Paying credit card?

newuser78

Hi

I got a Santander 123 credit card (0% interest for 23 months) roughly 1.5 months ago and I have just received my first statement.

So far I have racked up £450 and £28 is minimum payment mentioned in the statement (due on 3rd July).

In the interests of being a "good credit user", should I:
a) Pay off £450 in one go
b) Pay the minimum £28 via direct debit
c) Pay £200 (to reduce the balance) and allow direct debit to go out as normal

I have no other debts and the only reason I got this credit card was for the cashback and improving credit rating so I can get mortgage in a few years time. If this makes any difference, the credit limit is £3,800.

YorkshireBoy

I take it the statement confirms the £28 minimum payment will be collected by DD?

robfosters

If it was me, I would go for option c, but it doesn't have to be £200. Maybe add £72 to pay £100 off. For optimal credit ratings, a balance of between £780 to £1560 on a £3800 limit is good, but only if you can afford it. Apparently, this 20-40% debt to balance ratio is looked upon well by lenders. It shows that you do lend, but within your means.

jonesMUFCforever

Paying interest to ''improve credit rating'' is madness IMO.
If you have the money pay it off - be careful if you have set up a minimum D/D - look carefully at the statement to see how they work things out.

robfosters

He's not paying interest atm though, so he can afford to spread it out if it makes it easier for him.

jonesMUFCforever

robfosters wrote: »

He's not paying interest atm though, so he can afford to spread it out if it makes it easier for him.

It's not clear from his post whether he has a purchase free card or a balance transfer card.
Again to me it looks like he has been spending on the card rather than transfer a balance - you could be right if he has a purchase free card.

bengal-stripe

newuser78 wrote: »

c) Pay £200 (to reduce the balance) and allow direct debit to go out as normal

Santander is one of the CC companies who will adjust or cancel the minimum payment if a payment was received 5 or more days before the DD is due.

robfosters

jonesMUFCforever wrote: »

It's not clear from his post whether he has a purchase free card or a balance transfer card.
Again to me it looks like he has been spending on the card rather than transfer a balance - you could be right if he has a purchase free card.

Just thought the fact he says he has no other debt and only got it as a credit builder and cashback made me think it must be a 0% purchase card.

newuser78

Many thanks for your replies!

Apologies, it is a a 0% purchase credit card.

I do have the money to pay off the balance right now if that's the best thing to do but my confusion stems from:
- Martin Lewis saying "Make at LEAST the minimum repayments" - does this mean I should pay £30 or 50% of full?

- Some people saying I should pay only the minimum to demonstrate that I can manage the credit card debt. Carry on as normal till I reach credit limit.

- Some people saying I should clear the balance EVERY MONTH even if interest is 0%

Just want to do the "right thing" and be a "perfect customer" in the eyes of banks.

robfosters

I always pay more than the minimum payment.

Problem is, if you pay off your entire balance and never incur interest, the banks can see you as an unprofitable customer. But this mainly matters with CC's and the like.

As for a mortgage, just keep your balance below 50% of the limit and make regular payments. As much as you can afford, but deffo more than minimum payment.

A worker at HSBC once told me that as long as you have a clean credit record, the main thing is history with the bank. Not going into unauthorized overdrafts, putting a regular salary in over a long period and using the account responsibly is worth a hell of a lot.

newuser78

robfosters wrote: »

I always pay more than the minimum payment.

So in my case... would £50 be a "good" amount? Or should I aim for 50% of £450?

robfosters wrote: »

As for a mortgage, just keep your balance below 50% of the limit and make regular payments. As much as you can afford, but deffo more than minimum payment.

Ah so if I use the card for a large purchase, e.g holiday or a car that might cost £3000 (e.g. over 50% of my limit!) - the banks would see this as a bad thing even if I pay this off quickly?

robfosters wrote: »

A worker at HSBC once told me that as long as you have a clean credit record, the main thing is history with the bank. Not going into unauthorized overdrafts, putting a regular salary in over a long period and using the account responsibly is worth a hell of a lot.

I agree! I am a big saver and currently hold 3 accounts, working hard to have good relationships with the banks.