Don't pay off in full?

For just about anything you want to get off your chest about credit cards.
11 posts
ALZYMER
 
Posts: 2
Joined: Sat Mar 08, 2014 1:45 pm
Location: Fernandina Beach

Don't pay off in full?

Postby ALZYMER » Sun Mar 09, 2014 1:15 pm

I have a secured Cap One credit card and I have been advised to leave a few dollars outstanding every month to build up my credit score faster instead of paying it off in full every month. Is this good advice?


JoDa
Centurion Member
Centurion Member
 
Posts: 235
Joined: Tue Mar 12, 2013 10:10 pm
Location: United States

Postby JoDa » Sun Mar 09, 2014 6:52 pm

Apparently having a *small* balance report is the way to go, but reporting =/= to paying interest. Your balance, generally, reports on your statement date, about a month before payment is due to avoid interest. So, if you charge 1-10% of your line that you don't pay off before the STATEMENT DATE, but pay it off before the PAYMENT DATE, you get the credit boost and never pay interest. To further break it down in plain terms: your statement date is the 20th of March and your payment date is the 15th of April. You charge a little on the card between February 21 and March 20, not paying it all off before March 20th. Your statement shows a small balance that gets reported to the credit bureaus. Then you pay that amount off on or before April 15th to avoid interest. Does that make sense?
CSP $19K
BOA $4K
UMP $11.5K
Target Visa $1.5K

samhradh
Centurion Member
Centurion Member
 
Posts: 388
Joined: Thu Nov 21, 2013 1:13 pm
Location: United States

Postby samhradh » Sun Mar 09, 2014 8:36 pm

ALZYMER wrote:I have a secured Cap One credit card and I have been advised to leave a few dollars outstanding every month to build up my credit score faster instead of paying it off in full every month. Is this good advice?


NO.

To put it more simply than JoDa: Pay your balance in full every month.

If you wish to do so, you can pay ~90% of your balance a few days before the statement is going to be determined. Then, after the statement posts, you can pay the remaining balance. This process will help make it look like you are not over utilizing your credit. I find the benefits to one's credit score are unnecessary unless you plan to apply for more credit in the near future.
Citi Forward ($10.1K), AmEx Blue Cash Everyday ($30K), Chase Freedom ($12.4K), Discover it ($5.5K), Barclaycard Arrival ($12.5K), L.L. Bean Visa ($5K). FICO 806 (TU), 812 (EQ), 806 (EX).

MemberSince99
Centurion Member
Centurion Member
 
Posts: 4913
Joined: Sun May 20, 2012 4:35 pm
Location: WI

Postby MemberSince99 » Sun Mar 09, 2014 8:56 pm

I think the confusion is, as far as your score, pay if all off except a small amount (1-4% for best score) BEFORE your closing date (the date your statement is generated) THEN pay it off in full right away so you don't pay any interest once your statement posts.


This will give you the best score without you paying interest.

HeyChrisBaker
 
Posts: 1
Joined: Mon Mar 10, 2014 4:59 am
Location: Manhattan, NY

Postby HeyChrisBaker » Mon Mar 10, 2014 5:01 am

JoDa is EXACTLY right on how this should be done. Kudos

takeshi
Centurion Member
Centurion Member
 
Posts: 1741
Joined: Wed Jun 05, 2013 3:12 pm
Location: US

Postby takeshi » Mon Mar 10, 2014 7:22 am

ALZYMER wrote:I have a secured Cap One credit card and I have been advised to leave a few dollars outstanding every month to build up my credit score faster instead of paying it off in full every month. Is this good advice?

The utilization advice is in regard to reported balance, not carried balance. Paying in full doesn't mean that you're reporting a 0 balance. Balances are generally reported at statement end. They are not reported on your payment due date.

MemberSince99
Centurion Member
Centurion Member
 
Posts: 4913
Joined: Sun May 20, 2012 4:35 pm
Location: WI

Postby MemberSince99 » Mon Mar 10, 2014 4:48 pm

takeshi wrote:The utilization advice is in regard to reported balance, not carried balance. Paying in full doesn't mean that you're reporting a 0 balance. Balances are generally reported at statement end. They are not reported on your payment due date.




In my opinion, doing it that way (on the payment due date), along with giving how much the total spent on the card during the billing cycle was, would be a better way of doing it. The current system basically begs to be gamed for scoring purposes. Why not just make it easier and show true utilization as well as usage.

JoDa
Centurion Member
Centurion Member
 
Posts: 235
Joined: Tue Mar 12, 2013 10:10 pm
Location: United States

Postby JoDa » Mon Mar 10, 2014 11:09 pm

I have to disagree with you a little there, Member. Utilization shows how much you *owe,* usage shows only that you spent the money. I, and probably most of you, put all expenses possible on my cards for points. I always have the money, I'm just spending it through a different method (CC versus debit card, cash, and checks). Telling another potential lender "psst, she spends $2K/month on her card," is immaterial to how much I *owe* (which is nothing, and I can make my report say that if DTI is going to be examined). I suppose that's "gaming" to an extent, but I wouldn't want to have to totally stop using my cards for a long time (6 months, a year?) before major credit purposes to *additionally* show I don't *use* them, beyond not *owing* anything on them. If they went this route, then I'd also like to see a "carried balance" reported...that is, what I ultimately paid interest on. That seems fair enough...I spent X, owe 0, and paid no interest. That at least lets the lender truly see that I'm managing my cash flow.
CSP $19K
BOA $4K
UMP $11.5K
Target Visa $1.5K

MemberSince99
Centurion Member
Centurion Member
 
Posts: 4913
Joined: Sun May 20, 2012 4:35 pm
Location: WI

Postby MemberSince99 » Tue Mar 11, 2014 7:00 am

The reason I suggested that is what reports on your balance doesn't necessarily mean you "owe" money because you could have paid it but there is no way for anyone who sees your report to know that and so it's considered "debt" even though you pay in full and it's paid.


Part of the reason paying before the statement is due lowers your score a bit is it "looks" to the scoring models like you aren't using your cards so they assume 0 balance = I'm a loser who doesn't use my credit cards so penalize me for that. (Ok just a bit of sarcasm there but that's how it's handled).


They already monitor literally everything we do anyway, they damn near even know what we are thinking (and I'm sure they are working on that, seriously) so it's not as if we have any sort of privacy in our lives whatsoever though when they demand cameras in every room of our home for our "safety and security" that's the point at which I openly protest - let them drive the tanks over me for it) so this would give a more true picture of things.

takeshi
Centurion Member
Centurion Member
 
Posts: 1741
Joined: Wed Jun 05, 2013 3:12 pm
Location: US

Postby takeshi » Tue Mar 11, 2014 8:02 am

MemberSince99 wrote:In my opinion, doing it that way (on the payment due date), along with giving how much the total spent on the card during the billing cycle was, would be a better way of doing it. The current system basically begs to be gamed for scoring purposes. Why not just make it easier and show true utilization as well as usage.

Any system ends up getting gamed. It's not the system in question that leads to gaming but the people. One can certainly work to reduce the amount of gaming but I'd guess that even adding up all the members of every credit-related site like this results in an insignificant number of people.

MemberSince99 wrote:Part of the reason paying before the statement is due lowers your score a bit is it "looks" to the scoring models like you aren't using your cards so they assume 0 balance = I'm a loser who doesn't use my credit cards so penalize me for that. (Ok just a bit of sarcasm there but that's how it's handled).

That's oversimplified. It holds true if one only has one card but for those with multiple cards the models tend to prefer fewer reported balances.



Return to “General Credit Card Talk”

Who is online

Users browsing this forum: No registered users and 3 guests