topic Carrying a balance in Credit Cards

Carrying a balance

red259 — Wed, 07 Jan 2015 04:32:43 GMT

I have a balance on my CSP card of 2600 out of 12k. 1600 of which is due in a few days. I have already made a payment of $200, well over the minimum payment. I have outstanding vendor payments which will be coming in over the next 2-3 weeks. I could dip into my emergency fund and pay the outstanding balance, although I really prefer not to touch that if possible since I have the funds coming in already its just payments were slowed down during holidays. My questions are as follows:

1. Will chase freak out if I carry the balance? (as I mentioned I already made a $200 payment this cycle but I am concerned because I just opened four new accounts in Jan and am worried about how chase may perceive their risk with me)

2. If I do carry the balance for say one cycle am I paying interest on the $1600 or the full $2600?

Again I have access to emergency funds to make the payment if I have to, but I really rather not dig in to that because I have money coming in soon anyway. I will probably pay another $200 or so this cycle to knock the balance down to $1400 before the due date.

Re: Carrying a balance

NRB525 — Wed, 07 Jan 2015 04:53:46 GMT

@red259 wrote:
I have a balance on my CSP card of 2600 out of 12k. 1600 of which is due in a few days. I have already made a payment of $200, well over the minimum payment. I have outstanding vendor payments which will be coming in over the next 2-3 weeks. I could dip into my emergency fund and pay the outstanding balance, although I really prefer not to touch that if possible since I have the funds coming in already its just payments were slowed down during holidays. My questions are as follows:

1. Will chase freak out if I carry the balance? (as I mentioned I already made a $200 payment this cycle but I am concerned because I just opened four new accounts in Jan and am worried about how chase may perceive their risk with me)

2. If I do carry the balance for say one cycle am I paying interest on the $1600 or the full $2600?

Again I have access to emergency funds to make the payment if I have to, but I really rather not dig in to that because I have money coming in soon anyway. I will probably pay another $200 or so this cycle to knock the balance down to $1400 before the due date.

If the $1600 was only just added to this prior statement, then your payment of $200 covers the minimum requirement.

When this next statement cuts, it will see a remaining $1,400 from that first statement, and the interest clock will begin to tick on the entire open balance of $2,600. The interest is calculated on the "daily open balance" so if you pay from that incoming funds, the "daily open balance" begins to decline as you make those payments.

I doubt Chase will do any freaking out if you carry this kind of a balance. You've made the minimum payment. They are in the business of collecting interest from you. The terms of your loan agreement here are to make at least the minimum payment they calculate for you.

I would not worry about it at all, just pay as you've got your cash flow coming in.

If you want to shut off the interest clock, then you need to pay down that $2,600. Either by catching up the payment from the second statement, or what is the same thing, using another card for a while then making sure that $2,600 is paid to zero open amount. Even this is more if you prefer not to carry even that low amount on interest. Chase will have no problem even if you were to charge $1,600 per month and pay that or nearly that each month. Again, they are in the business of earning interest income.

Re: Carrying a balance

red259 — Wed, 07 Jan 2015 05:08:52 GMT

@NRB525 wrote:
@red259 wrote:
I have a balance on my CSP card of 2600 out of 12k. 1600 of which is due in a few days. I have already made a payment of $200, well over the minimum payment. I have outstanding vendor payments which will be coming in over the next 2-3 weeks. I could dip into my emergency fund and pay the outstanding balance, although I really prefer not to touch that if possible since I have the funds coming in already its just payments were slowed down during holidays. My questions are as follows:

1. Will chase freak out if I carry the balance? (as I mentioned I already made a $200 payment this cycle but I am concerned because I just opened four new accounts in Jan and am worried about how chase may perceive their risk with me)

2. If I do carry the balance for say one cycle am I paying interest on the $1600 or the full $2600?

Again I have access to emergency funds to make the payment if I have to, but I really rather not dig in to that because I have money coming in soon anyway. I will probably pay another $200 or so this cycle to knock the balance down to $1400 before the due date.
If the $1600 was only just added to this prior statement, then your payment of $200 covers the minimum requirement.
When this next statement cuts, it will see a remaining $1,400 from that first statement, and the interest clock will begin to tick on the entire open balance of $2,600. The interest is calculated on the "daily open balance" so if you pay from that incoming funds, the "daily open balance" begins to decline as you make those payments.

