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Paying off credit card bills...

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I was shocked to learn that carrying a zero balance on your credit cards is actually considered a negative in terms of calculating your FICO score. I was told that I should carry around 5% - 10% of my available credit.
 
outunderthestars said:
I was shocked to learn that carrying a zero balance on your credit cards is actually considered a negative in terms of calculating your FICO score. I was told that I should carry around 5% - 10% of my available credit.
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That's incorrect. It's been stated before but it's not true. You can pay it off in full with no penalty.
 
Zoe said:
It doesn't matter how much you use over the course of the billing cycle. Pay the full statement balance by the due date, and pay down to 10% or so of your limit before the statement cuts.
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countless sources state otherwise.

This article states that you should use only 10% .. 20 % max.

"According to FICO surveys, credit scoring "high achievers -- those with a score north of 750 -- they're using an average of 7% of their available credit," Sprauve says. "I think 20%, for a lot of people, is more realistic."

http://www.foxbusiness.com/personal-finance/2013/02/22/credit-limit-tricks-keep-high-score-while-still-using-your-card/


"Most experts advise keeping credit card balances to 30% or less of credit limits. Using too much of your available credit hurts your credit score"

http://money.msn.com/credit-rating/4-myths-of-credit-card-limits-indexcreditcards.aspx

"experts recommend keeping your debt-to-limit ratio under 30%, or even under 10% if possible"

http://money.cnn.com/2008/09/25/pf/credit_limits/


"You should charge no more than 30% of your available credit, recommends Cunningham. "
https://www.mint.com/blog/how-to/10-credit-score-commandments/
 
gtrunner said:
countless sources state otherwise.

This article states that you should use only 10% .. 20 % max.

"According to FICO surveys, credit scoring "high achievers -- those with a score north of 750 -- they're using an average of 7% of their available credit," Sprauve says. "I think 20%, for a lot of people, is more realistic."

http://www.foxbusiness.com/personal-finance/2013/02/22/credit-limit-tricks-keep-high-score-while-still-using-your-card/


"Most experts advise keeping credit card balances to 30% or less of credit limits. Using too much of your available credit hurts your credit score"

http://money.msn.com/credit-rating/4-myths-of-credit-card-limits-indexcreditcards.aspx

"experts recommend keeping your debt-to-limit ratio under 30%, or even under 10% if possible"

http://money.cnn.com/2008/09/25/pf/credit_limits/


"You should charge no more than 30% of your available credit, recommends Cunningham. "
https://www.mint.com/blog/how-to/10-credit-score-commandments/
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How does any of that contradict what I said?
 
Had $3300 on my Home Depot card from remodeling on our old house we lived in for almost 20 years that we just sold, paid it off today from the profits, and still have a nice tidy sum left.

I honestly haven't felt as relieved about my family's financial situation in years.
 
Daniel Jackson said:
American consumers and their creditcards, a thing I will never fully understand. Why is that such a common method of payment? It's luring you into spending money that you do not have.
I have a CC too, but I really only use it to buy stuff on iTunes. I never have - and never will - use it to buy stuff I cannot afford at the moment with my own money.
For all purchases (electronic payment in stores), I use my normal bank card (is that a debit card?). Money I spend is immediately and directly withdrawn from my bank account.
For online purchases I use Paypal (also connected directly to my bank account, not via a credit card)
I
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Couple things. Credit cards are much safer to use than debit cards. Sure, they can both get stolen, but would you rather your money get stolen or the banks? If someone uses your debit card, that is your money in your bank that is taking the hit. That can cripple you until your bank will refund you the money, whether that is a few days a weeks.

Second, responsible uses of CC net me hundreds of dollars in reward points each year. Getting 3-5% cash back on purchases is awesome.
 
outunderthestars said:
According the financial planner I just met with last week, you are incorrect.
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There is a lot of conflicting advice, but keeping a balance for a good score is just wrong:

http://www.foxbusiness.com/personal-finance/2014/01/10/keeping-card-balance-to-boost-credit-score-is-dumb-advice/

Keeping a balance on your credit card account does nothing for your credit score. In fact, paying less than your balance in full every month is almost always a bad idea -- for your credit score and your total financial picture.
Click to expand...
 
I'm still a poor graduate student, but I've managed to get this far with no CC debt, no student loan debt, and I paid for my car up-front. I usually pay off my credit card bill every month in its entirety. Sometimes I have to make a partial payment. It's tough, but I've become accustomed to having a small monthly budget. It'll be nice once I'm out working full-time with a proper job.
 
