topic Re: Paying off credit card before statement closes, multiple payments, large purchases in Credit Cards

Re: Paying off credit card before statement closes, multiple payments, large purchases

Anonymous — Thu, 02 Feb 2012 16:36:55 GMT

Hello,

It's my first time posting, but I haven't been able to find an answer to my specific questions using the search function, so I thought I'd start a new thread. Thank you in advance for your help.

I have a four-year credit history and two credit cards. I pay off my balances in full each month. My credit history is composed only these two cards - no other types of loans. I'm trying to identify whether or not certain actions will help/hurt my credit score.

From previous forum posts, I've gathered that paying down (partially - below 9% or completely) credit cards before the statement closes is a good idea. Occassionally I have large purchases to make (tuition payments). Would it in any way hurt my credit score if I pay the tuition using my credit card in three payments? Example: One semester's tuition is $12,000. My credit limit on one card is $9,000, so at the start of the month, I put $4,000 worth of the bill on my credit card and pay it off a week later. Then I repeat two more times within one statement period. In this scenario, my credit balance would never exceed by credit limit, but in aggregate my credit card spending would exceed the limit - even though it never exceeded the threshold at any one point in time. I've gathered that CC companies (unless stated) don't mind multiple payments within a billing period - but would that scenario have a negative impact on my credit score?
I've also read previously (and my own expereince seems to support this) - that one way to encourage your credit card company to increase your line of credit is to spend up to 1/2 or 2/3 your credit line, let your statement close, then pay it off in full before the bill is due. One of my two cards has a relatively low credit limit ($2900), and I'd like it increased so I can better take advantage of the associated rewards. Does it make sense to pay this card off completely before the statement closes, or spend about half the credit limit - then pay it off completely after the statement closes? Do you think the actions described in question (1) would impact the credit limit? In otherwords, if the answer is that I should leave a balance on my card until the statement closes then pay it off before the due date - should I only be spending half the credit limit, or can I spend more (as described in question 1), then pay down the balance until an amount representing half my credit line remains?

Thank you again for your help. I've had these questions for quite a while and its nice to find a forum on which to ask them.

Re: Paying off credit card before statement closes, multiple payments, large purchases

Anonymous — Thu, 02 Feb 2012 16:43:37 GMT

I will address #1: you can break up you tuition and charge and pay off your cr as much as you want as long as you never go over your credit limit during any 1 given transaction. If you have shown good payment history with the card you may be eligible for a cli for both cards. Do you have income? Are the cards unsecured? Are they student cards?

Re: Paying off credit card before statement closes, multiple payments, large purchases

Revelate — Thu, 02 Feb 2012 16:59:07 GMT

Re #2: Nobody really knows, it's all a swag from anecdotal evidence.

What is absolutely known, is that your high balance (over the course of the revolving tradeline, not necessarily statement closing date) is reported. That can and probably will factor into the equation when other lenders look at you, but it may or may not on that same lending institution.

Personally I run every new card up to max and then pay it, but that's a holdover back from the days where limits weren't always reported. Also, the more heavily you use the card, and the more frequently you pay it down, in my opinion is the best way to justify a CLI. Extra payments *do* cost the lender more in transactional cost (however small, it's non-zero, and aggregated over millions of customers, they will try to reduce it), so just PIFing a few times a month if needed is a good way to justify it in my opinion... but that's my opinion only and has absolutely no hard fact behind it.

Besides, every lender is different and with some of them not even God knows why they give a CLI or not.

Re: Paying off credit card before statement closes, multiple payments, large purchases

LTomBerry — Thu, 02 Feb 2012 17:00:03 GMT

1. You can spend/pay as much as you want during the cycle. All that matters to your score is the balance on the statement, it doesn't care how much you spent & paid during the month. And I believe you are correct most CCCs don't mind when you do this.

Keep in mind that if you have to make a big purchase one month and have a high balance on that statement, in the long run it's no big deal as long as you PIF by the due date. Your score might take a dip that month but it'll bounce right back the next month. Your score doesn't have a "memory" of past util, it only cares what your current util is. The only time your credit score matters is when you are applying for something.

