topic Re: Carrying a balance in Credit Cards

Carrying a balance

Anonymous — Tue, 12 Jan 2016 02:23:42 GMT

Good evening to all. Question? Other than paying interest fee. Is there wrong with carrying a balance on credit cards? Is it viewed in the eyes in the banks as a bad thing? Thanks in advance.

Re: Carrying a balance

Anonymous — Tue, 12 Jan 2016 02:26:12 GMT

@Anonymous wrote:
Good evening to all. Question? Other than paying interest fee. Is there wrong with carrying a balance on credit cards? Is it viewed in the eyes in the banks as a bad thing? Thanks in advance.

It can be a bad thing if the balance is high compared to your limit and you only make minimum payments. generally though if the balance is reasonable and you make decent payments each month, then there isnt anything horrible if you carry a balance.

Re: Carrying a balance

azguy13 — Tue, 12 Jan 2016 02:29:44 GMT

Keep your balance between 1-9% of the CL and you are good to go.

Re: Carrying a balance

Anonymous — Tue, 12 Jan 2016 02:33:12 GMT

Ok thanks. I don't plan on using more 20% at the most. Maybe 30% but even then bring it under 20% before repoerted to the bureas Definitely no not to max out.

Re: Carrying a balance

Anonymous — Tue, 12 Jan 2016 02:35:29 GMT

Also agree 1-9% is best 20-30% would be only for big purchases not all the time

Re: Carrying a balance

Anonymous — Tue, 12 Jan 2016 04:07:39 GMT

Make sure you know when your creditor reports to the CRA's. Some report before your payment due date. If that happens and you are at 35%, you will take a hit.

When I was applying for a mortgage I called all my creditors to see when they reported. I would pay them off a day or two before and left 50 on one. It relfected on my credit report perfectly.

Re: Carrying a balance

NRB525 — Tue, 12 Jan 2016 04:34:19 GMT

@Anonymous wrote:
Make sure you know when your creditor reports to the CRA's. Some report before your payment due date. If that happens and you are at 35%, you will take a hit.

When I was applying for a mortgage I called all my creditors to see when they reported. I would pay them off a day or two before and left 50 on one. It relfected on my credit report perfectly.

How much of a hit, exactly?

Yes, when applying for a mortgage one must groom the accounts closely. Most months, however, we aren't applying for a mortgage, so letting the balances report isn't a bad thing.

Re: Carrying a balance

OmarGB9 — Tue, 12 Jan 2016 04:55:38 GMT

^May I ask why you're going around asking everyone for an *exact* amount of points somebody's scores would take for high UTIL? Because honestly nobody can know the exact amount of points one's file would lose.

Re: Carrying a balance

NRB525 — Tue, 12 Jan 2016 05:01:18 GMT

@OmarGB9 wrote:
^May I ask why you're going around asking everyone for an *exact* amount of points somebody's scores would take for high UTIL? Because honestly nobody can know the exact amount of points one's file would lose.

Good question. How many points is "a hit" ? 4? 10? 100? It's a loaded word that can be interpreted many different ways, when the reality of the impact of crossing 10% or 50% on a card is not a huge amount of points.

If we are giving information out to others, especially to those asking a question because they don't know the frame of reference, have not experienced it, it is important that information should be useful, not vague. And not scary either, because that is inappropriate. And the most common reply is to use scare words, not facts.

Re: Carrying a balance

bada_bing — Tue, 12 Jan 2016 05:51:10 GMT

@Anonymous wrote:
Good evening to all. Question? Other than paying interest fee. Is there wrong with carrying a balance on credit cards? Is it viewed in the eyes in the banks as a bad thing? Thanks in advance.

Make sure you understand how interest is calculated and how the grace period (which you loose for.

the duration of carrying a balance) works. The effective cost of carrying an interest bearing balance

on a daily driver card is more than the stated interest rate would imply.

Your payment behavior is tracked by your issuers and they use the information to categorize you as

a customer. The categories are broadly referred to as Transactor and Revolver. It is generally assumed

that issuers treat transactors (who don't typically carry balances) somewhat better than they do otherwise

equivalent revolver customers. Not necessarily "wrong" to be a revolver but it does perhaps have small

downsides beyond interest paid.

