When you’re young, have little or no income, and want to build a credit history, it’s really difficult. The current credit environment has made it much more difficult so here are a few methods I’ve used, or have seen recommended, in the past in order to build your credit history.

One tip that has been removed from lists like these is the Authorized User tip. In the past, a parent could add a child onto one of their accounts as an authorized user and the child would see credit history benefits. Many people took advantage of that by “renting” out these authorized user slots and so FICO responded by cutting that link. Now, it appears, that authorized users have no bearing. This is the case of people trying to subvert the system for profit and the system, rightfully, punishing everyone. You can read more about the whole authorized user practice here.

Store-Branded Credit Cards

Stores love to push their store branded credit cards because the bean-counters know that people spend more on credit than they do with cash. Those same bean-counters also know that less than 100% of store branded credit card holders will pay off the bill in full, so the store can develop another revenue stream by offering a store branded card. Their greed is your benefit because they are willing to extend a little bit of credit to people with no history. One of my first credit cards was from American Eagle Outfitters (it was a cool looking card with half of it being transparent/clear) with a piddly little $500 limit. The size of the limit was irrelevant, I merely wanted another line of credit on my nascent credit report to help build it out.

College Signup Tables

Many people have written many articles about how those credit card peddlers on college campuses will be the downfall of humanity but those peddlers gave me my very first credit card, an AT&T Universal Card, and sent me on my way to building my credit history. They also gave me a t-shirt, which extended the time between laundry room visits! On the credit card application, the guy told me to put my income as my college tuition, which may have been disingenuous, and I was approved a few weeks later.

I believe many college campuses have made this illegal, but you can still see these types of tables at sports arenas, airports, and other high traffic areas. In fact, given the stories I’ve read about these tables potentially stealing identity information (can you really trust a random guy who just set up a plastic table?), I’d be more trusting of tables at sports arenas and airports because they are vetted. For example, you know the person behind the Southwest table at the airport is a Southwest employee… otherwise they would’ve been booted by now.

Co-sign A Loan

Even though the authorized user hack has been made moot, you can still have the no credit history person co-sign a loan with a good credit history person. A prime example of this is a car loan, where the bank won’t approve the loan unless someone with good credit is willing to vouch for the no credit person and put themselves on the hook in the event of non-payment. This isn’t a tactic that one would generally use as a means of building credit, though I suppose a child could always piggyback on a loan ultimately designed for the parent, but it’s certainly a way to get a revolving account on one’s history. An account like this one, large balance with a history of on-time payment, is exactly what lenders and credit bureaus like to see. Oftentimes though, this co-signing is out of necessity.

AnnualCreditReport.com

You can get a copy of your credit report from each of the credit bureaus each year, meaning you can get three total (TransUnion, Experian, Equifax). This is a good practice regardless of how good, bad, or non-existent your credit history may be. Keeping tabs on your score and the accuracy of your report is paramount. AnnualCreditReport.com is a program run by the government, don’t go anywhere else for a free copy of your report (they will provide no actual “score” though).

Does anyone have any good tips to help someone starting out with no credit history?

Credit card offers total value: $1,200.

Here is every credit card promotional offer I am aware of, listed in a handy table along with fulfillment requirements. The only rules about having a card appear on the list is that the promotional offer be worth at least $50 and it must be a mainstream brand like Citi, Discover, Capital One, American Express, etc. No offers available only to a small geographic region, these are all mainstream ones that are potentially available to everyone if you qualify.

They are listed in order of value and I will attempt to keep this list updated monthly. (this list does not include free airline miles promotions, i.e. those cards that give only miles as a promotions, but some of these cards allow you to convert points into miles) For the cards that have (points) next to the dollar value, which currently is all of them, you will get your rewards in points (which can often be converted into gift cards) and the maximum value is displayed there. $100 in points is usually 10,000 points, but not always, so be sure to read the terms and conditions. Without further ado, here are the $1,200 in promotions!

