Maxing out Credit Card then Paying in Full?

[Mrm-na]

A lender should know what charges and payments you've put on their own card, day by day hour by hour, regardless of what got reported to the bureau last month.  They have all the transaction data.

If you're trying to show that balance to other lenders, not the ones who issued the card, then maybe you'd want the balance to report in that case.

[MMB85]

I've always paid in full. Usually always paid in full before my statement stated that I had a payment to make. My statement showed that I had a balance, but in the section that states the minimum payment I neeed to make, it still states $0.00...Should I wait until it states an amount?

So from what I've gathered on here, there are some who like a high balance to carry over to the next cycle, but then pay it off immediately once that happens so that the issuer sees that you had a high balance reported, but you are reliable by paying it all off in a timely manner. by doing so, they hope that the issuer would give them a higher limit, correct?

It isn't like the issuer only sees the balance that got reported on the end of the cycle statement, correct? It isn't like that for us who pay off in full immediately, and always have a zero balance once the cycle closes, that the issuer then thinks that we never use the card, right? I mean they see our daily transactions and our payment history. And when it is time to evaluate our account for a CLI, they see that information rather than just seeing that we always have a zero balance once the cycles closes, and assuming we don't need a higher increase because of that, correct?

So I have always wondered, say my credit score is 750. If I carry over a few hundred dollar balance to the next cycle, will my score drop a couple notches for the time being?

I also hear that it is bad to pay off in full because they issuer never makes money off of you, is that true? Is their only profit from us is the APR from the balance we have sitting in our account once the cycle closes?

[Startome]

See if I needed to buy 1500 worth of stuff on a 500 CL card, I'd just make a 1500 payment, go into a negative balance of 1500, then go buy everything I needed. LOL

If that doesn't show them I need a higher balance for my cash flow, idk what else would, lol

[bribro]

OP, I wouldn't worry about it. Credit card companies WANT you to use their cards after all. And by paying the balance in full before your statement cuts, you'll avoid any possible AA that might happen when other lenders see a large balance report.

[tony46231]

While that method is perfectly fine ... I would say the time spent getting the money orders, paying for them, paying for postage, paying for envelopes, and stuffing the envelopes is way more of a waste than simply logging into your account online and spending two minutes to send money somewhere.  My grandmother still writes checks and mails all of her bills in, but she is older and can barely use a computer, so I wouldn't recommend that she start using online banking/bill pay.  As for anyone that doesn't fall into that category, I don't see the point in not taking advanage of online banking and bill pay.  I realize you can afford the cost of the money order, postage, and envelopes.  But when I have the option, I'd much rather keep those dollars in my pocket.    

[tony46231]

3. You can buy 1 stamp or 500 of them and the price per stamp is the same.  The USPS doesn't give volume discounts on stamps that I've ever heard of.

[Mrm-na]

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@MMB85 wrote:

I also hear that it is bad to pay off in full because they issuer never makes money off of you, is that true? Is their only profit from us is the APR from the balance we have sitting in our account once the cycle closes?

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They get paid swipe fees by the merchant every time you use the card.  In some cases of course there's also an annual fee.

Although there is a popular assumption that banks want you to carry a high balance, I'm not convinced.

Sure, they get interest that way, but they also face a substantial loss if you end up not paying it back.  The higher the balance, the greater the chance of that happening.  The interest gives them a reason to tolerate that risk, but it's a risk nonetheless.  If the goal is to make the bank money, then a high balance will do that.  But that doesn't translate to them trusting you as a client.

if the goal is to be perceived as a valuable, but low risk customer, then I think the best way to do that is to charge their card everywhere (giving them swipe fees) but pay it off in full.

[jamesdwi]

When it comes down to it, Credit card companies make money for all usage patterns except for a couple, use the card get swipe fee's, 1-2% of the purchase, perhaps more. Pay the card at any time before interest is charged the money can be used for additional purchases by others, the money is cheap, less than 1% a year. If they charge you interest its a big win. AF's are money in their pocket.  If you are late they make money in fee's and interest, the only times they lose is if they charge off the off the account, or you file BK, but even then its not a total loss, it still goes into the books as a loss, so it saves them money in taxes off there profitable customers, and fee's, interest, and costs for closing the account are all part of the loss reported even if they didn't really loose the money, they just didn't receive all the money they wanted to charge you. Yes creditors will still hate you if you cost them money.  But heavy use of the card and payments don't bother prime cards.

As to maxing out the card and paying it off credit card companies beyond rebuild cards will like you for it. If you have prime cards its fine and may lead to larger CL's in the future. When you have prime cards the lenders trust you, and see your record of responsible credit history and are willing to bet that you will pay your bill, unless you usage pattern is way out of the norm nothing will happen. If you exceed your income by a lot, miss a payment, have other baddies show up, they may take AA against you, but keep everything under control and no new baddies on your report you will be fine.  Use the credit  they gave you, make large payments, and no one is going to complain much. AMEX loves customers that push 40 or 50k a month through their card. 

[Revelate]

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@Mrm-na wrote:

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@MMB85 wrote:

I also hear that it is bad to pay off in full because they issuer never makes money off of you, is that true? Is their only profit from us is the APR from the balance we have sitting in our account once the cycle closes?

---

They get paid swipe fees by the merchant every time you use the card.  In some cases of course there's also an annual fee.

Although there is a popular assumption that banks want you to carry a high balance, I'm not convinced.

Sure, they get interest that way, but they also face a substantial loss if you end up not paying it back.  The higher the balance, the greater the chance of that happening.  The interest gives them a reason to tolerate that risk, but it's a risk nonetheless.  If the goal is to make the bank money, then a high balance will do that.  But that doesn't translate to them trusting you as a client.

if the goal is to be perceived as a valuable, but low risk customer, then I think the best way to do that is to charge their card everywhere (giving them swipe fees) but pay it off in full.

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That maybe applies to Citi, it doesn't apply to any of the other commonly discussed lenders at least here or on a few similar forums around the net.  Popular assumption / common wisdom would be wrong in this case.

You're doing it correclty regarding use the cards for everything (more money and better statistical profiling from their perspective) and then PIFing.

[lonelyisland]

I wish we could like individual responses on a topic. The TOS gif made my week on the internet.