Re: Carrying a balance

red259 — Tue, 12 Jan 2016 06:08:06 GMT

@Anonymous wrote:
@Anonymous wrote:
Good evening to all. Question? Other than paying interest fee. Is there wrong with carrying a balance on credit cards? Is it viewed in the eyes in the banks as a bad thing? Thanks in advance.
It can be a bad thing if the balance is high compared to your limit and you only make minimum payments. generally though if the balance is reasonable and you make decent payments each month, then there isnt anything horrible if you carry a balance.

+1 The key here is decent payments each month. Don't pay just the minimum. Has a rule of thumb I try to pay at least double the minimum amount due. Also, the interest you will be charged can add up quite quickly, so I would strongly suggest doing the math before ever considering carrying a balance and if push comes to shove look to see if you can do a BT to a 0% APR. I frequently carry balances on my 0% APR cards, but I try not to go over 50% of the total credit line when doing so. I haven't had any issues following the guidelines I laid out above. If getting ready to do some apps though carrying a balance is not the greatest idea.

Re: Carrying a balance

Anonymous — Tue, 12 Jan 2016 06:41:49 GMT

i typically sit at about 5%. One month i made a few very large purchaes on one day that pushed me up to about 28%, and the card processed/reported 2 days later before i could pay it off. My score dropped ~50 points. The following month report (after paying off the purchase) my score went right back up to where it was. Most score factors take time (AAoA, payment history, etc) but keeping your credit utilization ratio in check is the one thing that can dramatically affect your score month to month.

Re: Carrying a balance

Anonymous — Tue, 12 Jan 2016 11:26:18 GMT

Your utilization will be higher than if you didn't carry a balance. Given that you're only going to 20% utilization, I'm wondering if you really need to carry a balance at all. I would at least try to put it on a 0% intro rate.

Re: Carrying a balance

takeshi74 — Tue, 12 Jan 2016 14:43:41 GMT

@Anonymous wrote:
Is there wrong with carrying a balance on credit cards? Is it viewed in the eyes in the banks as a bad thing?

It's not just how creditors view it. Spending money you don't have is a "bad" thing. If rewards on spend is a priority it's also a "bad" thing as interest easily kills any potential rewards. If you're using the card for purchases while carrying a balance, keep in mind that you typically lose your grace period. Check your terms to confirm.

It's really revolving utilization that matters as far as scoring models and creditors are concerned. However, revolving utilization is just one factor among many. It falls under Amounts Owed.

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

That said, credit cards are designed to allow for revolving so oversimplfications such as "good" and "bad" aren't necessarily all that useful. You need to consider what your situation, your goals and your priorities and then do what best aligns with your priorities, If you do find yourself carrying then you may need to review your budget, finances, liquid reserves, etc.

Re: Carrying a balance

Anonymous — Tue, 12 Jan 2016 18:18:33 GMT

I don't know what someone else's HIT would be - but I normally report less than 10% - but with the holidays I took advantage of the 0% interest rate (or will be because it hasn't entirely carried a balance per se - only reported a balance) So right now I'm sitting between 23 and 30% depending on bureau..... I took about a 25 pt hit. I know its temporary - and will bounce back as I pay it down over the next month - but if you need to apply for something soon - it's good to know.

Re: Carrying a balance

SouthJamaica — Tue, 12 Jan 2016 20:02:54 GMT

@Anonymous wrote:
Good evening to all. Question? Other than paying interest fee. Is there wrong with carrying a balance on credit cards? Is it viewed in the eyes in the banks as a bad thing? Thanks in advance.

I think carrying balances will cost you in your FICO score.

Re: Carrying a balance

Aahz — Tue, 12 Jan 2016 20:16:52 GMT

@NRB525 wrote:
@OmarGB9 wrote:
^May I ask why you're going around asking everyone for an *exact* amount of points somebody's scores would take for high UTIL? Because honestly nobody can know the exact amount of points one's file would lose.
Good question. How many points is "a hit" ? 4? 10? 100? It's a loaded word that can be interpreted many different ways, when the reality of the impact of crossing 10% or 50% on a card is not a huge amount of points.

