 1st year. I’ll call next year and see if they’ll waive it – if not, I’ll probably cancel. No big deal.

With these 3 cards, I got all the different benefits I was looking for. Capital One actually denied my application which makes no sense to me because they market themselves as an issuer for those new to credit. American Express really surprised me. I was instantly approved and I’ve always thought of AMEX as an issuer who only accepts those with the cream of the crop in credit scores.

My App-O-Rama was tiny compared to what a lot of people do, but ya gotta start somewhere, right? Overall, I think it went well and I got the cards I wanted. I gotta admit though, while I’m using the cards for good reasons and not going into debt, I do get an adrenaline rush from the who process. Maybe I’m just weird like that?

Working in retail, I hear a lot of opinions of retail store credit cards. Some customers love the rewards they get while others don’t want another card taking up space in their wallet. Both are fine with me – I just have to ask if a customer would like to apply. I’ve mentioned before that I think store cards can be good in the right circumstances, but I wanted to provide some more details about how they work. To keep this more interesting than boring, I’ve listed a question or statement I’ve heard along with my response.

1 -”Stores push their card so they can make more money off of interest charges.”

This probably surprises a lot of people, but as far as I know, the stores actually don’t receive any interest a cardholder pays. Very few, if any, stores are actually letting you borrow their money. The card definitely has their logo or design, but a behind the scenes bank is the only one lending any money. That means they collect the interest.

2 – “The interest rate on store cards is outrageous.”

This is 100% correct. Even with great credit, store cards routinely charge 20%+. With bad credit, it’s more like 23% or even 26%. If you want/need to carry a balance, stay away from store cards.

3 – “Why can’t I get cash back after I return a purchase but I’ve already paid my credit card bill?”

I hate when customers come in with this problem because there’s nothing anyone can do.

If I buy something on my store card, pay the bill, then return the purchase, my refund will show up as a credit on my credit card statement. This is fine, unless I rarely shop at the store. Then my money is  held hostage until I buy something at that store.

The reason for this relates to #1 above. When you pay your CC bill, you are not paying the store. You are paying the bank that issues the card. This is super important to understand. We already got your money when you swiped your card. Because most stores will only issue refunds in the original payment type, the refund must be credited back to the card. At my store, the computer will not allow me to give someone cash if they originally paid with a CC. Managers can’t even override this.

4- “Why are some stores so pushy with their card?”

Cause they’re horrible. Nah, retailers love store cards for 2 reasons:

• Cardholders shop more. Studies have shown that customers come back to stores where they have an account more often. Repeat business turns the retail industry on like nothing else.
• Stores pay less in credit card processing fees on store cards. Best Buy may have to pay 3% when you use some random Visa or American Express. Use their Best Buy Card though and they only pay 1%.

Both of those motivate stores to ask every customer if they’d like to apply. I’m sure some managers pressure their employees to pressure customers into applying, but the company I work for doesn’t run its business with an iron fist.

Like I said earlier, store credit cards aren’t always horrible. But I think knowing the above is helpful if you’re considering opening a branded card.

While I think I do a an overall bang up job of managing my money and whatnot, it’s nice to know that other people think so too. More specifically, I’m talking about credit scores. Credit scores are like opinions – most people have ‘em and some of ‘em really blow. Love it or hate it, credit scores are used to sum up our financial lives into one compact little number.

I’ve been keeping tabs on my credit score since the fall just for kicks. (To do list: get a hobby). I’ve been using the website www.creditkarma.com. It’s free and legit. They pull my TransUnion (1 of the 3 credit bureaus) credit score and let me know how it stacks up against everybody else. As of today, my score is a respectable 704. The worst score is 300 and the max is 850.

While my score is relatively awesome now, that wasn’t the case last year. Just back in October, it was a mediocre 637. Here you can see how fast it rose. That’s a 67 point increase for the math challenged.

SEXY!

As awesome as Credit Karma is, the TransRisk score they provide is not necessarily the same as my FICO score. FICO stands for the Fair Isaac Corporation. They are the king of credit scoring and what they say matters most. I decided I should find out my official score, in case Credit Karma was lying to me or something. It was even better than I thought:

awwww yeaaahhhh

731! Now that’s what I’m talking about. At this point, my score has no where else to go but up. My credit card accounts and student loan will continue to “age” which should tack on more and more points as time goes on. Plus I’ll be able to get credit line increases, which will also make my score climb.

Have you checked your credit score? What is it?

