Dear Mary: My 30-year-old son-in-law needs to get a credit card approved so he can buy tires for his truck. Every time he applies for a card, he gets denied. He has no credit and needs to begin building credit. He did try Orchard Bank, but their 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 it bothers me to do so. If you said he needed a credit card to begin building his credit file (which he does, and he's about 10 years late getting started), that would be one thing. But to get a credit card for the sole purpose of going into debt is troubling.
Because I assume your son-in-law has no credit history at this point in his life, he's in the same category as those who have bad credit.
Go to http://www.IndexCreditCards.com, and look for the category "Credit Cards for Bad Credit — Secured Credit Cards." There you will see a number of different issuers, all of them anxious to become your son-in-law's first creditor. He should compare the terms and conditions of all of these accounts and then apply for the one that is most favorable. And most importantly, he should reject all other offers that will begin to show up in his mailbox once he has established credit.
You will see that Capital One is second on the list, with a secured account that has no annual fee. Because of his situation, I doubt he'll be able to get a low-interest rate card, so he should take the best terms possible.
A secured credit card account is a great way to begin building credit. "Secured" 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 guarantee that he abide by the terms and conditions of the account.
My advice to young people is to get one all-purpose credit card while still a student, preferably in their second or third year of college. They will automatically qualify for the best terms and conditions because card companies tend to lower the qualifications for 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 look forward to your money-saving tips. Many years ago, your "Freedom Account" idea gave me a new tool to manage my income. Thank you! Recently, my husband passed away, so as a widow, I am depending on my Freedom Account more than ever. Please keep it up. — Joyce
Dear Joyce: By way of explanation for my other readers, the Freedom Account is a budgeting tool I created that works on the same principle as a Christmas club account. You determine how much you will need for an irregular expense (like car repairs, insurance, property taxes and Christmas), divide that number by 12, and then treat that amount as a regular monthly bill.
It's a little more involved than that (it's a complete chapter in my book "Debt-Proof Living"), but you get the idea. I can't tell you how many people I've heard from who tell me their Freedom Account has truly brought freedom to their financial situation.
Instead of being surprised by things such as car repairs and Christmas, they're prepared, funded and ready to go. And all because they're smart enough to plan ahead by saving just a little bit every month.
Thanks so much for writing. I send you my deepest sympathies for the loss of your husband. I love knowing that we're everyday friends!
Mary invites you to visit her at EverydayCheapskate.com, where this column is archived complete with links and resources for all recommended products and services. Mary invites questions and comments at https://www.everydaycheapskate.com/contact/, "Ask Mary." Tips can be submitted at tips.everydaycheapskate.com/. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of EverydayCheapskate.com, a frugal living blog, and the author of the book "Debt-Proof Living."
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