Best way to pay off credit - Individual Transactions (vs) Direct Debit Full Statement Balance

ryanburns

Hi everyone, 

I can’t seem to find a definitive answer as to which is the best method to build credit, while preventing 'credit account closure' and 'reduction in credit limit’. Please assume everything listed below is ’set up correctly’:

Option 1) To pay off individual transactions manually (at the same value) as soon as they're deducted from my credit limit, reducing my balance to zero AHEAD OF my direct debit paying off the Full Statement Balance at the end of the month.

(or)

Option 2) To NOT pay off individual transactions, leaving my used credit balance untouched DURING the month, ONLY allowing my direct debit to clear the Full Statement Balance at the end of the month.

QUESTIONS

1)   Does Option 2 (ONLY paying down balance via direct debit - NOT individual payments) give more ‘good' information to the CRA’s (credit bureaus)? - Specifically, do direct debits (ONLY paying the Full Statement Balance off itself), allow CRA’s to see that a balance is not always at zero (£0.00) therefor showing that the credit limit IS being used, more-so than Option 1 (paying off individual transactions manually)?

2)   If using Direct Debits (without paying off individual transactions) does report that the credit limit is being used ‘better’ than Option 1 (paying off individual transactions manually), should I just use Direct Debit?

3)   Is it actually a ‘bad idea’ to pay off individual transactions IN COMPARISON to direct debits for the above reason?

4)   If my credit balance is zero (with or without transactions) when the payment due date arrives, will a statement be generated? (Scenario: I’ve used credit, debited the same amount, my balance is now zero. Will I get a statement?)

5)   Does the information above apply to all CRA’s (credit bureaus)?

I understand that it is ‘good practice’ to keep on top of credit used, which is why the masses are advised to adopt the method of paying off individual transactions. However, I have a moderate-high understanding of credit itself and do not take purchases lightly. So I am asking purely for the best use case of 'Direct Debit Full Statement Balance (vs) Individual Transactions' for my own understanding.

I also understand any advice given may not be legal advice. I’m still open to hearing advice from professionals.

Trying to get to the bottom of this once and for all so I’d love to hear a true expert's advice if possible please!

Thanks in advance,

Ryan 😀

[Deleted User]

Just set up a full pay DD. 

It shows that you're using the card, can handle the credit and aren't panicking every time you use the card.

I'm not aware of the 'masses' ever being advised to pay off individual transactions.

[Deleted User]

If you pay off the card before the statement it's registered as not being used, which won't help you build up a good credit history (note: not score, the gimmick score is never seen by any lender).

The best way to show good credit management is to spend on the card then pay off in full every month after the statement is produced (and the safest way is via direct debit to pay in full so you get the DD guarantee and don't need to worry about it).

This will be reported by the lender in the same way to every CRA they use

Ebe_Scrooge

Yep, to reiterate the above - if you pay off a transaction as soon as it hits your account, your balance will be zero when the statement is produced (and, to answer Question 4, yes you will still get a statement sent to you, showing zero balance).  Not bad as such, but a totally unnecessary faff and it won't be doing anything to improve your credit history.  The "correct" - and usual - way to run a credit card is just to wait for the statement to arrive and then pay it in full (whether by DD or manually, it doesn't matter, but a DD just makes things safer as you won't forget to pay if you're away on holiday or whatever).

And, like ZX81 says, "the masses" have never been advised to pay off individual transactions to my knowledge - I'd be curious as to where you read that

Thrugelmir

Stop overthinking everything. Use credit when you actually need to. A good history is achieved over time. Churning spend through a credit card evidences nothing. Using a debit card and never letting your current account go overdrawn is equally as effective. The danger with credit cards is that the money spent is paid out of next months pay. In effect you become a month in arrears. Credit card interest rates are high to compsensate the lender. As when financial stress occurs first thing you are not going to pay in full is the credit card.