Paying credit card early, is it good or bad?

Risco

I got myself a credit card from my bank. I put about £650 on it last month, and paid it off before my bill came through. This month I put £360 on it, and was going to pay it off early again. My bill date is the 28th for reference. However they told me because I paid it off early, I wont get the minimum payment come off til next month? So should I pay it now?

I am a little bit confused on if paying off early is a good or bad thing? I want to clear the balance now, would it be bad to do this? Should I wait til end of next month? See I am going to buy mobile phone from Amazon this that will cost me £450 (its one of those lovely N97 ) But I hate having a big balance, even though I am more than able to pay it off!

I want to keep building my credit rating, so any help is appreciated!

chattychappy

Perhaps I'm not understanding something... but if you pay off the balance before the statement is generated, then unless you make further purchases before generation, both the balance and minimum repayment will be zero. (Assuming no interest/other charges are in play.)

If you pay off the balance and then make a further purchase before generation, the new balance will be just that purchase and the minimum repayment will be based on that - typically 2.25%. (Depending on the card.)

If you pay off the balance just after generation, having made a further new purchase just before generation, then the statement will show both the balance and the new purchase with a minimum payment required. Since the "old" balance was paid after generation, the minimum repayment required is likely to have been satisfied. Paying for the new purchase before the due date will avoid interest.

Where people can get caught out is if month-by-month they make a small payment just after the statement is produced. This is always enough to satisfy the minimum. Then one month they pay too early - ie before the statement is generated. This generated statement will show two payments - the normal one and the "early" one. A minimum repayment will be calculated and required in the normal way. But the cardholder thinks he's paid already. So unless the next payment is also "early"... he will have missed a payment and face the consequences.

daily_2

Setup a direct debit to pay off the full balance, stress free, no interest. £450 on a mobile phone :eek:

Risco

chattychappy wrote: »

Perhaps I'm not understanding something... but if you pay off the balance before the statement is generated, then unless you make further purchases before generation, both the balance and minimum repayment will be zero. (Assuming no interest/other charges are in play.)

If you pay off the balance and then make a further purchase before generation, the new balance will be just that purchase and the minimum repayment will be based on that - typically 2.25%. (Depending on the card.)

If you pay off the balance just after generation, having made a further new purchase just before generation, then the statement will show both the balance and the new purchase with a minimum payment required. Since the "old" balance was paid after generation, the minimum repayment required is likely to have been satisfied. Paying for the new purchase before the due date will avoid interest.

Where people can get caught out is if month-by-month they make a small payment just after the statement is produced. This is always enough to satisfy the minimum. Then one month they pay too early - ie before the statement is generated. This generated statement will show two payments - the normal one and the "early" one. A minimum repayment will be calculated and required in the normal way. But the cardholder thinks he's paid already. So unless the next payment is also "early"... he will have missed a payment and face the consequences.

Ok, I am now thoroughly confused! I just looked at my last statement, it shows my spending of £602.62 anbd then notes on the 25th June "faster payment received" when I paid of the balance. My new balance then showed £0.00.

Since this point I have put on £359.88, and this is the one I want to clear off. So if I pay it off now, will I still be building my credit rating?

YorkshireBoy

Risco wrote: »

So if I pay it off now, will I still be building my credit rating?

Even if you don't use the card you'll still be building your credit rating because your credit file will show your "payments are up to date".

Paying off before you have to is pointless in your circumstances, being as you always pay in full (and assuming you don't use the credit card for cash transactions).

As suggested earlier, set up a full payment DD and do something else with your time.

CannyJock

Be aware that the DD might not be in place in time for the next statement that's produced - so you may have to make a manual payment. You can check with the card's CS people when you phone them to setup the DD.

chattychappy

Risco wrote: »

Ok, I am now thoroughly confused!

It wasn't my finest post!

Risco wrote: »

I just looked at my last statement, it shows my spending of £602.62 anbd then notes on the 25th June "faster payment received" when I paid of the balance. My new balance then showed £0.00.

Since this point I have put on £359.88, and this is the one I want to clear off. So if I pay it off now, will I still be building my credit rating?

By simply have the account open and operating you are helping it. I've noticed on Experian some cards show more detailed information (eg payments made) whilst others just show just the outstanding balance at a point when they update the record.

I would wait until the statement before paying off the balance so it shows that you have taken some credit, but I doubt whether it makes a lot of difference.

solace

Risco wrote: »

I got myself a credit card from my bank. I put about £650 on it last month, and paid it off before my bill came through. This month I put £360 on it, and was going to pay it off early again. My bill date is the 28th for reference. However they told me because I paid it off early, I wont get the minimum payment come off til next month? So should I pay it now?

I am a little bit confused on if paying off early is a good or bad thing? I want to clear the balance now, would it be bad to do this? Should I wait til end of next month? See I am going to buy mobile phone from Amazon this that will cost me £450 (its one of those lovely N97 ) But I hate having a big balance, even though I am more than able to pay it off!

I want to keep building my credit rating, so any help is appreciated!

Yes .Paying credit card early is good.

andrewsmith121

Paying credit card early or before the due date will be always good rather then paying minimum amount or after due date

splatt30

If you pay in full each month the loan from the credit card company is interest free. Why pay it off early? Keep the money in your (ideally savings) account for as long as possible earning you interest (OK so not huge in the current climate). When the bill arrives each month arrange for it to be paid, in full, a couple of days before it's due, with faster payment this can be the day before.

You keep hold of your money longer, earning you interest.

CLAPTON

splatt30 wrote: »

If you pay in full each month the loan from the credit card company is interest free. Why pay it off early? Keep the money in your (ideally savings) account for as long as possible earning you interest (OK so not huge in the current climate). When the bill arrives each month arrange for it to be paid, in full, a couple of days before it's due, with faster payment this can be the day before.

You keep hold of your money longer, earning you interest.

At the current time, paying a day early and relying on faster payments is in general guarenteed to incur late payment charges, interest and adverse marks on your credit record... a DD for the full amount is the best way forward.