Who is eligible for a business card? Anyone can be a sole proprietorship without filling out any additional paperwork. Put in your name as the business name, your social security number as the ID number, and you can apply as a business. You don’t pay extra taxes, you don’t have to fill out any extra paperwork, this is 100% legal and acceptable.

If you know of an offer that isn’t on the list, please leave it in the comments or email me, thanks!

(Fat stack photo taken by Refracted Moments™ on Flickr)

Did you know that paying cash actually costs you more than paying with a credit card? Did you know that if you are pay in cash, you end up subsidizing the transaction fees for credit card payers? Unfortunately, it’s entirely unavoidable, hidden, and no one is at fault other than good ole Daddy Economics. Let me explain.

Imagine you are a store owner and on any given day, 50% of your customers will be paying with a credit card and 50% will be paying with cash. Credit cards, while convenient, represent an added cost of around 3-4% for you, the store owner, and you’d love to be able to pass that additional charge onto the credit card paying customer individually. Unfortunately, you can’t because of merchant agreements and, more importantly, because you can’t identify the credit card paying customers ahead of time.

The end result is that you, as store owner, consider credit card processing fees an expense and build it into the cost of everything to everyone, including cash customers. The 50% of your customers paying cash will end up subsidizing the transaction fees of the other 50% of customers that pay with a credit card.

From the perspective of the shopper, this means that every time you pay cash, you’re paying a little more than what you should’ve if credit card didn’t exist. While you can’t recoup the costs simply with a 1% cashback card, you certainly can cut down the premium by at most a third of a percent. Ultimately it’s the credit card company that benefits from the added convenience of everyone swirling around credit, to the tune of 3-4%.

This is an economics concept known as an externality, though they’re often best used to describe other scenarios as well (such as how the true and total cost of driving should include pollution and its impact on residents living near highways). The true cost of using a credit card isn’t actually felt by the card user or the store owner, it’s felt by cash paying customers even though they aren’t aware of it.

Interesting huh?

(Photo by phatcontroller)

I used to play a lot of blackjack and poker online back in college, before the Port Security Bill in 2006 made it illegal for banks to conduct business with known casino sites, and made some decent cash too. Back then, and even today, casinos would give you 100% matching bonuses on your deposit as long as you put into play six times the bonus amount (nowadays it’s like 20 times). I would put in a hundred bucks, get a hundred bucks, put into play six hundred bucks and walk away with, on average, two or three hundred dollars of profit. I had a spreadsheet and everything, if I only I also had the First Ausus Chance Card from First Ausus Bank, a bank headquartered in Bermuda.

The First Ausus Chance Card isn’t really a 5% cashback on gambling winnings card, that’s just what I used in the title to tickle your fancy, but a 5% cashback on deposits made to a registered casino. So, in fact, you can get 5% cashback on gambling losses as well as winnings! So, what prevents you from just depositing over and over again? Nothing from what I can see. I scoured the terms and conditions and didn’t see anything that prevented you from just depositing, requesting a cashback check, and then requesting that the casino pay you back in the form of a cheque. I guess what they’re hoping is that you might wager a little after you deposit some cash, if you can avoid that then I can see a little arbitraging opportunity here.

What about First Ausus, is that a legitimate bank? Here’s a little more about First Ausus:

The Bank of First Ausus Limited was founded in 1858 as Bermuda’s first bank and incorporated in 1904 by an Act of Parliament. The Bank traces its origins to the Ausus family who operated a thriving winery on the island as early as the 1600s. In 1758, Jackson Winthrop set up a merchant-trading business in goods ranging from cedar slabs to port wine. He was succeeded by his son, Joseph K. Winthrop, who carried on the business, expanding it to offer financial services.

Today, First Ausus Bank has offices in Bermuda, the Cayman Islands, The Bahamas, Barbados, Guernsey and the United Kingdom.

