Best strategy for paying off CCs monthly?

[money_talks]

I have read multiple posts and threads in this forum and it seems there is not a definite answer as to the best method for paying off CCs before the statement closes. Here are the 2 scenarios I have seen recommended the most by users on this forum: (this is assuming 2 or more credit cards, not sure what is best for 1 CC)

1) Leave a balance on 1 card, pay all others off completely. Total util on CCs should be 1-9%. This is the best way to boost your credit score.

2) Leave balances on all cards. Total util on CCs should be 1-9%. This shows you are using all your CCs monthly.

I am trying to rebuild my credit. I am in the lower 600s. What strategy is best for me right now? If #1 is the indeed the best way to boost your score, why aren't we all using #1? Are there an other advantages to #2?

[09Lexie]

Actually, its let a balance report on one cc for maximize scoring. Total util between 1-9% , PIF so you are not carrying the balance to avoid interest

[Simply827]

#1 is the best strategy. You actually get a score ding by having balances on all cards. The only advantage to #2 would be for future CLIs, but then again, a lender knows if you're using their card or not, even if it doesn't show a balance on your CR.

[takeshi74]

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@money_talks wrote:

I have read multiple posts and threads in this forum and it seems there is not a definite answer as to the best method for paying off CCs before the statement closes. 

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Of course not.  Best is always highly subjective no matter what the topic so there is never one definite answer for any "Which is best?" question.  I PIF the cards that I mainly use and pay the others on their statement dates as I only use the sock drawer cards once a month to keep them active.  With my limits, a single, small charge has no impact on my utilization and this approach keeps things simple for me.  As with any subjective matter, you have to determine what works best for you and go with it.  We don't all have the same credit profiles, finances, goals, priorities, etc so best on this topic will vary from person to person.

The nitpicking details really don't matter.  Just keep your utilization as low as possible using whatever approach suits you best.

[money_talks]

09Lexie wrote: Actually, its let a balance report on one cc for maximize scoring. Total util between 1-9% , PIF so you are not carrying the balance to avoid interest

So you should put your balance on the single card with the lowest APR, correct? If both cards happen to have the sam APR, it's a coin toss at that point as to which one to have the balance on or is there something I should look for in this scenario to decide where to put the balance?

Simply 827 wrote: #1 is the best strategy. You actually get a score ding by having balances on all cards. The only advantage to #2 would be for future CLIs, but then again, a lender knows if you're using their card or not, even if it doesn't show a balance on your CR.

Based on your advice, then there is really no reason to use #2? What's the reasoning behind getting a score ding by having a balance on all cards? If your util is the same, why would your score drop? You would still owe the same dollar amount on all credit cards combined.

takeshi74 wrote:  I PIF the cards that I mainly use and pay the others on their statement dates as I only use the sock drawer cards once a month to keep them active.  With my limits, a single, small charge has no impact on my utilization and this approach keeps things simple for me.

By having sock drawer cards and using them only to keep them active, should there be any concern for a CLD? What does it take for a CLD to happen?

[09Lexie]

Low APR wouldn't apply if you are PIF. To be clear, let 1 cc report a balance, as long as you PIF before the due date and do not carryover a balance- you will not be charged interest

[money_talks]

09Lexie wrote: Low APR wouldn't apply if you are PIF. To be clear, let 1 cc report a balance, as long as you PIF before the due date and do not carryover a balance- you will not be charged interest

If you let a balance report on your card, it's impossible to avoid interest, right? On both my cards I have active right now interest is computed when the statement closes. I am under the impression that you avoid interest only when you PIF before the statement closes. If you have even a $0.01 balance when the statement closes, interest will be charged on your average daily balance. Maybe I am not understanding your comment.

Some more questions:

By having sock drawer cards and using them only to keep them active, should there be any concern for a CLD? What does it take for a CLD to happen?

What's the reasoning behind getting a score ding by having a balance on all cards? If your util is the same, why would your score drop? You would still owe the same dollar amount on all credit cards combined.

[SSA_2013]

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@money_talks wrote:

09Lexie wrote: Low APR wouldn't apply if you are PIF. To be clear, let 1 cc report a balance, as long as you PIF before the due date and do not carryover a balance- you will not be charged interest

If you let a balance report on your card, it's impossible to avoid interest, right? On both my cards I have active right now interest is computed when the statement closes. I am under the impression that you avoid interest only when you PIF before the statement closes. If you have even a $0.01 balance when the statement closes, interest will be charged on your average daily balance. Maybe I am not understanding your comment.