I doubt Chase will do any freaking out if you carry this kind of a balance. You've made the minimum payment. They are in the business of collecting interest from you. The terms of your loan agreement here are to make at least the minimum payment they calculate for you.

I would not worry about it at all, just pay as you've got your cash flow coming in.

If you want to shut off the interest clock, then you need to pay down that $2,600. Either by catching up the payment from the second statement, or what is the same thing, using another card for a while then making sure that $2,600 is paid to zero open amount. Even this is more if you prefer not to carry even that low amount on interest. Chase will have no problem even if you were to charge $1,600 per month and pay that or nearly that each month. Again, they are in the business of earning interest income.

Sorry just a bit confused. If I want to stop the interest from running once the second statement cuts would I just need to pay $1600 or I gotta pay $2600 to stop the interest?

Re: Carrying a balance

bada_bing — Wed, 07 Jan 2015 05:17:39 GMT

@NRB525 wrote:

If the $1600 was only just added to this prior statement, then your payment of $200 covers the minimum requirement.
When this next statement cuts, it will see a remaining $1,400 from that first statement, and the interest clock will begin to tick on the entire open balance of $2,600. The interest is calculated on the "daily open balance" so if you pay from that incoming funds, the "daily open balance" begins to decline as you make those payments.

I doubt Chase will do any freaking out if you carry this kind of a balance. You've made the minimum payment. They are in the business of collecting interest from you. The terms of your loan agreement here are to make at least the minimum payment they calculate for you.

I would not worry about it at all, just pay as you've got your cash flow coming in.

If you want to shut off the interest clock, then you need to pay down that $2,600. Either by catching up the payment from the second statement, or what is the same thing, using another card for a while then making sure that $2,600 is paid to zero open amount. Even this is more if you prefer not to carry even that low amount on interest. Chase will have no problem even if you were to charge $1,600 per month and pay that or nearly that each month. Again, they are in the business of earning interest income.

Anytime you consider carrying a balance past due date, it is useful to understand exactly what that does to the interest charged on your account. It isn't just the matter of the APR times the unpaid due balance. You also loose the grace period on all new charges until you have once again posted a 0 account balance on a monthly due date. That is why the effective cost of carrying a small balance over on an account that is normally PIF is so high. The card company is going to charge you interest on everything owed on the card from the day each dollar first posts. Depending on your spending pattern, the effective cost of carrying a small balance can be many times the posted APR. The grace period is a perk of nearly all cards that seldom gets mentioned, but can be very costly to give away by not PIF.

Re: Carrying a balance

NRB525 — Wed, 07 Jan 2015 05:24:48 GMT

You have to pay down that $2,600, catch up your PIF cycle by paying in full.

Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?

Re: Carrying a balance

red259 — Wed, 07 Jan 2015 05:29:37 GMT

@bada_bing wrote:
@NRB525 wrote:

If the $1600 was only just added to this prior statement, then your payment of $200 covers the minimum requirement.
When this next statement cuts, it will see a remaining $1,400 from that first statement, and the interest clock will begin to tick on the entire open balance of $2,600. The interest is calculated on the "daily open balance" so if you pay from that incoming funds, the "daily open balance" begins to decline as you make those payments.

I doubt Chase will do any freaking out if you carry this kind of a balance. You've made the minimum payment. They are in the business of collecting interest from you. The terms of your loan agreement here are to make at least the minimum payment they calculate for you.

I would not worry about it at all, just pay as you've got your cash flow coming in.