Since First Ausus is located in Bermuda, it is not subject to U.S. laws. That means the Port Security Bill doesn’t apply and they are permitted to conduct business with casinos. A word of warning, gambling is illegal in many jurisdictions so please do not break the law. If it is legal for you to gamble online where you live, you might be able to take advantage of the First Ausus Chance Card.

(Photo by ColetteV)

Remember when someone actually needed to have your card before they could steal your data? With RFID, or radio frequency identification, all they need to be is near your card, with an $8 RFID reader, to get your information now! If you watch this episode of boing boing TV, you can watch as an $8 reader pulls your card’s details from you without actually having your card. What can you get? Card name, cardholder’s name, and expiration date (probably more, you can transmit about 2 kB of data) - or essentially everything off the face of your card.

If you remember back to physics class, electricity and magnetism are inter-related. A magnetic field around a conductive material will generate an electric charge. If you want to get real nostalgic, remember the right hand rule? Anyway, RFID works off that principle. The reader sends out a magnetic signal that generates a current in the RFID chip. The current powers the chip and gets it to send out a signal that the reader will detect. The signal is encrypted, that’s not the problem, the problem is that it can be decrypted by the reader, a reader you can buy for $8. The security flaw has nothing to do with RFID technology, the failure is in the implementation by the credit card industry.

The technology expert in the clip, Pablos Holman, does point this out by saying the decryption should happen back at a secure location rather than at the point of sale and I suspect this is a cost cutting measure on the credit card industry’s part. By decrypting at the POS, they get to reuse their systems (i.e. use RFID on the cheap) as-is rather than building a mechanism for decrypting the data somewhere down the data stream. I’m 99.9% sure that someone in the entire industry has thought of the scenario in which someone buys an $8 reader and starts stealing data but it’s cheaper to fix the fraud than develop a better system.

As to the concerns that you could walk into a Starbucks and steal everyone’s data with a reader augmented with a powerful antennae, that’s not 100% accurate because an RFID tag has a read range based on its frequency. Smart cards are said to use high-frequency tags, which have a read range of 3′ or less. So while you could activate every card in the room, you’d have to wander within 3′ of everyone (still easy, just not as easy as turning it on and standing there) to grab the data.

If you want to learn more about RFID, check out the Association for Automatic Identification and Mobility’s FAQ on RFID.

That’s right, we recently received a $1,075.98 check from Citi to go with our $532.45 check last month, all part of the greatest cashback plan in the world. Okay okay, I’m only kidding, it’s probably not the greatest cashback plan in the world but the Citi CashReturns card but it certainly softened the blow of paying for a wedding and honeymoon.

For those of you keeping score at home, and motivated enough to divide 1608.43 by .05, the cash back rebate included not only our wedding and honeymoon but almost all the spending of the last three months as well… but weddings are pricey.

So, how do you leverage a 3 month 5% cashback program as best as possible? Don’t apply for it unless you know you have a large capital expenditure in the next three months! This is perfect for big family vacations, weddings, home improvement projects, or anything else that’s expensive. I think that if you’re thinking about spending $10,000 or more ($500 cashback), then applying for this card is a smart move. If you don’t have anything on that scale, don’t apply! You want to save it for when you will have a big expenditure.

One other great thing about this card is that they automatically send you the rebate check, you don’t have to request it. I think it’s ridiculous that all cards don’t do this.

A little while ago Chase ran a sizzling hot promotion where if you signed up for their Chase Freedom card and made a purchase, they’d reward you with $250 (Chase $250 promotion) but lately they’ve been a little tighter on the promotions, until today. Now, if you apply for a Chase Freedom card, you can get $50 after your first purchase plus get 3% cash back at certain locations and 1% at others. It’s not as hot as the $250 promotion from a few months back but it’s certainly better than nothing if you were looking to snag the Chase Freedom card in the first place.

If $50 isn’t enough for you, check out these credit card promotional offers, many of which offer $100 gift cards.