If we are giving information out to others, especially to those asking a question because they don't know the frame of reference, have not experienced it, it is important that information should be useful, not vague. And not scary either, because that is inappropriate. And the most common reply is to use scare words, not facts.

NRB - do you have another word in mind?

Since you know that no one can give an actual number, are you recommending that we all just ignore questions such as this because we can't supply exact numbers as "facts"?

The fact is increased utility is going to cause FICOs to decline - aka "take a hit" - 90%+ of the time.

And the fact is that no one can provide a specific answer - it will always be vague - just like the "not a huge amount" response you gave is vague and not a fact.

Re: Carrying a balance

Anonymous — Wed, 13 Jan 2016 02:16:05 GMT

Thanks for all the responses. A lot of great info. For the most part plan on PIF and if i carry a balance would be no more 2 or 3 month at tbe most. Gardening til min 1/17 but hoping i can make it to 6/17 . So no apping for me.

Re: Carrying a balance

NRB525 — Wed, 13 Jan 2016 02:58:34 GMT

@Aahz wrote:
@NRB525 wrote:
@OmarGB9 wrote:
^May I ask why you're going around asking everyone for an *exact* amount of points somebody's scores would take for high UTIL? Because honestly nobody can know the exact amount of points one's file would lose.
Good question. How many points is "a hit" ? 4? 10? 100? It's a loaded word that can be interpreted many different ways, when the reality of the impact of crossing 10% or 50% on a card is not a huge amount of points.

If we are giving information out to others, especially to those asking a question because they don't know the frame of reference, have not experienced it, it is important that information should be useful, not vague. And not scary either, because that is inappropriate. And the most common reply is to use scare words, not facts.
NRB - do you have another word in mind?

Since you know that no one can give an actual number, are you recommending that we all just ignore questions such as this because we can't supply exact numbers as "facts"?
The fact is increased utility is going to cause FICOs to decline - aka "take a hit" - 90%+ of the time.
And the fact is that no one can provide a specific answer - it will always be vague - just like the "not a huge amount" response you gave is vague and not a fact.

Of course I do not recommend ignoring the question. Although, if you go back and read OP's original question, it was related to how the specific bank where the balance is being carried, where interest was being paid, would view the cardholder. Generally, the bank would be very happy with this customer because they are paying interest, as long as they continue to pay. There is first a tendency among respondents to gravitate back to the basics they want to write about: Don't carry a balance because the utilization will hurt your score. This is applied in many reponses where the trigger word Utilization turned up even in the shadow of the original question

Second, there are real reasons someone might want to carry a balance. There could be a 0% purchase APR, and a large expense is coming up such as dental work or new tires, costs I've paid recently on such cards. In that case, it's good inexpensive financing, and in some cases, earned rewards for using specific cards like the AK Airlines or EDP that I have on 0% APR. In other cases, low or 0% APR BT offers are available, saving interest cost with low cost financing.

But the general intent of many, not all but many, is to react as if carrying a balance is a very bad thing. With the need to justify the thinking, "the hit to the FICO score" becomes a common, generalized reply with no reference points.

To get to your question, the better response would be: "Carrying a balance should be done if it benefits you financially, or you decide you have to do it, but you should be aware you can lose some FICO points when your utilization goes up. It may be a few points, it may be more, but those points will come back once you pay down the utilization, and realize the benefits of what hopefully is low cost financing." That is what I hope comes across as a Balanced Answer, not a Judging Answer.

Credit is there for a purpose: To allow people to borrow now to buy things that they need (or want) on their promise to pay it back in the future. Getting a good credit file allows you to borrow. There's not many other reasons to strive for a really high FICO score other than borrowing, since your score is not exactly public knowledge, and FICO doesn't send you a bonus check when you get to 700 or 800.

Cheers!

Re: Carrying a balance

Anonymous — Wed, 13 Jan 2016 03:07:48 GMT

Thanks