Building credit or digging a grave?
I'm just wondering if my following idea is a better alternative to building credit quickly.
If I got two credit cards and max one out with a cash withdrawal and used the second to pay the first one off while using the cash I got from the first one to pay the second one.. I know it's confusing lol.. Basically a continuous circle that ends up in me only losing cash through the interest payments. Would that not be better than just getting a single card and making a purchase and paying it off?
Answers:
It's not a bad idea, but credit cards have high interest rates. It would be better to get say $1000 and open a savings account at a bank. Then take a personal loan at that bank and use the savings account as collateral. Use the borrowed money from the loan to pay back the loan, or possible repeat the process.
Personal loans have a more positive impact on your credit score. And with them being secure, you should only pay about 4-5% over the interest you are earning and not the 20% on a credit card.
that's a crazy plan.
don't do it.
get a couple of cards.
charge something on one and pay it off.
having two cards open shows some credit worthiness, but if you have one open that never has a balance on it, it isn't showing a trend of you paying anything off... which is what helps build you a better credit score. lenders are eager to give cards away to younger persons with no real credit because many of them are not responsible. you are seeking to build your credit and that is a smart thing, but you don't want to lose money in the process. you don't have to max out either card and using one to pay the other isn't necessarily better. a lot of people keep several lines of credit open so they can negotiate a better interest rate with their credit card company. i would probably buy something with one card and makes timely payments... and maybe use the other card for other purchases. if you are smart with your money and use your card for routine things you know for certain that you can pay off, it can be a good way to build your credit and get perks... like frequent flier miles, etc. JUST DON'T FALL INTO THE TRAP... it's way too easy to spend what you don't have. my best advice... look into the difference that making minimum payments on something can make over the long run before you buy anything too big that you can't pay off soon enough. and be careful buying technology on credit... you don't want to be paying off outdated technology 5 years later... by then you've paid way too much and there's much better out there. if you are going this route, get no interest, no finance charges for one year from a place like best buy. builds credit and as long as you have it paid off in one year, you don't have any additional fees, charges or interest... nice!
good luck. would be interested to see how your two card system works for you.
Don't do it... For two major reasons.
Cash advances are a major trap. Most cc companies charge a higher interest rate for cash, and charge interest daily. There is also usually a cash advance fee, which will usually be about 3% of the cash advance. Also lower interest balances will be paid before higher interest balances, which means in order to stop paying the higher interest rate for your cash advance, you have to pay off your balance in full. Some cards vary but read the terms and conditions carefully, and if your clever- shred your pin number before you even look at it.
Also, I'm pretty sure the scenario you're referring to is a type of credit card fraud, like check kiting or money laundering, and is illegal.
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