If you want to shut off the interest clock, then you need to pay down that $2,600. Either by catching up the payment from the second statement, or what is the same thing, using another card for a while then making sure that $2,600 is paid to zero open amount. Even this is more if you prefer not to carry even that low amount on interest. Chase will have no problem even if you were to charge $1,600 per month and pay that or nearly that each month. Again, they are in the business of earning interest income.

Anytime you consider carrying a balance past due date, it is useful to understand exactly what that does to the interest charged on your account. It isn't just the matter of the APR times the unpaid due balance. You also loose the grace period on all new charges until you have once again posted a 0 account balance on a monthly due date. That is why the effective cost of carrying a small balance over on an account that is normally PIF is so high. The card company is going to charge you interest on everything owed on the card from the day each dollar first posts. Depending on your spending pattern, the effective cost of carrying a small balance can be many times the posted APR. The grace period is a perk of nearly all cards that seldom gets mentioned, but can be very costly to give away by not PIF.

Just curious lets use the following example with simple numbers:

I have $200 due on 1/7.

I have $100 of new charges which is on the second statement

So now I am paying intrest on $300 after the second statement cuts

Now in the above scenario say that after the second statement cuts I place another $50 charge on the card (the statement cycle for this charge has not cut yet).

Am I now paying interest on $300 or $350?

If I pay $300 does this stop the interest or I need to pay $350 to stop the interest?

Re: Carrying a balance

red259 — Wed, 07 Jan 2015 05:35:40 GMT

@NRB525 wrote:
You have to pay down that $2,600, catch up your PIF cycle by paying in full.
Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?

I will have to check although the APR is not good that is for sure since its a rewards card. In another week or so I would have the first cycles payment. Sadly it seems by doing this I would be hit with a ton of interest because then I would lost the grace period on the second statement amount and now would have to come up with $2600 instead of the $1600. It looks like I will need to dig into my emergency fund as much as I hate doing so, especially since the money is coming in but is just not coming in fast enough.

Let's say the APR is 20% (I'm just making up an APR I forget what mine is). How much interest would that be if I carried $2600 for 30 days?

Re: Carrying a balance

Chris679 — Wed, 07 Jan 2015 05:39:56 GMT

If you do not PIF a statement you will be subject to interest based on the average daily balance for the next cycle (sometimes the next two). The average daily balance includes all new purchases and anything carried over from previous statement. To stop the interest you need to pay the full statement balance sometimes for two statements in a row. Read your card member agreement to see exactly how your card works.

Re: Carrying a balance

Chris679 — Wed, 07 Jan 2015 05:44:24 GMT

@red259 wrote:
@NRB525 wrote:
You have to pay down that $2,600, catch up your PIF cycle by paying in full.
Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?
I will have to check although the APR is not good that is for sure since its a rewards card. In another week or so I would have the first cycles payment. Sadly it seems by doing this I would be hit with a ton of interest because then I would lost the grace period on the second statement amount and now would have to come up with $2600 instead of the $1600. It looks like I will need to dig into my emergency fund as much as I hate doing so, especially since the money is coming in but is just not coming in fast enough.
Let's say the APR is 20% (I'm just making up an APR I forget what mine is). How much interest would that be if I carried $2600 for 30 days?

$43

Re: Carrying a balance

red259 — Wed, 07 Jan 2015 05:45:22 GMT

@red259 wrote:
@NRB525 wrote:
You have to pay down that $2,600, catch up your PIF cycle by paying in full.
Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?
I will have to check although the APR is not good that is for sure since its a rewards card. In another week or so I would have the first cycles payment. Sadly it seems by doing this I would be hit with a ton of interest because then I would lost the grace period on the second statement amount and now would have to come up with $2600 instead of the $1600. It looks like I will need to dig into my emergency fund as much as I hate doing so, especially since the money is coming in but is just not coming in fast enough.
Let's say the APR is 20% (I'm just making up an APR I forget what mine is). How much interest would that be if I carried $2600 for 30 days?

