Difference Between Statement Cut and Due Date

[Anonymous]

Hi everyone,

I only have one credit card and am applying for a mortgage in a month or two, so want to get this absolutely straight:

I want to boost my FICO score. Per my bank 5 minutes ago: my statement cut date is the 15th of each month and the due date is 12th of each month. (I would have thought it would be the other way around--why cut off a statement after it's due??).

Anyway, I've read that I should leave a small balance by the cut off date and PIF by the due date. Is this correct? I'm trying to buy a house so don't want to mess it up. My plan is to show 1% utilization on the cut off date---is that the right way to do it? Since my due date is a few days before the cut date, do I PIF on the 12th and then charge a small balance to get it to 1% utilization?

I feel like I'm missing something here. Help!

[Anonymous]

I am also dyslexic, and this makes me feel so stupid. I do not for the life of me understand what this means.

What is a statement cut date? Is this the date to show 1%? 

My bank said "the 15th is when your Visa reports a balance." Reports a balance to whom? The credit bureaus I assume??

What is a statement due date? Is this the date I need to PIF to avoid interest?

And most importantly: Why would my due date be BEFORE the cut-off date?

[newhis]

Everything you buy up to the 15th, is due the next month until 12th.

So if you charge 500 by the 15th and then another 500 by next month on the 12th, you only need to pay 500 to avoid interest on the 12th, but if you pay 1000 by then and don't charge anything up to the 15th then your statement will show $0 due 12th next month.

Credit cards give you at least 20 days after the cut date to pay it (due date), others give you 25 or even 28. That's why your cut date is 15th and due date 27 days later (12th).

[Anonymous]

Let's say you started with $0 balance, and between January 15 and February 15, you made $500 in purchases. Your February statement will cut with a $500 balance. Between Feb 15 and March 12, you racked up another $1000.

If you pay the statement balance of $500 on March 12, you will not pay any interest. Assuming you don't make any more purchases before your March statement cuts on the 15th, your March statement will show a balance of $1000. This is what will be reported to the credit reporting agencies.

Now, let's say your card has a $5000 limit. This would be 20% utilization, which is above what you want. If you want to show 1% utilization, you need your March statement to cut with a balance of $50. So instead of paying just $500 on March 12, you need to pay $1450.

The only reason to do this is to tweak utilization. You're only required to pay the full "statement balance" of $500 to avoid being charged interest. You're not required to pay the "current balance" shown on your bank's website.

So the answer to your question is YES, the "statement close" date is the date you want to your utilization to be at 1%.

[onstar]

Vireo put it nicely. The grace period is one of the big perks of using a credit card. You buy stuff until the statement date, then you have 20-25 days to have to pay for it and not get charged any interest! How sweet! Of course, nowdays it's mostly about the rewards ...

Generally, PIF your statement balance by the following month should be good enough for most people. The exception would be if your overall CL is not that high (relative to your monthly spending) or if you are applying for a big loan soon and wanting a spotless report. If you have like $50,000 total CL and spend only $4,000 per month on credit cards, then utilization barely matters.

[takeshi74]

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@Anonymous wrote:

Per my bank 5 minutes ago: my statement cut date is the 15th of each month and the due date is 12th of each month. (I would have thought it would be the other way around--why cut off a statement after it's due??).

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They don't.

If, for example, your statement cuts on 2/15 then you have a grace period of at least 21 days (for applicable balances) and your payment is due on 3/12.  The following cycle cuts on 3/15 and is then due on 4/12.

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@Anonymous wrote:

Anyway, I've read that I should leave a small balance by the cut off date and PIF by the due date. Is this correct? I'm trying to buy a house so don't want to mess it up. My plan is to show 1% utilization on the cut off date---is that the right way to do it? Since my due date is a few days before the cut date, do I PIF on the 12th and then charge a small balance to get it to 1% utilization?

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Pay to adjust the current balance to the desired level by statment date.  The current balance on statement date is the statement balance reported to the CRA's.

PIF the statement balance (not the current balance) by the due date.  If you charge anything during the time between the statement date and the due date it will increase your current balance but not your statement balance since that cycle has already closed out and you're in the following cycle.

It's not uncommon for non-dyslexics to be confused by the overlapping of cycles.

[Anonymous]

Thanks, everyone. I finally get it.

[Anonymous]

Good stuff 

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@newhis wrote:

Everything you buy up to the 15th, is due the next month until 12th.

So if you charge 500 by the 15th and then another 500 by next month on the 12th, you only need to pay 500 to avoid interest on the 12th, but if you pay 1000 by then and don't charge anything up to the 15th then your statement will show $0 due 12th next month.

Credit cards give you at least 20 days after the cut date to pay it (due date), others give you 25 or even 28. That's why your cut date is 15th and due date 27 days later (12th).

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[Anonymous]

Since you're dealing with a mortgage and can't have screwups, I feel it is important to mention that you DO NOT want to have 0% reporting on the statement date. Fairly extensive testing here has shown that reporting a $0 balance indicates that you're not using your credit and will cause you to take a big credit score drop.

It is also worth noting that the statement date is not the relevant date for all cards. Some cards update midcycle (such as Chase, I believe). As you get within a month of when your lender is going to pull your scores, you should carefully monitor your utilization. Doing something like buying a pack of gum a month and paying for everything else on debit will work sufficiently well to cover you in this regard.