Credit Card Payment Frequency - Advise

Ormtho

Hi all,

I have taken out a low credit, credit card as I have low credit and want to improve my score. My plan is to buy my online weekly shop on the card and pay it off in full. My question is about the frequency of payments.

I get paid weekly so would like to pay the card off in full each week on payday, the week after I purchased my shopping on the card. I wonder if this kind of payment schedule might be too frequent to have enough of a positive impact and if I should actually hold the money each week and just pay the card off in full once a month.

Any advise would be greatly appreciated,
Thanks,
Tom

p00hsticks

Unless you are worried that you potentially won;t have enough in your bank account to cover the ful bill at the end of the month, the simplest way would be to just set up a direct debit to pay off the bill in full every month.

Terry_Towelling

You are starting with a clean sheet so that makes things a little more straightforward and what follows relates specifically to starting with a clean sheet. You can make payments to your card provider whenever you like as long as you don't put the card into a credit balance situation.

However, you really want to get the most out of your card and make use of the fact that it is allowing you to defer parting with your cash for potentially the better part of two months. Perhaps consider the following approach:-

Open up a Savings account (e.g. Marcus paying 1.5%) and stick £1 in there to meet the minimum operating balance. Then, every time you use your credit card, transfer a like amount from your current account into the savings account. Your credit card effectively becomes a 'pending' transactions list and your savings account will act as a 'ring-fence' for the cash you will be using to fully clear the credit card balance.

Wait for your card provider to send you a statement and then clear the balance in full using the saved cash. The recommended method of clearing the card is by Direct Debit and, if you set one up to pay your card, your card provider will take it on the exact payment due date and you will be charged no interest whatsoever. You will, however, receive some interest on your 'ring-fenced' cash (not a lot) for the period you have it saved.

You will need to be fastidious in your handling of the card and ensure that the saved cash is transferred back from savings into the current account you are using for the direct debit.

There are other ways of doing it, such as using a current account that pays you interest, in which case there is no need to bother opening a savings account and no need to transfer cash here and there. Alternatively, use an interest-paying current account with a linked 5% easy-access regular saver to ring-fence the cash.

The possibilities are many, but you still have to be responsible and don't take your eye off the ball. One final word of warning, some card providers want your first monthly payment to be made 'manually' but subsequent months can be by direct debit - check what yours requires.

Willing2Learn

Terry_Towelling wrote: »

One final word of warning, some card providers want your first monthly payment to be made 'manually' but subsequent months can be by direct debit - check what yours requires.

@OP

Great Advice from Terry Towelling

When your first statement is issued, it will say on there if the Direct Debit has been set up. If it does not specifically say the Direct Debit has been set up, then you MUST make the first monthly payment manually. Otherwise you will have a negative marker recorded against you on your credit file(s).

Ebe_Scrooge

Forget about your credit "score", that's seen by no-one except you and the credit reference agency. Sensible use of a credit card will, however, improve your credit history over time.

To get the most benefit, you need to wait until you receive your statement each month, then pay off the balance in full. You've usually got a couple of weeks or so between receiving the statement and the "payment due" date - though the due date will be clearly stated on the statement.

The problem with paying off transactions before the statement is produced is that it will look to the CRA - and hence to prospective future lenders - like you are not using the card. That in itself is not a bad thing, but it won't be doing much to build up your history of responsible borrowing and repayment - which it sounds like is your primary aim.

Saying that, you really MUST make sure you pay in full, on time, every month. If you're late in paying, that will be a black mark against you. A couple of late payments in years of otherwise faultless history is not the end of the world. But lots of late payments starts to affect your history very badly.

And if you don't pay the full amount each month, you'll be paying interest - which no-one like doing :-)

phillw

Ebe_Scrooge wrote: »

You've usually got a couple of weeks or so between receiving the statement and the "payment due" date - though the due date will be clearly stated on the statement.

Don't forget to factor processing times, especially if the due date is the day after a bank holiday. It's much better to use Direct Debits, because then it's the banks problem.

Ebe_Scrooge wrote: »

The problem with paying off transactions before the statement is produced is that it will look to the CRA - and hence to prospective future lenders - like you are not using the card.

They see the statement balance and the payments you make every month (I just checked noddle to confirm this). They'll see a zero balance every month but they'll see all the payments you made to the card. So they can figure out you're doing something odd, whether they'll care is another matter.