Carrying a balance?

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AceH
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Carrying a balance?

Postby AceH » Tue Apr 27, 2010 5:24 pm

I just got a Secured Credit Card and just finished paying off my FIRST bill in FULL...0 BALANCE. Is it ok to OCCASIONALLY carry a balance for a couple of months...i.e. pay HALF the bill one month then pay in FULL the following month? I would NEVER pay only the minimum!


cpaynter
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Postby cpaynter » Wed Apr 28, 2010 9:16 am

AceH wrote:I just got a Secured Credit Card and just finished paying off my FIRST bill in FULL...0 BALANCE. Is it ok to OCCASIONALLY carry a balance for a couple of months...i.e. pay HALF the bill one month then pay in FULL the following month? I would NEVER pay only the minimum!


Congratulations on paying your bill in full! That's a great habit to get into.

As to your question, well, I guess it depends on what you mean by "ok." Is it OK with the issuer? Of course! They'll love that, they'll rake in lots of interest from you.

Is it OK for your credit report? Well, I guess that depends on the balance owed reported to the bureau versus your overall available credit. But be aware that a "carried" balance isn't reported any differently on your credit report than a paid-in-full balance. No one looking at your report could accurately determine whether you paid your balance in full or made payments (as long as they were on time and at least the minimum). Nor would such a consideration make any difference whatsoever on your credit score. And paying more than the minimum is no better for your credit than paying the minimum.

Is it "OK" with your personal finances to carry a balance? I would say almost definitely not. The only situation in which it would be "OK" to carry a balance on a credit card is if you had the money to pay the bill, but had it invested in some type of savings vehicle which was earning more interest than the credit card charges, after adjusting for tax implications. So if, for example, my credit card interest rate were 19.99%, I'd only consider it "OK" to carry a balance if I could instead invest that money (safely) at 28.97%.

Good luck.

Chris.

AceH
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Postby AceH » Wed Apr 28, 2010 2:35 pm

Thanks for the reply. When I posted that question I did't think about the many possible situations you pointed out. Thanks again.
My single minded thinking regarding carrying a balance was solely aimed at the credit agencies, credit scores, etc.

I got the Secured Credit Card through my bank and my APR is 9.25% with NO ANNUAL FEE. Also with the Secured Credit Card, I don't have a HEFTY credit limit thus acrruing any substantial interest charges would be practically nill (at 9.25% APR). I was just wondering if it would also help my credit history and score by occasionally carrying a small balance. As mentioned in my original post, I would pay HALF one month then pay if full the following month. I would NOT do this often...only about twice, three times maximum a year.

cpaynter
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Postby cpaynter » Wed Apr 28, 2010 6:30 pm

AceH wrote:Thanks for the reply. When I posted that question I did't think about the many possible situations you pointed out. Thanks again.
My single minded thinking regarding carrying a balance was solely aimed at the credit agencies, credit scores, etc.

I got the Secured Credit Card through my bank and my APR is 9.25% with NO ANNUAL FEE. Also with the Secured Credit Card, I don't have a HEFTY credit limit thus acrruing any substantial interest charges would be practically nill (at 9.25% APR). I was just wondering if it would also help my credit history and score by occasionally carrying a small balance. As mentioned in my original post, I would pay HALF one month then pay if full the following month. I would NOT do this often...only about twice, three times maximum a year.


Right, so like I said, carrying a balance will not affect your credit one way or the other. It's a common misconception that you have to carry a balance from time to time on your credit card to improve your credit. It just doesn't work that way. It does not help your credit to carry a balance. It's still credit if you PIF, because you're carrying that charge for 30-45 days or so before PIFing.

In terms of your credit report, the only thing that matters is what the dollar amount is on the day it's reported to the bureau (typically the date your statement is cut). I'm told that the magic spot is somewhere between 10% and 30% of your credit limit. If the reported value is less than 10%, then it looks like you're not using credit at all, which is a negative. If it's greater than 30%, then it looks like you are getting too far in debt, which is obviously a negative. Some people who PIF will actually make an extra payment a day or so before the statement is cut, to bring the balance down to less than 30% of C/L (if this month's charges add up to more than 30% of C/L). Seems overkill to me, but it could improve your score in an edge case.

I hope this helps.

Chris.

FidelityAmex
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Postby FidelityAmex » Wed Apr 28, 2010 10:35 pm

Hey, congratulations on your first secured credit card.

For your questions, I would just pay it in full every months. Remember this is your first credit card to help you build credits, so the banks want to see that you can take a good care of the card by paying it on time, and not over spend your limit. That's all they need.

I asked the rep at my bank about this question before. He told me that pay your balance in full is good, but not as good as carry a balance. He said every months make sure you pay your bill on time, and also have something left on the balance like $50-$100 dollars. You will pay a small amount of interests, but this will help your score improve faster because the banks will earn some interests and see you are a good customer... I didn't trust him.

According to MSN credit card experts. They said you don't need to carry a balance or pay any interests to have a good credit score. Just as long as you pay your bill on time and don't over spend your limit, then over a period of times your score will go higher... This time I trust them, so I pay all my bills in Full every months.

Good Luck to you.

LTomBerry
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Postby LTomBerry » Tue Jun 01, 2010 10:56 pm

FidelityAmex wrote:Hey, congratulations on your first secured credit card.

For your questions, I would just pay it in full every months. Remember this is your first credit card to help you build credits, so the banks want to see that you can take a good care of the card by paying it on time, and not over spend your limit. That's all they need.

I asked the rep at my bank about this question before. He told me that pay your balance in full is good, but not as good as carry a balance. He said every months make sure you pay your bill on time, and also have something left on the balance like $50-$100 dollars. You will pay a small amount of interests, but this will help your score improve faster because the banks will earn some interests and see you are a good customer... I didn't trust him.

According to MSN credit card experts. They said you don't need to carry a balance or pay any interests to have a good credit score. Just as long as you pay your bill on time and don't over spend your limit, then over a period of times your score will go higher... This time I trust them, so I pay all my bills in Full every months.

Good Luck to you.


Ha! Of course your bank rep said carrying a balance is better. Where do you think his paycheck comes from! As we have said ad nauseum, paying interest will have ZERO effect on your score.



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