2. It seems to me that a CCC would be able to look at your total spending during the month, not just what posts on your statement, since they can see the full picture on their internal system, and are not limited by what shows up on your CR. You can probably call your bank and see if you can talk to someone that can advise you on the best course of action.

Re: Paying off credit card before statement closes, multiple payments, large purchases

Anonymous — Thu, 02 Feb 2012 17:04:14 GMT

In response to dharalex-

Thanks for your quick reply.

I have some income - I used to work full time and drew a full salary. Now I'm back in graduate school and only working part time.
Both cards are unsecured
They aren't student cards

The card with the low credit limit is a Chase Amazon Visa card. I've requested a CLI in the past (after 2 years of use) and they refused citing the length of my credit history. I thought the problem might have been that I was paying off the balance in full before the closing date. So then I started leaving about half the balance until the statement closed, then paying it off before the due date. About a year and a half later, the company added $1,000 to my credit limit and did so without me requesting a CLI. I haven't tried requesting a CLI since then. I've been in school for about a semester and I'm not sure they'd be willing to give me an increase given their past reluctance and the fact that I'm earning less than half of my previous income.

I've also thought that maybe the company is just keeping the credit limit low on my card (and perhaps others' cards) so customers would be more likely to charge less on the card and therefore the company would have to pay out less in rewards.

Re: Paying off credit card before statement closes, multiple payments, large purchases

Anonymous — Thu, 02 Feb 2012 17:11:34 GMT

@Anonymous wrote:
In response to dharalex-

Thanks for your quick reply.

I have some income - I used to work full time and drew a full salary. Now I'm back in graduate school and only working part time.
Both cards are unsecured
They aren't student cards
The card with the low credit limit is a Chase Amazon Visa card. I've requested a CLI in the past (after 2 years of use) and they refused citing the length of my credit history. I thought the problem might have been that I was paying off the balance in full before the closing date. So then I started leaving about half the balance until the statement closed, then paying it off before the due date. About a year and a half later, the company added $1,000 to my credit limit and did so without me requesting a CLI. I haven't tried requesting a CLI since then. I've been in school for about a semester and I'm not sure they'd be willing to give me an increase given their past reluctance and the fact that I'm earning less than half of my previous income.

I've also thought that maybe the company is just keeping the credit limit low on my card (and perhaps others' cards) so customers would be more likely to charge less on the card and therefore the company would have to pay out less in rewards.

In that case, it's worth a try. The amount you make isn't the immediate concern, IMO, you just need some sort of income. Time has passed, you history has improved, so I think you have a shot. I usually like to deal with automated systems, but in your case, I would speak directly with a credit specialist. I admit, my experience with Chase is almost non existent. Good luck to you in your educational endeavors!

Re: Paying off credit card before statement closes, multiple payments, large purchases

LTomBerry — Thu, 02 Feb 2012 17:12:30 GMT

@Anonymous wrote:
In response to dharalex-

Thanks for your quick reply.

I have some income - I used to work full time and drew a full salary. Now I'm back in graduate school and only working part time.
Both cards are unsecured
They aren't student cards
The card with the low credit limit is a Chase Amazon Visa card. I've requested a CLI in the past (after 2 years of use) and they refused citing the length of my credit history. I thought the problem might have been that I was paying off the balance in full before the closing date. So then I started leaving about half the balance until the statement closed, then paying it off before the due date. About a year and a half later, the company added $1,000 to my credit limit and did so without me requesting a CLI. I haven't tried requesting a CLI since then. I've been in school for about a semester and I'm not sure they'd be willing to give me an increase given their past reluctance and the fact that I'm earning less than half of my previous income.

I've also thought that maybe the company is just keeping the credit limit low on my card (and perhaps others' cards) so customers would be more likely to charge less on the card and therefore the company would have to pay out less in rewards.

Banks earn money every time you use the card (interchange fees), so normally they would encourage heavy use of the card. They set up rewards programs with this in mind.

Low limits have more to do with your score, income, and history. It's all about risk management for them, how much credit they extend to you is decided by how likely it is you'll pay them back (by their determination).