Zoe said:
How does any of that contradict what I said?
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if my credit line is $1000, I buy something that's $900. I pay the $900 off the next week. Week after that I buy something that's $500. I pay that off in last week of the month. Even though my account shows "0" at the end of the month on the statement. FICO will see me as an "At risk user" and my score will be damaged. It's literally the measurement of "usage" , how much of the credit line did you use that month. They don't care if you paid it off.(for that measurement)
 
gtrunner said:
if my credit line is $1000, I buy something that's $900. I pay the $900 off the next week. Week after that I buy something that's $500. I pay that off in last week of the month. Even though my account shows "0" at the end of the month on the statement. FICO will see me as an "At risk user" and my score will be damaged. It's literally the measurement of "usage" , how much of the credit line did you use that month. They don't care if you paid it off.(for that measurement)
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The only things reported are your balance and minimum payment required. They do not report how much you spent over the entire period.
 
gtrunner said:
if my credit line is $1000, I buy something that's $900. I pay the $900 off the next week. Week after that I buy something that's $500. I pay that off in last week of the month. Even though my account shows "0" at the end of the month on the statement. FICO will see me as an "At risk user" and my score will be damaged. It's literally the measurement of "usage" , how much of the credit line did you use that month. They don't care if you paid it off.(for that measurement)
Click to expand...

There are a few things here:

1) You have a $1,000 line of credit. You spent $900, then do not pay it off until you receive your statement. My statement, for example is for the period between May 25th and June 24th. I then have until July 19th to pay off the $900 balance and if I manage to do so I will accrue no interest. This certainly shows up as "usage" at the end of the month/for the credit reporting agencies.

2) The alternative is if you pay off the $900 before the end of your statement period (June 24th, in my case). If I were to pay it off on June 23rd, when my statement period ends, my usage at the end of the period would say $0.00, since I had already paid it off before the end of the statement period. I'm not sure if this usage is reported to credit reporting agencies or not...but, if you're so worried about this, why not just leave the money on your account until the end of that billing period, then pay it off before interest would accrue (which is July 19th, in my case)?

Anyway, I have my CC auto-paid at the end of every billing period, after I receive my statement, but before any interest would accrue (in the above example, I auto-pay on July 14th). I basically have 3-4 utilities in my name and my single credit card (opened the CC when I was 18, opened the utility accounts when I was 22; I'm 25 now) and I have a FICO score of 800.

The absolute bottom-line is that there is no reason to ever pay interest on your balance for the sake of improving your credit. That's a horrible idea, although I'm pretty sure that's not what you're trying to say.
 
mackattk said:
Couple things. Credit cards are much safer to use than debit cards. Sure, they can both get stolen, but would you rather your money get stolen or the banks? If someone uses your debit card, that is your money in your bank that is taking the hit. That can cripple you until your bank will refund you the money, whether that is a few days a weeks.

Second, responsible uses of CC net me hundreds of dollars in reward points each year. Getting 3-5% cash back on purchases is awesome.
Click to expand...

This. Got my credit card stolen once, quick call to Chase got all the transactions from when I lost it nulled. None of my actual money was involved.

Hmm, I need to upgrade my Amex card. I'm currently using Blue Sky, but now that I'm paying off my student loan via Amex (which is then paid off in full every month), means I could do better.
 
Credit cards are not evil if you use them responsibly.

Good luck getting a home loan if you have never established a history of borrowing and paying back money.
 
Zoe said:
The only things reported are your balance and minimum payment required. They do not report how much you spent over the entire period.
Click to expand...
T he problem is you don't know when the bank is going to send the report. you can call your bank and ask them, but you would have to take their word that they are reporting your utilization on the day that they say they are.

"Card issuers report to the credit bureaus in different ways. Some report specific monthly payment information along with account balance and credit limit; others do not The biggest issue with credit utilization and credit scores is that your score is based on a snapshot of your credit report on a given day."

http://www.foxbusiness.com/personal-finance/2013/05/30/how-card-companies-report-credit-utilization-to-bureaus/
 
gtrunner said:
countless sources state otherwise.

This article states that you should use only 10% .. 20 % max.

"According to FICO surveys, credit scoring "high achievers -- those with a score north of 750 -- they're using an average of 7% of their available credit," Sprauve says. "I think 20%, for a lot of people, is more realistic."

http://www.foxbusiness.com/personal-finance/2013/02/22/credit-limit-tricks-keep-high-score-while-still-using-your-card/


"Most experts advise keeping credit card balances to 30% or less of credit limits. Using too much of your available credit hurts your credit score"

http://money.msn.com/credit-rating/4-myths-of-credit-card-limits-indexcreditcards.aspx

"experts recommend keeping your debt-to-limit ratio under 30%, or even under 10% if possible"

http://money.cnn.com/2008/09/25/pf/credit_limits/


"You should charge no more than 30% of your available credit, recommends Cunningham. "
https://www.mint.com/blog/how-to/10-credit-score-commandments/
Click to expand...

