Only 2 rev accounts, help please

[texasmade]

I only have 2 rev accounts
1 cc limit is 3500 balance is 1050
1 loc 2500 limit balance is 1901
What should I pay down or off? How much? Thanks

[tufa4311]

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@texasmade wrote:
I only have 2 rev accounts
1 cc limit is 3500 balance is 1050
1 loc 2500 limit balance is 1901
What should I pay down or off? How much? Thanks

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I suggest paying both off 100% so you are no longer being charged interest on those past purchases, then use one of them to less than 10% UTIL before your next statement cuts so it reports that balance, then pay that off  fully before the due date, again,so as no to incur any interest, then just start all over again.

I'd also suggest looking into getting one more credit card.

[Thomas_Thumb]

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@texasmade wrote:
I only have 2 rev accounts
1 cc limit is 3500 balance is 1050
1 loc 2500 limit balance is 1901
What should I pay down or off? How much? Thanks

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I would suggest paying off the account with the lower limit 1st and then maintaining reported balance on your other card to below the point where overall (aggregate) utilization stays below 10% (e.g. $600 for a $6000 combined credit line). Once you are at this point, consider applying for another credit card. You typically need three cards minimum to maximize credit score potential and the added CL from the 3rd card can be helpful in reducing aggregate utilization. Usually it works best to designate your highest CL card as primary and let it show some non zero balance month to month - which you should PIF (funds permitting).

Note: It is important to show some activity on your other cad(s) every year to avoid a potential CL reduction and possible closure due to non use. This also builds payment history which can help increase score over time

[tufa4311]

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@Thomas_Thumb wrote:

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@texasmade wrote:
I only have 2 rev accounts
1 cc limit is 3500 balance is 1050
1 loc 2500 limit balance is 1901
What should I pay down or off? How much? Thanks

---

I would suggest paying off the account with the lower limit 1st and then maintaining reported balance on your other card to below the point where overall (aggregate) utilization stays below 10% (e.g. $600 for a $6000 combined credit line). Once you are at this point, consider applying for another credit card. You typically need three cards minimum to maximize credit score potential and the added CL from the 3rd card can be helpful in reducing aggregate utilization. Usually it works best to designate your highest CL card as primary and let it show some non zero balance month to month - which you should PIF (funds permitting).

Note: It is important to show some activity on your other cad(s) every year to avoid a potential CL reduction and possible closure due to non use. This also builds payment history which can help increase score over time

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Why would he not pay off the full balance on both cards if that is an option.Correct me if I'm wrong, and I'm not 100% sure about this but I believe I am correct, any balance that he leaves on the card past the due date he would start to incur interest on (which may already be occuring, I do not know if the current balance has already incurred any interest) . Why would he do that? If he has the ability to pay the cards off in full, and he has not suggested otherwise, then why would he pay more money than he has to? Pay the cards off in full then take another purchase that will post less than 10% - that way he will not incur interest, or any futher interest, until after the due date of his next statement. This scenario present the best of both worlds - no interest, or no further interest, incurred and continuing to show a small balance so as not to be 0% UTIL.

Now, if he does not have funds to PIF then, based on saving more money, I would suggest he pay off the balance that has the higher APR. All this is about not spending more than you need to. UTIL has little memory (I no longer subscribe to the scool of thought that UTIL has no memory at all) and if he does not need his credit score to be optimized any time soon his goal should be to save money - paying off his highest balance card and not his highest APR card (if indeed they are not one in the same) does not save him money, it causes him to spend more money.

[Thomas_Thumb]

From a strictly financial perspective, I agree that both accounts should be paid in full as a starting point.

Since no interest rates were mentioned, I assumed that both were within a percentage point or two of each other - in which case I would pay off the lower CL balance 1st.. Once paid down; using the highest CL card and allowing it to post a balance (which is then PIF) helps with credit score. I have cards with a range of interest rates but since they are all PIF rate does not come into play.

A 3rd account (revolving credit card) provides a long term benefit for credit history building and getting it early helps with AAoA later on.

[NRB525]

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@texasmade wrote:
I only have 2 rev accounts
1 cc limit is 3500 balance is 1050
1 loc 2500 limit balance is 1901
What should I pay down or off? How much? Thanks

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What are your resources to make payments on these balances, what have you been paying on them so far?

What are the interest rates on each of the card and LOC?

How are you handling monthly expenses such as groceries and gas, what payment method are you using for those?

What was the money on the LOC drawn and used for?