According to a new study by CardHub, the decrease in consumer credit debt has nothing to do with people actually paying down their balances. Instead, the decrease is the result of customers defaulting and banks writing off debt. According to Federal Reserve data, 75 billion dollars of debt was charged off by banks, yet total credit card debt only decreased by 66.9 billion compared to 2009.

Now that the economy is slowly improving, I suspect we’ll see more and more people return to using their credit cards. With that comes larger balances. One thing the article didn’t make clear was whether this debt is being carried month after month or simply the total balance owed to banks at a certain point in time. I usually owe $200-500 a month, but I wouldn’t call it debt since I never pay interest and have that much in my checking/savings accounts at any given moment. Would my “debt” be included?

When the economy went south, people who had the cash available but still carried a balance probably paid off their debts. Now I’m guessing that those same people (assuming they have jobs) are resuming their previous spending habits and not worrying about a bit of interest. Of course, plenty of other people have sworn off credit cards for good. I’ve heard from plenty of customers at work that they’ve got their balances paid off and aren’t touching their cards for a long time.

What do you think of this study? Agree/Disagree? Any other theories on consumer debt?

Last summer, Discover was the only credit card issuer willing to take a chance on me. They approved me for the Discover® Student Card – a credit card that offers up to 5% cash back on purchases. The rewards program is based on categories that rotate every few months. The categories usually have some seasonal connection. My trip to Cedar Point last September was partially subsidized by Discover giving me 5% of my ticket price. For 2011, the rewards calendar looks likes this:

• Janurary, Feburary, & March: Travel & restaurants. Includes airlines, hotels, car rentals, and cruises
• March Only: Grocery & drug stores
• April & June: Home and fashion. Includes home improvement, department stores, and clothing stores
• July, August, & September: Gas and Hotels. Includes gas stations, hotels (duh), movies, and theme parks
• October, November, & December: Restaurants & Fashion. Includes restaurants, department stores, and clothing stores

You do have to sign up for each category individually when a new month starts. However, Discover does a good job of making an announcement whenever a new category starts.

If this card sounds like a good fit for you, you can apply for the Discover® Student Card today. Other benefits include:

• * 0% Intro APR on purchases for 9 months.
• * 5% Cashback Bonus® in categories that change like travel, department stores, gas, groceries, restaurants, and more.
• * Up to 1% unlimited Cashback Bonus on everything else you buy.
• * No Annual Fee

Apply Today!

I have some good news to share today. Good news for me, anyway. I received a $750 credit line increase on my Discover card! If you’ve been around for a while, you remember that this was my first credit card. After applying to Chase, Capital One, and Citi Bank and being denied by all three, I decided one last time to try for an approval. Discover surprised me and was more than happy to grant approval for a Discover® Student Card.

The limit was only $500 – both good and bad, depending on how you look at it. Regardless, I was on my way to building credit. Then I opened up a Chase Amazon Visa around Christmas time and was given a $2,000 credit line. I thought it was a mistake. A credit line 4X larger than my previous one in less than 6 months? If you say so, Chase. Now my total credit limit is $3,250 across 2 cards. I’m also still an authorized user on one of my dad’s cards, which has a limit of $10,000 (!).

Why Do This?

Some people would say that a 18 year old has no business with 2 credit cards and such a relatively high limit – “It’s a recipe for disaster!!!!” they’d scream. I would tell them to be quiet shut up and mind their own business.

Having high limits reduces my credit to debt ratio; how much of my credit I’m using compared to my limits. A lower ratio helps my credit score increase.

As a college student, my spending is variable. Some months I have to spend $300 in books and $200 in gas. Other months, all I charge is gas and maybe eating out a few times. Until I got my Chase Visa, I would come dangerously close to my Discover card’s limit some months. Not cool. Now I have  2 cards with high enough limits that this shouldn’t be a problem. Diversity is good!

How I’d Do It?

I called the number on the back of my card. Yeah, that was it. Discover will only do credit line increases over the phone and the account has to be at least 6 months old, BTW. American Express I’ve heard will let you do online requests. Not sure about the other card issuers.

Note: Discover’s customer service continues to impress me. I called, was connected within 60 seconds (after being told it would be a 5 minute wait) to a native English speaker in Utah. The rep was ridiculously nice and friendly. She even wished me a fun and safe study abroad trip. (I had mentioned I’d be needing a higher limit to buy plane tickets.)

This should be the first of many credit limit increases. I don’t know why, but I want to see how high I can get my limits. Not that I would ever max them out, but hey, some people collect stamps or string. I’ll be the guy accumulating insanely high credit limits.