Didn't know that using more than 30% of your available credit can hurt your score. Mine is usually less anyway but thanks.
 
gtrunner said:
T he problem is you don't know when the bank is going to send the report. you can call your bank and ask them, but you would have to take their word that they are reporting your utilization on the day that they say they are.

"Card issuers report to the credit bureaus in different ways. Some report specific monthly payment information along with account balance and credit limit; others do not The biggest issue with credit utilization and credit scores is that your score is based on a snapshot of your credit report on a given day."

http://www.foxbusiness.com/personal-finance/2013/05/30/how-card-companies-report-credit-utilization-to-bureaus/
Click to expand...

You're way over analyzing it.
 
Does anyone know the day you should pay your credit card off, i.e. couple days before the due date or a week before? When does the interest actually get charged for your balance?
 
Marty Chinn said:
You can pay up through the due date before you take on interest.
Click to expand...

Another question if you don't mind answering, is there a set time you should keep money on your card before paying off to show you have a balance on the card? For, lets say, credit score or rewards. Thanks.
 
ChanDangle said:
Another question if you don't mind answering, is there a set time you should keep money on your card before paying off to show you have a balance on the card? For, lets say, credit score or rewards. Thanks.
Click to expand...

Most CCs only report balance when they issue a statement, so if you want to manipulate the balance on your report, simply pay or don't pay before the statement date. That said, FICO only uses your current balance (last statement) for their scoring. This is really not worth worrying about unless you're applying for credit in the next 30 days. Rewards are calculated based on purchases; it makes no difference when you pay them off.
 
No debt and I pay my cards off every month. I love my credit cards, especially the one with rewards on grocery purchases (which is my biggest monthly expense after housing).
 
ChanDangle said:
Does anyone know the day you should pay your credit card off, i.e. couple days before the due date or a week before? When does the interest actually get charged for your balance?
Click to expand...

Just ask your bank to turn on auto payment (from your debit) for you. As long as you always have enough in your bank account, you will never be charged interests.
 
My main credit card now is my Costco AMEX... love the cash back and rewards with it including shopping at costco for cash back.

I am trying to get my credit score back up to near 800. Right now my FICO is 742 and that's because of these debts. Debt to $ availability ratio was out of whack.
 
I've had this CC bill following me for a while now. Its all moving expenses and various other getting back to normal expenses that I let just sit there since my interest is low. I tend to pay off a bit a month but then put some thing else back on the card.

I should probably just pay it off, and I have the money too. I just keep putting it off for some reason.

Though recently it has been stressing me out, probably because I am thinking of buying an investment property or two.

I said I would pay it off by September, though maybe I'll try and pay it off by the end of the month. Its about 7k last time I checked.

Meh, PITA.
 
Darren870 said:
I've had this CC bill following me for a while now. Its all moving expenses and various other getting back to normal expenses that I let just sit there since my interest is low. I tend to pay off a bit a month but then put some thing else back on the card.

I should probably just pay it off, and I have the money too. I just keep putting it off for some reason.

Though recently it has been stressing me out, probably because I am thinking of buying an investment property or two.

I said I would pay it off by September, though maybe I'll try and pay it off by the end of the month. Its about 7k last time I checked.

Meh, PITA.
Click to expand...

Why do you like throwing money away? There's no reason to pay interest if you can afford to not pay it. You're just burning money.
 
gtrunner said:
T he problem is you don't know when the bank is going to send the report. you can call your bank and ask them, but you would have to take their word that they are reporting your utilization on the day that they say they are.

"Card issuers report to the credit bureaus in different ways. Some report specific monthly payment information along with account balance and credit limit; others do not The biggest issue with credit utilization and credit scores is that your score is based on a snapshot of your credit report on a given day."

http://www.foxbusiness.com/personal-finance/2013/05/30/how-card-companies-report-credit-utilization-to-bureaus/
Click to expand...
You don't have to carry a balance past due date to be counted as usage. I constantly have 3k on my cards due to statement coming on 25th and balance is paid in full the following 20th. By then I've already racked up several thousand for the new statement. My balance is NEVER zero and I have NEVER paid a dime in interest. I've had my credit report pulled and have had people mention my usage being in the 10-20 percent range.
 
Been there. Did it all from transferring balances to paying off as much as I could and incurring some interest charges. Been getting it paid off monthly now for the last 4 years running.
 
If you carry a credit card balance from month to month, and are financially well-off enough that you don't need to, you're throwing money away. I don't understand peoples' propensity toward doing that.
 
Hmm... I should pay off my credit debt soon. It's only a few hundred dollars and I always pay well over the minimum on time every month, but my limit is only $2700 (though the bank had increased it a few times recently over the course of this year from $900 originally). I was thinking I'd take a bit out of my savings to pay the rest off and get it down to the 30% range (I think) I was around a few months ago.

