Payment Level Question

[Anonymous]

Can anyone help me find an old thread on how the banks look at CC payments?  I remembered last year sometime I saw a thread on the subject... it had a list of payments ie.. min level A, 1.5 min level B.

The reason is I am trying to educate DD on making more then min payments (she's hard headed and driving me nuts lol)

Thanks

[xaximus]

I've looked around (didn't find anything but that's probably cause I havn't searched that well) but in general

Minimum payment - generally looked as bad and can cause AA especially if you have a high balance.

Minimum payment plus extra - generally looked at as a better option and more often then that, it shows that you are tackling balances and want to pay off faster.

PIF - usually best but should let a small balance report every now and then (small, few $, let the statement cut so that it shows then PIF.

[Anonymous]

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@xaximus wrote:
I've looked around (didn't find anything but that's probably cause I havn't searched that well) but in general

Minimum payment - generally looked as bad and can cause AA especially if you have a high balance.

Minimum payment plus extra - generally looked at as a better option and more often then that, it shows that you are tackling balances and want to pay off faster.

PIF - usually best but should let a small balance report every now and then (small, few $, let the statement cut so that it shows then PIF.

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Thanks!

I literally have turned myself blue trying to explain this to her and have shown her examples here on the myfico.  I have also shown her my paybook (I keep a log on each of my accts)

but.. she has dumped her credit in the toilet (3 COs and 2 CC Closed for late payments 1 open/maxed) and seems to think that if she keeps paying the min everything is hunky dory (sorry about the rant lol)

I remember seeing a payment level posted by a bank employee (pos former) last year and I have tried searching but no luck

[Anonymous]

My own PERSONAL rule of thumb is to pay 10X the minimum payment requested if carrying a balance on a 0% APR offer.  I'm not a fan of paying interest.

[fuzzle]

statements all have to show how many years of minimum payments it will take, and what the total cost will increase to, that should be bad enough without worrying about the bank's opinion

[Kforce]

Banks look at minimum payments for extended time as a red flag.

The real problem is the money loss from your end paying the debt. 

$10,000 on a card at the average of 17% APR with minimum payment of 2.75% and paying the lower minimum each month = (19 years to pay it off, 20,000 total paid, loss of of 10,000 in interest).

If you pay the current minimum payment of about 275/month and don't make it smaller every month as the new minimum goes down = (4 years to pay it off, 14,150 total paid, loss of 4,150 in interest).

Do not keep lowering monthly payments to the new monthly minimum. It is a money trap. You can put the numbers into any payment calculator or amortization program and see the effects of different payments.

Paying the minimum every month will make the banks unhappy but more important will cost you 4 to 5 times interest loss.

[NRB525]

OP, DD is not prepared to discuss the concept of “why pay more than minimum”. You won’t get anywhere with any argument about that. Full stop.

The only absolute in credit is always make the minimum payment on time. Not doing that ( seems like she has not, at times ) is what puts her FICO score so low.

Beyond making payment on time, everything else is just a decision about how to use credit. Maxing our a card, paying interest, those are options for a person to make. Maxing our a card or all cards means that she is very unlikely to get any more credit. She will then begin paying interest on those purchases, and as noted above and on the monthly statement, paying a lot more over time. Any new items she wants to buy cannot be bought on credit, unless it is simply replacing an item already on the card by paying down, recharging the same amount.

As long as she is clear how much extra cost she is paying in interest, she has to decide if that makes sense.

The concern about 1.5x Minimum payment? That is going to be overshadowed by the lousy score from late payments, and high utilization. Banks are simply not going to care whether it is 1x or 1.5x at this point.

[Anonymous]

If she already has 2 COs, 2 cards closed due to late payments and maxed cards, trying to educate her on payment level is sorta pointless and just scratching the surface, the real issue here is budgeting/over spending.

[Anonymous]

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@Anonymous wrote:
If she already has 2 COs, 2 cards closed due to late payments and maxed cards, trying to educate her on payment level is sorta pointless and just scratching the surface, the real issue here is budgeting/over spending.

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So True!  She and her sibs wern't raised this way and it kills me with the cavalier attitude.  I really want her to grow up (she's 33) and move out of my house (I did rant about this today in another area).  Yesterday she got a "pre-approval" from credit one and blithely announced "I must be doing something right" I spurted out my tea (accident) in disbelief!

I know that alot of folks here (absolutly no judgement) have filed bk, but I believe that if you use the CC then you pay the bill even if it means beans and rice...you never walk away from your word and that's what she has done...gave her word she would pay the bill when they extended her the credit.  

Thanks all ! xoxo