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Getting a big amount money soon - credit card payment

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Aramos
New Contributor

Getting a big amount money soon - credit card payment

I finally have the opportunity in life with a higher income to get rid of a lot of debt. I will be receiving in the next couple of days a pretty big chunk of money in which I plan on using to pay down 5 CCs that all have 90%+ utilization. The question that I have is should I pay all 5 cards down to $0 immediately and risk balance chasing (Amex, Discover, Capital One, Wells Fargo, Macy's) or should I pay them down incrementally?

 

For example paying them down each to 8.9% in one payment this month, and next month paying the rest of each card's 8.9% off completely? Or just go ahead and pay them all down to 0% this month?

 

Side question: Which would have the biggest benefit to my score / credit? Would a card that has a few late payments on it be more likely to do a goodwill removal ( I am not too worried about this but figured I would ask) ?

Message 1 of 9
8 REPLIES 8
Jnbmom
Credit Mentor

Re: Getting a big amount money soon - credit card payment

@Aramos 

 

Finance over FICO always. If you have the means pay them off pronto, let one report a small amount and the rest zero.

EXP 780 EQ 791TU 795
Message 2 of 9
Anonymous
Not applicable

Re: Getting a big amount money soon - credit card payment

If they're going to balance chase you, they're going to balance chase you whether you pay it down most of the way or all of the way. So really, the question you're asking is whether or not you should pay an extra month of interest or not. Don't pay any more interest than you need to, pay them all down to 0 if it is within your capability to do so.

Message 3 of 9
Aramos
New Contributor

Getting a big amount money soon - credit card payment

Perfect perspective, thank you!! As far as letting one report a small amount that is always something that has just barely eluded me so in my attempt to clarify for myself if you could help me I shall list it as as I understand it.

 

I should let 1 of my CCs report, as in let the statement post the balance, a small amount of typically <9% of the individual CC limit to display a sense of debt management and that I utilize the card itself which in turn they like since it shows I can handle the CC and it's limit. All other cards should report $0=0% util but I should still utilize those cards for their individual benefits such as cash back or travel rewards to display to the respective creditors that I also utilize their CC.

 

Is this correct? If so, I would likely never really utilize the Macy's CC on a consistent basis but do not want to close it as I would lose the history and result in an effective hit to my FICO or should I / could I close it? Finally, do I have to utilize different cards or can I leave them at a $0 balance and just use the ones that benefit me the most with respect to their rewards.

Message 4 of 9
Anonymous
Not applicable

Re: Getting a big amount money soon - credit card payment

Pay them ALL off do not give the greedy banks anymore of your money just to pay for interest. By allowing any of these cards to carry a balance all you are doing is giving the banks free money. No more. You need to pay in full from today forward. Make your cards pay you not the other way around.

Message 5 of 9
coldfusion
Community Leader
Mega Contributor

Re: Getting a big amount money soon - credit card payment


@Aramos wrote:

Perfect perspective, thank you!! As far as letting one report a small amount that is always something that has just barely eluded me so in my attempt to clarify for myself if you could help me I shall list it as as I understand it.

 

I should let 1 of my CCs report, as in let the statement post the balance, a small amount of typically <9% of the individual CC limit to display a sense of debt management and that I utilize the card itself which in turn they like since it shows I can handle the CC and it's limit. All other cards should report $0=0% util but I should still utilize those cards for their individual benefits such as cash back or travel rewards to display to the respective creditors that I also utilize their CC.

 

Is this correct? If so, I would likely never really utilize the Macy's CC on a consistent basis but do not want to close it as I would lose the history and result in an effective hit to my FICO or should I / could I close it? Finally, do I have to utilize different cards or can I leave them at a $0 balance and just use the ones that benefit me the most with respect to their rewards.


 

Cards that remain idle for too long are at an increased risk of being closed for non-use.  You can reduce that risk by using each card at least once every few months to buy something fairly inexpensive like a cup of coffee at Dunkin' or Starbucks.  If you do that then you can continue with a strategy of putting most spend on the cards that benefit you the most and rotating through the others so that each gets some regular level of spend every few months, and at some point you can reassess whether or not the cards you don't regularly use are worth keeping.

 

Insofar as letting a single card report, you really only need to bother with that if you're in a position where you need or choose to claw for every last FICO point.  But, there is nothing inherently wrong with doing it and it isn't an unreasonable strategy to follow.

