Not able to pay full balance on card for first time ever - couple of questions!

Gub

Hi all,

I've had a credit card for several years, and have paid the balance in full every month without fail. However, due to moving jobs in the past couple of months, I've ended up with a short period of higher expenses than normal (needed nicer clothes for new job) and less income (smaller than usual salary payment from old employer for the last month, couple of weeks off before starting new job). Therefore I won't be able to pay the full balance for the first time ever, and to be honest with you all I'm not entirely sure how this works. Bit of background...

I've moved to a significantly better job, and I will be able to pay the full balance within two months - the majority at the end of July, and anything left over by the end of August, so I'm not particularly concerned about the comparatively small amount of interest I will have to pay; my interest rate is 16.9% APR, and the balance is currently at around £1800. I plan on paying a few hundred this month at least, but I will probably need to use the card for other purchases until I can pay it off - this job offer came up suddenly, and as I hadn't anticipating moving job I had committed to a few things that will cost a bit over the next couple of months. I would have been able to afford them without any problem if I hadn't had to do so much shopping, but in the long term this move is definitely financially beneficial. My limit is £6,900, and I don't see my balance going above £3000 by the time I pay it off, so I shouldn't be using over 50% of my available credit.

Am I correct in thinking that as long as I pay more than the minimum payment due until I can afford to pay it off in full then my credit rating won't be affected? I plan on paying a few hundred more than the minimum - as much as I can afford to really - and I've heard that paying the full statement balance each month doesn't improve your rating, but having never been in this position before I wanted to check that this is the case.

Given the details above, is there anything I'm overlooking or should be concerned about? I'm sure I'm building this up to be a bigger deal in my mind than it actually is, but I have no experience of being in this situation so I'd really appreciate some advice.

afzaal1988

Gub wrote: »

Hi all,


Am I correct in thinking that as long as I pay more than the minimum payment due until I can afford to pay it off in full then my credit rating won't be affected?

Yes you are correct.

Tixy

As long as you pay more than the minimum then your credit file won't be adversely affected.

If you don't pay in full then interest is calculated on the daily balance from the date of transaction to the date of payment, therefore it is in theory best to pay as much as you can as soon as you can and to put on new purchases as late as you can (although in the scheme of things this probably isn't going to be a massive amount of interest over a few months).

The other thing you could possibly consider is to see if you can get a new card with 0% on purchases and use that for future purchases over the next few months. Obviously you would still pay interest on the existing card until you had paid off the remainder of the current balance.

Thrugelmir

Gub wrote: »

Am I correct in thinking that as long as I pay more than the minimum payment due until I can afford to pay it off in full then my credit rating won't be affected?

Worry less about your credit rating and more about building some savings. The position you are in is how many peoples financial problems start. Everyone has the idea of paying the balance off the following month.

By using the card rather than spending cash you are already reliant on next months pay cheque to pay your bill.

phona

Congratulations on your new job!

What you describe is an appropriate use of credit cards, as long as you're sure to pay at least the minimum between the statement and due dates. People do get caught out paying before their statement is produced, which doesn't count towards the minimum.

Remember there will be some trailing interest because if you don't pay your statement in full you don't get the "up to 56 days interest free" so you'll be charged interest from the transaction date. That means you need to pay in full two statements in a row to get back to normal.

I think the situation you're in is actually a prime example of why having a credit card is very useful to provide flexibility in your finances short-term. They're not only a means to get into crazy debt!

Gub

Thanks all for your responses, and thanks phona for the congratulations - I couldn't be happier about my financial situation in the long term!

Thrugelmir wrote: »

Worry less about your credit rating and more about building some savings. The position you are in is how many peoples financial problems start. Everyone has the idea of paying the balance off the following month.

By using the card rather than spending cash you are already reliant on next months pay cheque to pay your bill.

Thanks for this advice also; everything you said is absolutely true. While I didn't mention it originally as I don't feel it is relevant to my current situation, I am a saver - unfortunately however I've been hit with several big expenses over the past few months which have drained my savings. First there was a major boiler issue that not only required a new boiler but for the flue to be rerouted, and then there was an issue with my car. The remainder went towards the clothes I had to purchase for my new role; luckily I should be able to build my savings up again fairly quickly with my new salary.

I'm only in my mid twenties and I have been extremely fortunate with the support that I have received from my family (most notably a generous inheritance from my grandfather which allowed me to become a home owner at a comparatively young age, especially considering the fact that I live in London) but I am now very much trying to make it on my own, so while I have followed similar advice in the past a reminder is always welcome - you never know what is around the corner!

Thanks to all for the reassurance - I look forward to paying off the card as soon as I can and rebuilding a foundation of savings to prevent this occurring again. I think I just needed to hear that my current situation would not have a negative impact on my future finances.

If anyone else has anything else to add please do; I'd very much welcome any other perspectives on my current situation.

-taff

Only that you can change your direct debit to pay in full each month without manually doing it.
I'm asuming you have it set to pay the minimum or did you change it to account for the shortfall?

Gub

I don't pay via direct debit - I organise the payment manually each month. I'm very aware of my finances and prefer to know exactly how much is going out and when as opposed to setting up a direct debit to do it automatically.

redcard

Wow. People really are becoming completely obsessed with this credit rating nonsense.

How do you know you're credit rating won't improve?

Gub

redcard wrote: »

Wow. People really are becoming completely obsessed with this credit rating nonsense.

How do you know you're credit rating won't improve?

I don't... Hence the reason that I posted this thread. I'm young and don't know exactly how important a good credit rating is, but from a logistical point of view it sounds like it is better to maintain a good credit rating as opposed to a poor credit rating, especially if I'd like to get a mortgage in the future. Maybe I'm wrong to worry about it, but to be honest your comment didn't really add much apart from insinuating I don't know that much about credit in general, which I've already admitted to. Not exactly sure what sort of answer you're looking for really.

redcard

Gub wrote: »

I don't... Hence the reason that I posted this thread. I'm young and don't know exactly how important a good credit rating is, but from a logistical point of view it sounds like it is better to maintain a good credit rating as opposed to a poor credit rating, especially if I'd like to get a mortgage in the future. Maybe I'm wrong to worry about it, but to be honest your comment didn't really add much apart from insinuating I don't know that much about credit in general, which I've already admitted to. Not exactly sure what sort of answer you're looking for really.

Just making a general point. You've bought a house, moved jobs, got credit cards..... and your first post is about how your credit rating might change due to an absolutely miniscule change to your finances.