Pay in Full vs. Paying after statement

[Anonymous]

Very responsible indeed.

[Anonymous]

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@longtimelurker wrote:

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@Chris679 wrote:

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@longtimelurker wrote:

Of course, doing this is cheating the system, just as much as say, oh, MS.   The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts.   So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers.  I am shocked it is openly condoned.

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How would there be any risk if the balance is already paid?  To make any argument that people who pay down before the statement are doing something wrong or misleading is ridiculous. 

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Or actually correct.  The FICO algorithms are based on data collected over time and comparing those that at some point defaulted from those that didn't.   It doesn't need to make sense, just statistical correlation.  So more points are given to those that have say one non-zero balance.   Because the data is based on "normal" behavior, this is going to happen when people are using only one cc, or perhaps rotating which cc they use from time to time.  Here, people can be spending abritrary amounts on all thier cards, and just paying htem down to 0 before the statement cuts.

We are not talking about risk THIS cycle, because as you say the money is paid.   But when you apply for a new card (precisely the time people are told to do this trick) you are giving the creditor the impression that you are one of these low-risk type of people, when in fact your real behavior doesn't match that all.

Whichever way you view it, this is gaming the algorithm.  Or being deliberately deceptive to gain an advantage.    Which is OK by me, but people should understand what they are really doing, and is as "wrong" as most other things that are called wrong here.

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Of course, if you're paying attention so much that you're paying in full before the statement cuts, then you probably are a fairly low risk customer. Its not to say that you couldn't run up a bill, but nothing in the system would prevent that. So, in a sense, it is measuring your risk reasonably, even if you're not performing "normal" behavior

[longtimelurker]

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@Anonymous wrote:

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@longtimelurker wrote:

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@Chris679 wrote:

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@longtimelurker wrote:

Of course, doing this is cheating the system, just as much as say, oh, MS.   The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts.   So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers.  I am shocked it is openly condoned.

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How would there be any risk if the balance is already paid?  To make any argument that people who pay down before the statement are doing something wrong or misleading is ridiculous. 

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Or actually correct.  The FICO algorithms are based on data collected over time and comparing those that at some point defaulted from those that didn't.   It doesn't need to make sense, just statistical correlation.  So more points are given to those that have say one non-zero balance.   Because the data is based on "normal" behavior, this is going to happen when people are using only one cc, or perhaps rotating which cc they use from time to time.  Here, people can be spending abritrary amounts on all thier cards, and just paying htem down to 0 before the statement cuts.

We are not talking about risk THIS cycle, because as you say the money is paid.   But when you apply for a new card (precisely the time people are told to do this trick) you are giving the creditor the impression that you are one of these low-risk type of people, when in fact your real behavior doesn't match that all.

Whichever way you view it, this is gaming the algorithm.  Or being deliberately deceptive to gain an advantage.    Which is OK by me, but people should understand what they are really doing, and is as "wrong" as most other things that are called wrong here.

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Of course, if you're paying attention so much that you're paying in full before the statement cuts, then you probably are a fairly low risk customer. Its not to say that you couldn't run up a bill, but nothing in the system would prevent that. So, in a sense, it is measuring your risk reasonably, even if you're not performing "normal" behavior

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Really?   At least some people here will optimize their score before an app spree or going for a hard card, etc, basically improving their chances of getting a card(s) they wouldn't normally be able to get, which doesn't always imply low risk.   Yes, I'm sure there are real low risk people who hate the idea of being in debt and pay off as soon as they charge (some of them are here).  But the other behavior looks exactly the same as far as score is concerned.

[longtimelurker]

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@yfan wrote:

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@longtimelurker wrote:

Of course, doing this is cheating the system, just as much as say, oh, MS.   The FICO score is meant to represent risk for the issuer, based on data from "normal" behavior, where people pay (either in full or in part) after the statement cuts.   So reducing balance before the statement cuts (just for that purpose) is a deliberate attempt to misrepresent risk to current and potential issuers.  I am shocked it is openly condoned.

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Yeah, it's exactly the same, except, you know, that no one agrees to a terms of service with Credit Reporting Bureaus promising not to pay their credit cards before the statement cuts, whereas by using credit cards we agree to terms that prohibit behavior that is commonly described as MS. The two are also exactly the same except that one is knowing the rules of the game and using them to your advantage and the other is gaming the system. So yes, other than the difference between an athlete who strategizes for a game within the rules and another athelete and who simply skirts the rules (say, by certain using certain prohibited enhancements) or that between a student who used test taking techniques to get a better test score and one who just cheats -- other than those, yeah, there is absolutely no difference between the two.

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T&Cs generally do not prohibit MS at all, merely say that rewards will not be paid on certain purchases, and if they pay anyway, not the buyers fault.  So both are playing within the rules.   But anyway your argument reduces to "It's not prohibited so it's OK" which is what many MS and churners say.     The behavior is unusual and frankly odd, hence all the posts asking for explanations of what % to leave on what card. This oddness and complexity should be a red flag that this is gaming the system, which can either be considered "strategizing within the rules" or as violating the spirit (breaking unwritten rules)  Just like MS/churning etc

[yfan]

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@longtimelurker wrote:

T&Cs generally do not prohibit MS at all, merely say that rewards will not be paid on certain purchases, and if they pay anyway, not the buyers fault. 

