Dear Mary: My 30-year-old son-in-law needs to have an approved credit card in order to buy tires for his truck. Each time he requests a card, he is denied. He has no credit and needs to start building credit. He tried Orchard Bank, but his cards have an annual fee. Can you suggest a card? – penny
Dear Penny: I can tell him how to do this, but I must say that it bothers me. If you said that he needed a credit card to start building his credit file (which he does, and he’s about 10 years late to start), that would be one thing. But getting a credit card for the sole purpose of borrowing is worrying.
Because I assume your son-in-law has no credit history at this point in his life, he is in the same category as those who have bad credit.
Go to http://www.IndexCreditCards.comand look for the category “Credit cards for bad credit – secured credit cards”. There you will see a number of different issuers, all eager to become your son-in-law’s first creditor. He must compare the terms and conditions of all of these accounts and then ask for the most favorable one. Most importantly, he must reject all other offers that will start appearing in his mailbox after establishing the credit.
You will see that Capital One is second on the list, with a guaranteed account that has no annual fee. Because of his situation, I doubt that he will get a low interest rate card, so he must accept the best possible terms.
A secured credit card account is a great way to start creating credit. “Guaranteed” means that he will be required to open a bank account and deposit $ 200 or $ 300 into it, which will then act as a security deposit and ensure that he complies with the terms and conditions of the account.
My advice for young people is to get a multifunctional credit card while they are still students, preferably in the second or third year of college. They will automatically qualify for the best terms and conditions because card companies tend to lower the qualifications of college students. And then they should use that card as a financial tool, not as a way to create debt.
Dear Mary: Every day, I wait for your money saving tips. Many years ago, your “Freedom Account” idea gave me a new tool to manage my revenue. Thanks! My husband recently passed away, so as a widow, I’m depending on my Freedom account more than ever. Keep it up. – Joyce
Dear Joyce: As an explanation to my other readers, Freedom Account is a budget tool that I created that works on the same principle as a Christmas club account. You determine how much you will need for an irregular expense (such as auto repairs, insurance, property taxes and Christmas), divide that number by 12, and then treat that amount as a regular monthly bill.
It is a little more engaging than that (it is a complete chapter of my book “Debt-Proof Life”), but that is the idea. I can’t say how many people I heard who tell me that their Freedom account really brought freedom to their financial situation.
Instead of being surprised by things like car repairs and Christmas, they are prepared, financed and ready to go. And all because they are smart enough to plan ahead, saving just a little each month.
Thank you very much for writing. I send you my deepest condolences for the loss of your husband. I love to know that we are friends every day!