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05-06-2009 11:22 PM
Sorry if this is one of those questions that's been asked a lot, but as you can see, I'm a noob - sorry.
I've recently arrived in the U.S. and successfully applied for a Capital One CC. It's only a little iddy-biddy limit ($300) but you've got to start somewhere, and if I follow there "3 steps" procedure, they'll increase that to $750 after 3 months. OK, fine.
My question is this: I know it's a given to pay at least the minimum on time, every time, but how much should I pay off each month? I've been clearing the outstanding balance in full for the first two months, but somebody on another (non credit related) forum reckons that I'm better off leaving a small balance on the card each month rather than paying it off in full. That makes no sense to me. Is he talking crap?
05-07-2009 12:44 AM
Welcome to the forums! You will learn lots as you just read about other people's cases.
What the other person said is false, but in its essence is not entirely false. He was trying to allude to the fact that the best way to optimize your credit score is to have at least one of your cards "REPORT a balance" to EQ,TU,EX. This shows that you are in responsible use of your credit, and that you manage it wisely. This is where people tend to get confused and kind of ask the question of "So I need to pay interest rates to get a good credit score?"
The answer to this is no. Each financial institution has different dates for when they report your balances to the agencies, and when the statement cuts and the formulate interest charges. It will vary, so if interested, you must call the institution (in your case, Capital One). They should give you information on when and how often they report your balances.
With all this said, there is no excuse to carry balances and pay interest charges. Yes, you might get the balance reported to the agencies, but then it becomes something more of you are paying for your credit score rather than obtaining its optimization for free. Paying in full is the wisest thing to do before the statement cuts, to avoid the fees. Just call and ask so you also know when your credit reports will show a reflection of balances reported.
I probably went on and on, but I hope this helps!
05-07-2009 07:07 AM
I agree with the above recommendation to Pay In Full (PIF) and not pay interest.
However, if you are using the card for normal use and paying the previous statement you will still likely have a balance reported since they report the balance at some point in the month. This will usually be the statement balance. It can be other dates.
I think you will find that a balance will be reported if you PIF by the due date. You don't need to pay before the statement cuts since there is a grace period with no interest.
Don't ever pay interest to get a better score!
05-07-2009 07:07 AM
The best financial habit is to PIF and not accumulate any unnecessary debt and not to pay any unnecessary interest.
As previous post indicated, you can have a small balance reported and still pay the balance by due date and therefore avoid all interest.
Save money and collect interest, don't pay it and especially not for the sole sake of FICO.
05-07-2009 09:10 AM
05-07-2009 09:21 AM
Let not your judgement be clouded by the promises or deceptions of the money lenders.