When to pay credit card balance - any difference?

phemark

Hello,

I like to pay my credit card balance as soon as I get the summary in the of the month - I don't like to wait for another month, thus thinking that I have more money than I actually do.
(I dont like my money to be displayed like that: 2000 in savings, 1000 in credit - I'd rather have 1000 in saving, 0 credit all the time)

For the same reason, I would even like to pay most of my bill before getting that summary, which I can do too.

What I want to ask is, if there is any difference at all on my credit rating, if after each month, my credit card bill is 1000 or 100 pounds (do credit agencies look at the amount I have borrowed during the whole month, or only at the end of month, or they dont care about that, as long as I pay in full)?


(credit limit in both cases = 3500)
Example a)
During the month i spend 1000 pounds on CC.
End of the month i get summary of 1000 pounds.
I pay it immediately, or any time at that month.

b) During the month i spend 1000 pounds on CC.
Before the end of month i pay 900 to CC.
End of month i get summary of 100 pounds.
I pay it immediately, or any time at that month.


So question - is there any difference on my credit score regarding if I choose a) or b)?


Hope all of this is clear, and the question is simple (sorry of it is a stupid question, but as I have just recently got my CC, and started understanding credit rating, I want to know everything:) )



P.S. I know that by doing a) I could save a bit more (is this amount=900*(interest rate per year)?), but I would probably prefer doing b) anyway.

Deru

I've been told that it is better to have a balance, get your statement and then pay off the statement as that's what counts.

If at the end of each month, your card has 0 balance, it's like the cards are unused.

I'm a bit like you and pay off chunks off my CC's before the statement. I leave a nice even number like £100 on mine before I clear mine though for the reason mentioned above.

For the same reason, with my Capital One Classic card (used for improving credit score), I spend a few pounds on it each month, get my statement and then clear the balance.

Option b is better.

phemark

Thanks for the reply.

Couple more to follow up:

1) Does it matter how big is the balance in actual pounds at the end of each month? 100 vs 1000 etc?
2) Does it matter how big is the balance as an utilization % at the end of each month? 5% vs 30% vs 50% etc?


Thanks

sfax

Keep the utilisation below 50%, some people say 30-40% is optimum. Get your credit file and see what the lenders see. As per Deru, get your statement balance first and then pay it off or your report wil show a string of £0 balances and it will look like you're not using the account

phemark

sfax wrote: »

Keep the utilisation below 50%, some people say 30-40% is optimum. Get your credit file and see what the lenders see. As per Deru, get your statement balance first and then pay it off or your report wil show a string of £0 balances and it will look like you're not using the account

Is there "too low" utilization?

I know that I shouldnt keep 0%, but what about 5-10%?

Or is ~30% the best?

PollyOnAMission

phemark wrote: »

P.S. I know that by doing a) I could save a bit more (is this amount=900*(interest rate per year)?), but I would probably prefer doing b) anyway.

As I understand it, so long as you pay back the full amount every month (whether that is before the statement is issued or afterwards, so long as you pay before the payment due date) you won't be charged any interest at all.

The only time you will be charged interest is if you don't pay back the full amount before the payment due date after receiving your statement.

Someone please correct me if I'm wrong!

phemark

PollyOnAMission wrote: »

As I understand it, so long as you pay back the full amount every month (whether that is before the statement is issued or afterwards, so long as you pay before the payment due date) you won't be charged any interest at all.

The only time you will be charged interest is if you don't pay back the full amount before the payment due date after receiving your statement.

Someone please correct me if I'm wrong!

Yes, I know that.

What I mean by "saving a bit more", is that if I always keep a balance in CC (but still pay in full last months spending, and new spend is the same as the old balance), I can keep that balance in Savings account and get interest of it.

But it wouldnt be big, so I want to better maximise my credit rating, if possible, by keeping utilization %, which is the best.

sfax

phemark wrote: »

Is there "too low" utilization?

I know that I shouldnt keep 0%, but what about 5-10%?

Or is ~30% the best?

I am by no means an expert and that 30-40% is from another thread where I asked the same question. I think 30% is "better" than 5-10% because the lender will see that you are using the credit and potentially paying a fair bit of interest, without being reckless, or just leaving an account dormant. So they get enough interest money from you with less risk of default, and don't get stuck with servicing costs for an acccount you don't use

phemark

sfax wrote: »

I am by no means an expert and that 30-40% is from another thread where I asked the same question. I think 30% is "better" than 5-10% because the lender will see that you are using the credit and potentially paying a fair bit of interest, without being reckless, or just leaving an account dormant. So they get enough interest money from you with less risk of default, and don't get stuck with servicing costs for an acccount you don't use

OK, makes sense, thanks

jennifernil

To my mind, the best way to use the card, especially if your spending is pretty constant each month, is to spend no more than a bit under 50% of your limit, and set up a DD to pay the full amount each month.

That way you get to keep your savings in the bank as long as possible, and you do not risk exceeding your credit limit.

It may not be the way you most like to do it, but it is the most MSE!