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Contributor
Hooosier
Posts: 84
Registered: ‎03-29-2013
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Paying Balance in Full Each Month

Hi guys, I'm new to the board and have a (possibly dumb) question.  My wife and I have been able to pay off nearly all of our credit card debt and they will all be completely paid off in the next couple of months.  The way I understand it, going forward it would be better to make small purchases and then pay off the balance of the credit card(s) in order to improve our credit scores even further.  My question is this: should I pay of the balance on the credit card as soon as the purchase is made or should I wait until my next statement to pay the balance?  For example, say I put a tank of gas on my credit card - should I wait a few days for the purchase to post the credit card account and then pay it in full or wait until the end of the month when I receive my next statement?  Hopefully my question makes sense!  


.........30K...............30K................15K.................15K................15K.................8.5K...............8.5K.................5K..................1K..................1K.........
FICO - 800
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HiLine
Posts: 2,870
Registered: ‎10-19-2012
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Re: Paying Balance in Full Each Month


Hooosier wrote:

Hi guys, I'm new to the board and have a (possibly dumb) question.  My wife and I have been able to pay off nearly all of our credit card debt and they will all be completely paid off in the next couple of months.  The way I understand it, going forward it would be better to make small purchases and then pay off the balance of the credit card(s) in order to improve our credit scores even further.  My question is this: should I pay of the balance on the credit card as soon as the purchase is made or should I wait until my next statement to pay the balance?  For example, say I put a tank of gas on my credit card - should I wait a few days for the purchase to post the credit card account and then pay it in full or wait until the end of the month when I receive my next statement?  Hopefully my question makes sense!  


If you need to improve your scores in the short term, you should pay off the balance minus a small amount before the statement closes, not after the statement closes. If you don't need a good score right away, it doesn't matter as long as you pay off the balance by the due date.

In case you're wondering about the reasons for that, feel free to check out my blog post on the topic: http://hiepsfinance.wordpress.com/2013/03/27/do-you-need-to-carry-a-balance-to-build-credit/

 

Established Contributor
distantarray
Posts: 2,112
Registered: ‎09-25-2011
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Re: Paying Balance in Full Each Month

pay off the balance in full on ALL cards minus 1 and put it at 2% of your total credit limit is considered optimal, and getting it to 2% of total limits 2-3 days before statement closes is ideal. Some companies post mid cycle so just watch when they post, but regardless as long as you keep it under 5% your fine for a good score, not that it really matters unless you don't mind paying interest, and the 2% of total limits should only really be exercised if your applying for new credit.


total credit limits $108,400 Credit scores Ex 728 EQ 738 TU 758
Valued Contributor
bs6054
Posts: 1,673
Registered: ‎11-11-2012
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Re: Paying Balance in Full Each Month

Yes.   As Hiline says, paying before the statement closes is only needed if you are trying to maximize your score for that month (because you are about to apply for something say).    Some factors, such as a late payment, impact your score over a long period of time because these are stored as history.  Utilization( balance/credit limit, per card and in total) doesn't have history stored, so if you have a large balance this month, your score may go down, but if you have a small one next month, it bounces right up again.

 

Some people here always try to maximize their score by paying all but one card to 0 before the statement cuts, and leaving a small balance on one.   This is a) prudent, you never know when a good offer is going to appear so you want the best possible score, or b) total OCD by weenies who need to get a life.   Or somewhere in between!

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HiLine
Posts: 2,870
Registered: ‎10-19-2012
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Re: Paying Balance in Full Each Month

Frequent Contributor
codimom
Posts: 386
Registered: ‎09-08-2010
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Re: Paying Balance in Full Each Month

Welcome to the forum and congratulations.  Paying off your credit cards in full feels great! 

Your question makes perfect sense.  I know once I got my cards all paid off I didn't want to ever SEE a balance!  But as another poster mentioned, it depends on your goal. If your goal is a quick score boost?  pay off the balance before the statement cuts except for 1 card, and let a small balance (less than 9%) report..  I stalk all my accounts online.  If you just want to keep it zero and not pay interest?  Pay in full before the due date.


Back in the garden!
App free since 23Oct2012 reset to 27Aug13 and reset again 4nov13


Contributor
SpiceIslander
Posts: 326
Registered: ‎02-01-2010
0

Re: Paying Balance in Full Each Month

I agree with the other posters but wanted to say welcome to the forums!

Meg.

FICO: 04/2014 - TU 765 | EQ ??? | EX 768

Amex BCP 12900 | Lowes 10,000 | LOC 9300 | Sallie Mae/Barclays World MC 9000 | FNBO 8900 | BOA Platinum+ 6000 | Citi Simplicity 5200 | Chase CSP 5000 | Achieva CU 4000 | Discover 4000 | Sam's Club 3000 | Sears 900
Frequent Contributor
brother7
Posts: 377
Registered: ‎02-06-2009
0

Re: Paying Balance in Full Each Month

There's some misinformation in the replies posted so far, mostly due to confusion about statement date and due date.

 

Due date - You should always make payment by the due date, otherwise you risk 1) paying interest charges and late fees and 2) getting dinged for a 30-day late

Statement date - Usually a few days after the due date, this is the date when your next statement cuts. The balance reported on the statement is reported to the CRAs by most (but not all) creditors.

 

Strategy for Optimal Short-Term Credit Score

Make payments such that all credit cards report a zero balance EXCEPT one. For the one card that reports a balance, aim for 1-3% utilization. For example, if the card has a $1000 credit limit, aim for $10-30 balance reporting.

 

Since most people are continually using their credit cards to make purchases, achieving a zero balance on the statement requires planning, in particular, knowing how much charges will post during the short time between the payment date and the statement date. One can either stop using the card during that period or make a second payment before the statement date to cover those charges.

 

I hope that helps.


11/02/2012 Peak - EQ 790 (ScoreWatch EQ FICO)
08/22/2014 Current - EQ 796 (Priceline TU FICO 08 Classic)
GOAL - 800! - App free since 03/13/2014
Contributor
Hooosier
Posts: 84
Registered: ‎03-29-2013
0

Re: Paying Balance in Full Each Month

Thank you all for your help!


.........30K...............30K................15K.................15K................15K.................8.5K...............8.5K.................5K..................1K..................1K.........
FICO - 800

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