Normally I use my credit card just like my debit, but specifically at the pump and restaurants, just in case of fraud.
 
Marty Chinn said:
Why do you like throwing money away? There's no reason to pay interest if you can afford to not pay it. You're just burning money.
Click to expand...

I'm aware. Trust me.
However, I would either have to pay capital gains on stocks or transfer money from overseas and get hit with conversion fees and exchange rates.

Both wind up being more then my interest.

I'll take care of it over the next month. Just deal with the charges and move on.
 
Wish I am living in the US, 3%-5% cash back sound fantastic.
Here in Thailand the best credit card that give cash back only give 1% and it cap how much you get cash back for each statement.
Most credit cards card here do not give cash back at all which suck.
I only got credit card for purchase expensive item. Currently type on Ipad Air which bought on 12 months plan with free interest.
 
Darren870 said:
I'm aware. Trust me.
However, I would either have to pay capital gains on stocks or transfer money from overseas and get hit with conversion fees and exchange rates.

Both wind up being more then my interest.

I'll take care of it over the next month. Just deal with the charges and move on.
Click to expand...

What you have to pay tax on capital gain in the US?
Luckily my country do not tax on capital gain on stocks and mutual funds.
 
My credit card build is automatically paid off first day of every month so i never have to pay any interest. Im the banks worst kind of customer - one that pays his bills on time. I just use it for points because every few months i can get discounts/vouchers at shops i like.

Edit: why is everything in america so complicated? Credit score? To get a loan here all you really need to do is show your pay cheques for the past 3 months and have a salary letter from your employer. This stuff you guys are talking about sounds really complicated. I have never understood credit/tax.
 
MaxDOL said:
What you have to pay tax on capital gain in the US?
Luckily my country do not tax on capital gain on stocks and mutual funds.
Click to expand...

Yep! I would say the average is about 15%. Though it depends on if its a long term gain or short term gain and what your tax bracket is at the time.
 
natsuyasumi said:
If you carry a credit card balance from month to month, and are financially well-off enough that you don't need to, you're throwing money away. I don't understand peoples' propensity toward doing that.
Click to expand...

It can potentially hurt your credit score, as well. From my experience, carrying a 0 balance doesn't hurt your credit score, but carrying a balance over a certain percentage and/or closing a credit card can.

Credit Karma.. I recommend that app to anyone trying to get a handle on their credit.
 
In the states when I grew up and here in Taiwan I use it the same.

For that cash back/sweet rewards. In the states I only used it for tiny purchases and gas the cash back was great.

Its the same here in Taiwan lol.
 
I've never carried a balance on my credit cards because I live/d in countries where credit cards aren't given willy-nilly, and I made sure to educated myself 110% before I even thought to apply for a credit card.

I was perfectly happy using my debit card until then. The reason I wanted one was because I wanted to buy stuff from the US through the internet.

The number of people carrying credit card debt (as claimed in this forum) scares me. If you can't pay off your full balance, or at least a significant portion of it in a month, doesn't that mean that you have no savings whatsoever?

Or do people rather use the money to invest rather than pay off the debt?

I feel like I'm missing part of the equation as to why people seemingly prefer to carry credit card debt. I swear I'm not trolling...genuine question here!

Please enlighten.
 
Was $5000 in the hole a few months ago. I'll be paid off by the time I return to school in September. Feels damn good..... fuck living in your credit. I'm happy to have that card for emergencies... that's it.
 
marimorimo said:
I've never carried a balance on my credit cards because I live/d in countries where credit cards aren't given willy-nilly, and I made sure to educated myself 110% before I even thought to apply for a credit card.

I was perfectly happy using my debit card until then. The reason I wanted one was because I wanted to buy stuff from the US through the internet.

The number of people carrying credit card debt (as claimed in this forum) scares me. If you can't pay off your full balance, or at least a significant portion of it in a month, doesn't that mean that you have no savings whatsoever?

Or do people rather use the money to invest rather than pay off the debt?

I feel like I'm missing part of the equation as to why people seemingly prefer to carry credit card debt. I swear I'm not trolling...genuine question here!

Please enlighten.
Click to expand...

Sometimes you hit hard times in your life... and the credit card is there. Are you gonna starve? Or are you gonna use the card?

I just did 10 semesters of school on student loans, and those student loans are not intended to cover the full amount... guess what I leaned on near the end of each semester when the money was gone?

For others it's not being a student but... insert financial calamity here. It's kind of cute that you act so shocked. Ever heard of poor people?

Of course, you're totally right. No one should live this way. But through situation or stupidity, it happens on a regular basis. The average American has $10,000 of consumer debt.
 
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