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And if I happen to cheat on a test and no one catches it, it's therefore not cheating? If an athelete "enhances" and happens to be able to get away with it, hey, not his fault! Making purchases to get rewards on things one has agreed not to get rewards on is cheating, plain and simple. And since that is what MS eventually is, yes MS is prohibited by terms. They don't have to use the term "manufactured spending" to prohibit it.

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@longtimelurker wrote:

 But anyway your argument reduces to "It's not prohibited so it's OK" which is what many MS and churners say.

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And they're wrong. Merely claiming ethical equivalency between cheating and playing within the rules does not make them equivalent.

[longtimelurker]

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@yfan wrote:

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@longtimelurker wrote:

T&Cs generally do not prohibit MS at all, merely say that rewards will not be paid on certain purchases, and if they pay anyway, not the buyers fault. 

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And if I happen to cheat on a test and no one catches it, it's therefore not cheating? If an athelete "enhances" and happens to be able to get away with it, hey, not his fault! Making purchases to get rewards on things one has agreed not to get rewards on is cheating, plain and simple. And since that is what MS eventually is, yes MS is prohibited by terms. They don't have to use the term "manufactured spending" to prohibit it.

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@longtimelurker wrote:

 But anyway your argument reduces to "It's not prohibited so it's OK" which is what many MS and churners say.

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And they're wrong. Merely claiming ethical equivalency between cheating and playing within the rules does not make them equivalent.

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My point is that by the definitions MS isn't cheating.   

I am not prohibited from buying gift cards ANY MORE than you are prohibited from paying before the statement cuts.  Now I might hope that the issuer is going to give me rewards anyway, but that's not so different that "Oh, with the score the issuer will assume I am particularly low risk when I'm not"

So again, both playing within the rules, for purposes not intended by the system owner.   

As my view is that neither are cheating,  your last point about ethical equivalency doesn't apply.  

I doubt we can agree when you clearly think one thing is cheating and the other isn't, whereas to me they are pretty similar.

[yfan]

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@longtimelurker wrote:

My point is that by the definitions MS isn't cheating. 

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Yes, it by definition is. Because it isn't just the purchase of the gift cards but coming full circle to converting them back into cash to pay the credit card bill so that you have in effect spent nothing and earned rewards - that's what it takes to fully take advantage of MS (otherwise there is no point). And that is by defintion cheating. And...

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@longtimelurker wrote:

I am not prohibited from buying gift cards ANY MORE than you are prohibited from paying before the statement cuts.  Now I might hope that the issuer is going to give me rewards anyway, but that's not so different that "Oh, with the score the issuer will assume I am particularly low risk when I'm not"

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Which is also cheating in and of itself. You ARE prohibited from earning rewards from buying [VISA/MC/Amex] gift cards, and "hoping" they give you rewards anyway is no different than cheating on a test and "hoping" no one notices - even more so because people who do MS buy the gift cards from the highest cashback category stores, they don't just go and buy it anywhere and hope for the best. That is gaming the system. That is cheating.

What you are saying is essentially that if something is possible to do in an existing system, then it is by definition not cheating. Just because you don't get a speeding ticket every time you speed doesn't mean that speeding is legal.

And actually, anyone who CAN pay off their balances before statement cuts IS lower risk than those who carry balances. That's actually the case. The scoring model assumes that the faster you pay your credit card balance, the lower risk you are - an assumption paying before the statement cuts is a part of. You can challenge the assumption, but that is how it works, so nobody is gaming the system by doing that.

[Fico2Go]

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@longtimelurker wrote:

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I doubt we can agree when you clearly think one thing is cheating and the other isn't, whereas to me they are pretty similar.

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I'd have to agree with LTlurker.  CC issuers don't want people to pay by statement date they would not earn interest.  And they would not have the opportunity to report a balance to the credit bureaus. These strategic moves are no less ethical than calculating how best to utilize a credit product to maximize rewards.

Another example would be people who shop for airline tickets on Tuesday evening when ticket consolidation takes place to save 20-50% more than those who shop with conventional thinking. 

I personally have a problem with people who think conventional thinking somehow dictates ethics. 

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[yfan]

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@Fico2Go wrote:

I'd have to agree with LTlurker.  CC issuers don't want people to pay by statement date they would not earn interest.  And they would not have the opportunity to report a balance to the credit bureaus. These strategic moves are no less ethical than calculating how best to utilize a credit product to maximize rewards.

Another example would be people who shop for airline tickets on Tuesday evening when ticket consolidation takes place to save 20-50% more than those who shop with conventional thinking. 

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And again, the fallacy of "if it's possible, it must not be ethically questionnable" rises. There is a difference between someone "not wanting you" to do something and you agreeting to terms that does not allow you to do something (like earn rewards on the purchase on Visa gift cards) and then circumventing it. What you think CCCs don't want you to do is different from what *you* have agreed not to do by agreeing to terms (evidenced by your use of a given card).

But this debate will pretty soon become nothing more than academic. Big data is a friend of issuers here. They are getting better and better at detecting MS and shutting down accounts, and they will continue to get better at it to the point where it becomes unprofitable. And while I don't care to comment on what kind of "people" I have a "problem" with, I wish them god speed.

[Fico2Go]

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@yfan wrote:

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There is a difference between someone "not wanting you" to do something and you agreeting to terms that does not allow you to do something (like earn rewards on the purchase on Visa gift cards) and then circumventing it. What you think CCCs don't want you to do is different from what *you* have agreed not to do by agreeing to terms (evidenced by your use of a given card).

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Yes you are correct.  if the terms and conditions exclude payment for certain purchases, then the issuer will not be paying them.   

So where's the problem?