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How to pay a credit card?

BrokeBandit
Established Member

How to pay a credit card?

I am startig to rebuld my credit.  I have one card with a $300 credit limit.  I know to only use up to 9% of that, or $27.  My question is when paying the statement, should I pay the total balance due?  Or should I leave some of the balance there (as long as it is under 9%) so that my credit report looks as though I use the card each month (instead of it always reporting a $0).

Message 1 of 12
11 REPLIES 11
aclockworkgeorge
Established Member

Re: How to pay a credit card?

from what i can tell, and im no expert, but you can spend more than 9% or 27 bucks, but as long as you pay it down before the statement date to less than 10%, itll look good on your credit report. 

 

and after that, its best to pay in full every month. those are pretty much the steps everyone recommends to increase your credit score.

Message 2 of 12
Switch2007
Contributor

Re: How to pay a credit card?

Hello! And welcome! 

 

I believe that they will report your high balance, so there's no need to really show a balance. With most cards, PIF every month will help your chances of getting a CLI.. that is unless it's Cap 1 or Orchard! I dont think it will hurt you much either way though. 


Starting Score: 08/01/2009 584
Current Score: 08/01/2011 EQ 684 EX (Lender Pull) 702 TU 712
Goal Score: 780+


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Message 3 of 12
john398
Senior Contributor

Re: How to pay a credit card?


@Switch2007 wrote:

Hello! And welcome! 

 

I believe that they will report your high balance, so there's no need to really show a balance. With most cards, PIF every month will help your chances of getting a CLI.. that is unless it's Cap 1 or Orchard! I dont think it will hurt you much either way though. 



The high balance that reports has nothing to do with util its the current balance, you can pay in full but still have a balance and statement date and you than still can get a high util, tyhey key is paying it down right before statement cuts

Message 4 of 12
Switch2007
Contributor

Re: How to pay a credit card?


@john398 wrote:

@Switch2007 wrote:

Hello! And welcome! 

 

I believe that they will report your high balance, so there's no need to really show a balance. With most cards, PIF every month will help your chances of getting a CLI.. that is unless it's Cap 1 or Orchard! I dont think it will hurt you much either way though. 



The high balance that reports has nothing to do with util its the current balance, you can pay in full but still have a balance and statement date and you than still can get a high util, tyhey key is paying it down right before statement cuts



My point n saying that was that it SHOWS that you use your card. Whether it takes it into account with your utilization percentage or not. Usage is being shown to other potentials that will look at your CR. I dont know where I read on the forums that someone was denied due to insufficient use of their current open credit lines. I suppose I figured that even while keeping your utilization down, the high balance will show that your card is in fact being used month to month. 


Starting Score: 08/01/2009 584
Current Score: 08/01/2011 EQ 684 EX (Lender Pull) 702 TU 712
Goal Score: 780+


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Message 5 of 12
john398
Senior Contributor

Re: How to pay a credit card?

oh ok gotcha Switch I understand now

Message 6 of 12
Walt_K
Senior Contributor

Re: How to pay a credit card?

Here's a previous writeup on playing the utilization game, hope this helps:

 

The general advice is that for best scoring purposes you want one account to report 9% or less of that card's credit limit (not total CL across all cards).  All other accounts should report $0.  Remember, utilization is rounded up, so for a $300 CL, you want a balance of $27 or less. 

 

You are controlling what reports to the CRAs.  You can use your card for more than $27 in the month, but you don't want more than $27 to report.  The number that is reported to the CRAs for most credit cards is the balance that is listed on your statement.  There are some cards that report an end of month balance.  You can search around the threads to figure out how yours reports, but it is likely statement balance.  You can also figure this out if you have a monitoring service by just noting whether the amount listed on your report matches your last month's statement balance.

 

So, with that in mind, if you charge $100 this month, you would want to make a payment a couple days before your statement generates to bring the balance below $27 so that when your bill is generated the balance reads $27 or less.  After the statement generates, you can immediately pay the remaining balance so that your balance is paid in full and you don't get charged any interest.  You don't have to do it immediately, you just need to do it before your due date.  But a common misconception with the 9% or less rule is that people think they need to carry a blance.  You are always better off if you pay in full (PIF).  This whole thing is for reporting purposes.

 

Another couple points to note.  9% or less on one account is what works best for most people.  Where your exact sweet spot is will depend on your specific credit report.  Additionally, you don't have to worry about this if you mess it up one month.  If you pay it back down to less than 9%, your score will go right back to where it was the previous month all else being equal (which it can never be exactly equal because everything has just aged another month). 

 

 


Starting Score: ~500 (12/01/2008)
Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
Goal Score: 720


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Message 7 of 12
steve23111
Frequent Contributor

Re: How to pay a credit card?


@BrokeBandit wrote:

I am startig to rebuld my credit.  I have one card with a $300 credit limit.  I know to only use up to 9% of that, or $27.  My question is when paying the statement, should I pay the total balance due?  Or should I leave some of the balance there (as long as it is under 9%) so that my credit report looks as though I use the card each month (instead of it always reporting a $0).


The way I read your post, you're asking what part of the statement balance to actually pay. The correct answer is "all of it." Any amount you do not pay and carry forward to the next billing cycle will accrue finance charges at whatever rate applies to your card.

 

The amount that you spend on your card during the month is unimportant, as long as it is below your credit limit. You can spend more than your credit limit as long as you make periodic payments during the month to keep the balance low. The key point is to show 9% or less utilization when the statement cuts. That means closely monitoring your account balance, making a payment of all but 9% of the balance a few days ahead of the end of your statement cycle.

 

As an example, my American Express has a $2600 credit limit. I might spend $3000 in a month on the card, but make several payments during the month to keep the overall balance down. My statement cuts on the 9th of each month, so by the afternoon of the 8th I want to make sure my balance is down below $234... but when that statement arrives showing a balance of $234, you'd better bet I'm paying 100% of that, else get stuck paying 17.99% interest on it!

 

Hope that helps.

Message 8 of 12
scientifics
Frequent Contributor

Re: How to pay a credit card?

I agree with letting 9% report, paying it all down before the due date, however, if you want to have a better chance at getting a CLI, you should charge more than that to the card per month (making multiple payments as necessary).

Message 9 of 12
BrokeBandit
Established Member

Re: How to pay a credit card?


@Switch2007 wrote:

Hello! And welcome! 

 

I believe that they will report your high balance, so there's no need to really show a balance. With most cards, PIF every month will help your chances of getting a CLI.. that is unless it's Cap 1 or Orchard! I dont think it will hurt you much either way though. 


It is an Applied Bank secured card.  My wife has a unsecured Orchard card  What difference should I be aware of with Orchard?

 

So if I get this right:

  • I can use a card as much as I want each month however I should make frequent payments each month to keep the balance down.
  • A few days before the statement cuts, pay it down to 9% or lower.
  • As soon as the statement cuts, pay the remaining current balance in full.

And it's the statement cut date I need to be aware of, and not the last business day of the month?

 

Thanks again!

Message 10 of 12
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