(2/2024)
FICO 8 (EX) 846 (TU) 850 (EQ) 850
FICO 9 (EX) 850 (TU) 850 (EQ) 850

$1M+ club

Artist formerly known as the_old_curmudgeon who was formerly known as coldfusion
Message 6 of 9
micvite
Frequent Contributor

Re: Getting a big amount money soon - credit card payment


@Aramos wrote:

I finally have the opportunity in life with a higher income to get rid of a lot of debt. I will be receiving in the next couple of days a pretty big chunk of money in which I plan on using to pay down 5 CCs that all have 90%+ utilization. The question that I have is should I pay all 5 cards down to $0 immediately and risk balance chasing (Amex, Discover, Capital One, Wells Fargo, Macy's) or should I pay them down incrementally?

 

For example paying them down each to 8.9% in one payment this month, and next month paying the rest of each card's 8.9% off completely? Or just go ahead and pay them all down to 0% this month?

 

Side question: Which would have the biggest benefit to my score / credit? Would a card that has a few late payments on it be more likely to do a goodwill removal ( I am not too worried about this but figured I would ask) ?


I have had varying degrees of success calling and explaining the situation to them before making a payment with the rep (for discover at least). I called told them I was worried my CL would decrease following payment since that had happened before, explained why my util was so high in the past and why my scores dropped and explained that I paid off all of my cards and they stopped balance chasing me. (They had just started) it doesn't hurt to call and ask regardless of whether they do anything or simply make a note so that you can recon the balance chasing later, IMO.

Ex: 742, TU: 726, EQ: 733 03/31/2021
Discover it cashback: $10900
Citi DC: $13000
WF Propel: closed 2k
Amex BCED: $3000
Amex Gold: $NPSL
Amex Plat: NPSL
Cap1 QS: $3200
Cap1 VX $50k
VS CC: $2900
Kohls: $3000
Synchrony car care: $3000
citi best buy visa: $8500
Message 7 of 9
SouthJamaica
Mega Contributor

Re: Getting a big amount money soon - credit card payment


@Aramos wrote:

I finally have the opportunity in life with a higher income to get rid of a lot of debt. I will be receiving in the next couple of days a pretty big chunk of money in which I plan on using to pay down 5 CCs that all have 90%+ utilization. The question that I have is should I pay all 5 cards down to $0 immediately and risk balance chasing (Amex, Discover, Capital One, Wells Fargo, Macy's) or should I pay them down incrementally?

 

For example paying them down each to 8.9% in one payment this month, and next month paying the rest of each card's 8.9% off completely? Or just go ahead and pay them all down to 0% this month?

 

Side question: Which would have the biggest benefit to my score / credit? Would a card that has a few late payments on it be more likely to do a goodwill removal ( I am not too worried about this but figured I would ask) ?


Pay them all down to zero.  Make sure at least one card reports a small balance before you pay it off.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 8 of 9
SouthJamaica
Mega Contributor

Re: Getting a big amount money soon - credit card payment


@Aramos wrote:

Perfect perspective, thank you!! As far as letting one report a small amount that is always something that has just barely eluded me so in my attempt to clarify for myself if you could help me I shall list it as as I understand it.

 

I should let 1 of my CCs report, as in let the statement post the balance,

 

That is assuming that the statement balance is the reported balance, which is true for most, but not all, credit cards. Do you know if your lenders always report the statement balance?  Also there's a separate issue for Chase cards, as Chase will report mid-cycle if the account is paid down to zero mid-cycle.  Also, there are some reports of store cards, and of some credit union cards, not being counted if they are relied on as the single card reporting a balance. So to be on the safe side, you might want to tell us which lender you are planning on using to report a balance.

 

a small amount of typically <9% of the individual CC limit

 

Yes. Ideally it should be at least $10 but no more than 8% of the limit.

 

 

to display a sense of debt management and that I utilize the card itself

 

No. The reason is to avoid the "all zero" penalty built into all the FICO algorithms.

 

which in turn they like since it shows I can handle the CC and it's limit. All other cards should report $0=0% util but I should still utilize those cards for their individual benefits such as cash back or travel rewards to display to the respective creditors that I also utilize their CC.

 

Sure you can use them as much as you want. Which is why "utilization" is a misnomer. It's not really how much you utilize the cards, it's what balance appears in your credit reports.

 

Is this correct? If so, I would likely never really utilize the Macy's CC on a consistent basis but do not want to close it as I would lose the history and result in an effective hit to my FICO or should I / could I close it?

 

My understanding is that Macy's never closes it. So don't worry about that one.

 

Finally, do I have to utilize different cards or can I leave them at a $0 balance and just use the ones that benefit me the most with respect to their rewards.

 

You can use whatever you want.  Just be careful about which card you select to be your balance-reporting card.


 


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 9 of 9
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