topic Re: Utilization and Optimum Balance in Credit Cards

Utilization and Optimum Balance

Anonymous — Sat, 12 Sep 2015 16:01:32 GMT

Background: I just got the Chase Freedom card with a $500 limit (very short credit history) and will be pushing $500-1000+ through this card every month for the cash back. I also have another card which I'd like to report a zero balance. Not sure exactly how utilization is reported though.

Keeping utilization low - should I PIF before or after the statement date? Which results in zero being reported? On the other card, I always used to wait for the statement to PIF (and the statement amount would usually be 80-90% of the credit limit).

Also, I've seen many recommendations to keep a 1-10% balance on one card - should I PIF and then make a small purchase before the statement date, then pay the full statement amount? Or is it necessary to carry the 1-10% balance and pay interest?

Re: Utilization and Optimum Balance

Anonymous — Sat, 12 Sep 2015 16:12:46 GMT

you never have to pay interest. and always pay before statement date.

Re: Utilization and Optimum Balance

Anonymous — Sat, 12 Sep 2015 18:42:31 GMT

@Anonymous wrote:
Background: I just got the Chase Freedom card with a $500 limit (very short credit history) and will be pushing $500-1000+ through this card every month for the cash back. I also have another card which I'd like to report a zero balance. Not sure exactly how utilization is reported though.

Keeping utilization low - should I PIF before or after the statement date? Which results in zero being reported? On the other card, I always used to wait for the statement to PIF (and the statement amount would usually be 80-90% of the credit limit).

Also, I've seen many recommendations to keep a 1-10% balance on one card - should I PIF and then make a small purchase before the statement date, then pay the full statement amount? Or is it necessary to carry the 1-10% balance and pay interest?

The two different dates tripped me up until I realized that once you switched over to paying by the statement date, rather than the due date, it works itself out.

Example: On my Freedom the due date is the 6th and the statement date is the 9th. I always used to pay the previous statement by the 6th, leaving a month's worth of charges reporting at any given time. So if the statement on the 9th was for $1000 and I charged $800 between the 9th and the next due date of the 6th, it would leave $800 reporting on the next statment, which I would pay on the next 6th. etc.

Then I came here and learned that was fine to avoid paying interest, but was not optimal to maximize credit scores. I was so locked in to the 6th due date that I didn't realize that if I pay the full statement balance on the 9th, $0 reports, and on the 6th there's nothing due. As long as I pay the statement by the following 9th, I can keep ignoring the 6th and paying in full on the 9th.

Unless you're trying to go for a loan etc. right now and want to optimize to the nth degree, I'd either stick to paying to $0 on the statement date or paying the last statement by the due date. Trying to get that 1-10% makes for more work, IMO. I'd only do it for that short window when trying to get a mortgage or whatever.

(Easy to say because I have loads of 0% kitchen reno expenses so I'm not going to be in that position for a looonnnnggg time. Keeping to a low percentage overall, but don't have to worry about the 1-10% thing.)

Re: Utilization and Optimum Balance

kdong1996 — Sat, 12 Sep 2015 20:47:12 GMT

Paying before your closing date will result in a 0 balance reported. This date is typically a few days after the due date.

Keeping a 1-10% balance will optimize your credit score, but isn't necessarily required when you're not applying for credit. Since you have a short history I would be more concerned about showing banks that you can handle credit rather than optimizing your score. Then when you apply for new credit optimize your score using the 1-10% utilization method.

YMMV, but in my experience Chase almost always gave me a auto CLI near the 5 month mark with heavy usage.