This would on apply if your credit card doesn't have a grace period. Usually interest gets billed if you leave a balance one month and pay off the partial amount by the due date. Thus leaving a remaining balance + interest. I don't know of any prime, and even most subprime, that charge you interest in such a way. I let a small balance report for utilization on a different card every month or every other month and never paid interest.  

Some more questions:

By having sock drawer cards and using them only to keep them active, should there be any concern for a CLD? What does it take for a CLD to happen? 

This varies by lender. Some lenders may CLD if they feel you don't need/utilize a high credit limit that they have issued. They may CLD you if you haven't used their card for 3 months, 6 months, etc. Some will CLD if they just feel exposure in the bank is too high. 

What's the reasoning behind getting a score ding by having a balance on all cards? If your util is the same, why would your score drop? You would still owe the same dollar amount on all credit cards combined.

The reason is that they view it as having multiple accounts with debt. One can assume they fear you may forget to pay 1 of the many accounts, you may be paying them off slowly spread across the accounts, etc.

[SSA_2013]

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@SSA_2013 wrote:

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@money_talks wrote:

09Lexie wrote: Low APR wouldn't apply if you are PIF. To be clear, let 1 cc report a balance, as long as you PIF before the due date and do not carryover a balance- you will not be charged interest

If you let a balance report on your card, it's impossible to avoid interest, right? On both my cards I have active right now interest is computed when the statement closes. I am under the impression that you avoid interest only when you PIF before the statement closes. If you have even a $0.01 balance when the statement closes, interest will be charged on your average daily balance. Maybe I am not understanding your comment.

This would on apply if your credit card doesn't have a grace period. Usually interest gets billed if you leave a balance one month and pay off the partial amount by the due date. Thus leaving a remaining balance + interest. I don't know of any prime, and even most subprime, that charge you interest in such a way. I let a small balance report for utilization on a different card every month or every other month and never paid interest.  

Some more questions:

By having sock drawer cards and using them only to keep them active, should there be any concern for a CLD? What does it take for a CLD to happen? 

This varies by lender. Some lenders may CLD if they feel you don't need/utilize a high credit limit that they have issued. They may CLD you if you haven't used their card for 3 months, 6 months, etc. Some will CLD if they just feel exposure in the bank is too high. 

What's the reasoning behind getting a score ding by having a balance on all cards? If your util is the same, why would your score drop? You would still owe the same dollar amount on all credit cards combined.

The reason is that they view it as having multiple accounts with debt. One can assume they fear you may forget to pay 1 of the many accounts, you may be paying them off slowly spread across the accounts, etc.

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I also forgot to add the one most crucial thing. The "game" of utilization and optimal scoring is only needed when you plan on applying for a new account. If you don't have any planned apps, not seeking any CLI's, etc you don't need to worry so much. The main thing is not to overextend yourself with debt that you can't pay or spook lenders. This is best by keeping any balance to no more than 30-50% at any given and/or prolonged period of time. Although credit is important....that doesn't mean you should let it take over your life or everyday way of living. 

[money_talks]

SSA_2013 wrote: This would on apply if your credit card doesn't have a grace period. Usually interest gets billed if you leave a balance one month and pay off the partial amount by the due date. Thus leaving a remaining balance + interest. I don't know of any prime, and even most subprime, that charge you interest in such a way. I let a small balance report for utilization on a different card every month or every other month and never paid interest.  

Interesting. Are you saying all prime cards and subprime cards charge you interest only on your ending balance for the billing cycle?

For example, my Credit One cardholder agreement says "Periodic Finance Charges will be assessed on all “average daily balances” until paid in full. I understand this to mean that if I had a $1,000 balance everyday during the billing cycle and I paid $999.99 right before the statement closed, my ending balance would be $0.01. Credit One would charge interest on about $1,000. Are you saying that most good cards prime/subprime would charge interest on the $0.01?

I am still trying to understand 09Lexie's response though. The post reads that there is a way to avoid interest and lettting a balance report when the statement closes. Does this have something to do with the grace period?