I attempted to do the math on my above hypothetical $2600 on a card with 20% APR for 30 days and I came out with interest of around $42. Does that sound right?

Re: Carrying a balance

red259 — Wed, 07 Jan 2015 05:45:45 GMT

@Chris679 wrote:
@red259 wrote:
@NRB525 wrote:
You have to pay down that $2,600, catch up your PIF cycle by paying in full.
Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?
I will have to check although the APR is not good that is for sure since its a rewards card. In another week or so I would have the first cycles payment. Sadly it seems by doing this I would be hit with a ton of interest because then I would lost the grace period on the second statement amount and now would have to come up with $2600 instead of the $1600. It looks like I will need to dig into my emergency fund as much as I hate doing so, especially since the money is coming in but is just not coming in fast enough.
Let's say the APR is 20% (I'm just making up an APR I forget what mine is). How much interest would that be if I carried $2600 for 30 days?
$43

Wow. What a racket these cards frickin are.

Re: Carrying a balance

red259 — Wed, 07 Jan 2015 05:51:30 GMT

My APR is 15.99 so I may carry the balance although I will pay a few hundred more before the statement cuts so I can get it down to about $30 to carry it for 30 days. I'm not going to be using the card for a few months anyway so I should have a couple of months of zero balance and I may be closing the card all together.

Re: Carrying a balance

NRB525 — Wed, 07 Jan 2015 05:48:57 GMT

@red259 wrote:
@NRB525 wrote:
You have to pay down that $2,600, catch up your PIF cycle by paying in full.
Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?
I will have to check although the APR is not good that is for sure since its a rewards card. In another week or so I would have the first cycles payment. Sadly it seems by doing this I would be hit with a ton of interest because then I would lost the grace period on the second statement amount and now would have to come up with $2600 instead of the $1600. It looks like I will need to dig into my emergency fund as much as I hate doing so, especially since the money is coming in but is just not coming in fast enough.
Let's say the APR is 20% (I'm just making up an APR I forget what mine is). How much interest would that be if I carried $2600 for 30 days?

Simple round numbers, figure 2% per month, so 2%. It will be less than that, I don't think the CSP interest is 20%, more like 16%. So with daily compounding you can figure 1.5% for 30 days. $40 of interest. Not a lot, if you can get back on that no-interest cycle again it's no worry.

Re: Carrying a balance

Chris679 — Wed, 07 Jan 2015 05:49:33 GMT

@red259 wrote:
@Chris679 wrote:
@red259 wrote:
@NRB525 wrote:
You have to pay down that $2,600, catch up your PIF cycle by paying in full.
Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?
I will have to check although the APR is not good that is for sure since its a rewards card. In another week or so I would have the first cycles payment. Sadly it seems by doing this I would be hit with a ton of interest because then I would lost the grace period on the second statement amount and now would have to come up with $2600 instead of the $1600. It looks like I will need to dig into my emergency fund as much as I hate doing so, especially since the money is coming in but is just not coming in fast enough.
Let's say the APR is 20% (I'm just making up an APR I forget what mine is). How much interest would that be if I carried $2600 for 30 days?
$43
Wow. What a racket these cards frickin are.

Not if you play the game right. Then that racket pays you 2-5% in rewards for all purchases.

Re: Carrying a balance

red259 — Wed, 07 Jan 2015 05:53:00 GMT

@Chris679 wrote:
@red259 wrote:
@Chris679 wrote:
@red259 wrote:
@NRB525 wrote:
You have to pay down that $2,600, catch up your PIF cycle by paying in full.
Once you pass this first statement due date not paying the first statement in full, then the interest clock begins on all open charges. It's not a multiple, it's still only the APR at a daily rate applied to the open balance, but it does start adding the interest until you catch it up.

What is your APR on this card?
I will have to check although the APR is not good that is for sure since its a rewards card. In another week or so I would have the first cycles payment. Sadly it seems by doing this I would be hit with a ton of interest because then I would lost the grace period on the second statement amount and now would have to come up with $2600 instead of the $1600. It looks like I will need to dig into my emergency fund as much as I hate doing so, especially since the money is coming in but is just not coming in fast enough.
Let's say the APR is 20% (I'm just making up an APR I forget what mine is). How much interest would that be if I carried $2600 for 30 days?
$43
Wow. What a racket these cards frickin are.
Not if you play the game right. Then that racket pays you 2-5% in rewards for all purchases.

Yes I am fully aware of the rewards which is the only reason I use credit cards to start with.

Re: Carrying a balance

bada_bing — Wed, 07 Jan 2015 06:51:16 GMT

One of the "rewards" of using credit cards is the grace period. Depending on spending pattern and APR, the grace period can be worth more than the 1% cashback on a typical reward card. Yet a lot of people don't even consider what they are doing when they throw away the grace period by carrying a small balance past the due date.

Re: Carrying a balance

lg8302ch — Wed, 07 Jan 2015 07:18:24 GMT

If you have a 0% APR offer on a non Chase card with a low BT fee I would do this but only because of the interest rate. I doubt that Chase will freak out for carrying a balance because on the card with my highest APR 22,99% (Freedom) Chase agressively sends me BT offers for 2% BT fee and 0% APR. That is a bit strange because I thought they gave me this horrible APR because they wanted to make sure I do not carry a balance. But from these monthly offers it looks more they really want me to carry a balance. So I doubt that is an issue for Chase if this is the only card where you carry a balance and is far from being maxed out and more than min payment.

Re: Carrying a balance

Anonymous — Wed, 07 Jan 2015 07:36:44 GMT

I don't understand the refusal to use the "emergency funds" to cover this debt. Isn't this what the fund is for? This IS an emergency, a minor one, but an emergency of sorts. Is that money untouchable until someone goes to the hospital? Plus, you say the money is coming anyway, so more reason to use the emergency funds now and IMMEDIATELY replenish them once the incoming money arrives.

For sure, that emergency money reserve is never going to make you more money in a month that what you would have to pay the credit card... and whatever implications it may have for your current APR offers. It's a no brainer to me.

Not all emergencies must be serious or involve blood. You have one now. Or am I missing something???

Re: Carrying a balance

Chris679 — Wed, 07 Jan 2015 08:34:47 GMT

@Anonymous wrote:

I don't understand the refusal to use the "emergency funds" to cover this debt. Isn't this what the fund is for? This IS an emergency, a minor one, but an emergency of sorts. Is that money untouchable until someone goes to the hospital? Plus, you say the money is coming anyway, so more reason to use the emergency funds now and IMMEDIATELY replenish them once the incoming money arrives.

For sure, that emergency money reserve is never going to make you more money in a month that what you would have to pay the credit card... and whatever implications it may have for your current APR offers. It's a no brainer to me.

Not all emergencies must be serious or involve blood. You have one now. Or am I missing something???

Great point, totally agree

Re: Carrying a balance

Anonymous — Wed, 07 Jan 2015 14:38:44 GMT

@Anonymous wrote:

I don't understand the refusal to use the "emergency funds" to cover this debt. Isn't this what the fund is for? This IS an emergency, a minor one, but an emergency of sorts. Is that money untouchable until someone goes to the hospital? Plus, you say the money is coming anyway, so more reason to use the emergency funds now and IMMEDIATELY replenish them once the incoming money arrives.

For sure, that emergency money reserve is never going to make you more money in a month that what you would have to pay the credit card... and whatever implications it may have for your current APR offers. It's a no brainer to me.

Not all emergencies must be serious or involve blood. You have one now. Or am I missing something???

If it costs you money to keep up an emergency fund by way of paying unnecessary interest....Of what use was the emergency fund.