Having trouble understanding when to pay credit card?

[Anonymous]

okay, I was going to post a picture of what the credit card account was telling me, but I do not see an area on the message field to attatched a photo. So I will just type it in. 

Account Summary
Credit Limit $1,000.00
Current Balance $189.62
Available Credit $810.00
Cash Available $500.00
Amount Overlimit $0.00

Statement Summary
Payment Due 01/13/2015
Min. Payment Due $0.00
Past Due Amount $0.00
Last Statement 12/16/2014
Statement Balance $0.00
Last Payment 12/01/2014

The only reason I have this card is to build credit. After doing research I learned that I should be utilizing no more than 20% of my spending limit (which would be $200) to optimize credit score. So each month I make a purchase for around $180. I thought I was suppose to just wait for my statement to come in and then just pay it off. Is this correct? If so, it is showing me I have a balance of $189.62, I told the situation to an online banker and I asked her when my next payment is due and she told me the 13th of January. But if my next statement isn't until the 16th would this mean that nothing is showing up in my credit? I ask this because credit karma informed me that my current credit card utilization is at 0%, and credit karma is usually spot on when it comes to reasons why my score isn't where it needs to be. Is it at zero percent because I need to wait until AFTER my next statement (the 16th), even though the online banker for the credit card told me my next payment is due on the 13th???  I have a feeling I am paying a bit too early, because credit karma WAS telling me that I was at 1-20% utilization (the recommended utilization rate) for  the first couple months I was using the card. But somewhere along the lines I think I got ahead.

ANY HELP WILL BE GREATLY APPRECIATED!

[coldnmn]

Welcome to the forum! You can use as much of your credit limit as you want without going over. Before the statement(s) close pay your balance down to 1%-9% on one card for optimal credit score. To avoid interest pay statement balance to avoid interest. Current balance is new charges that are due on next statement plus statement balance that's why I mention in bold statement balance to avoid interest. You wouldn't be charged interest on new charges if statement balance is paid by due date. Good Luck with your credit journey!

[takeshi74]

When to pay basically breaks down this way:

• Pay the minimum by the due date to keep the account current.
• Pay the statement balance by the due date to avoid paying interest.
• Pay prior to the statement date (or by reporting date if the card does not report on statement date) to reduce reported utilization.  Your balance on statement date becomes your statement balance and is reported at that time to the CRA's.  If you do this then make sure you pay any remaining statement balance by the due date to avoid interest.

Keep in mind that statement cycles typically overlap a bit.

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@Anonymous wrote:

After doing research I learned that I should be utilizing no more than 20% of my spending limit (which would be $200) to optimize credit score.

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The general advice is do not exceed 30%. When applying you might want to optimize by only allowing one balance to report at 10% or less. You don't need to maintain having only one report at 10% or less all the time though some choose to do so.

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@Anonymous wrote:

So each month I make a purchase for around $180. I thought I was suppose to just wait for my statement to come in and then just pay it off. Is this correct?

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Limiting spend and paying in full by the due date is one way to do it. Another is to spend whatever you want and reduce your balance prior to statement date so the reduced balance is reported and then pay the remainder by the due date.

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@Anonymous wrote:

If so, it is showing me I have a balance of $189.62, I told the situation to an online banker and I asked her when my next payment is due and she told me the 13th of January. But if my next statement isn't until the 16th would this mean that nothing is showing up in my credit? I ask this because credit karma informed me that my current credit card utilization is at 0%, and credit karma is usually spot on when it comes to reasons why my score isn't where it needs to be. Is it at zero percent because I need to wait until AFTER my next statement (the 16th), even though the online banker for the credit card told me my next payment is due on the 13th???

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It seems to me like your confusion stems from not understanding the overlap of cycles that I mentioned and possibly due to not understanding current balance versus statement balance. Let's take the data you posted and see if we can get this sorted out for you.

CK is reporting what's on your TU report. You had a current balance of 0 on your statement date of 12/16.  I would guess that you paid what was your current balance in full on 12/1 so when your statement date came and you had a 0 balance it was reported to TU which is why CK shows 0 utilization on that account. That's also why you have $0 due on your due date of 1/13. All that was for the prior cycle.

Your are in the middle of your current cycle. Your current balance is $189.62. If your balance doesn't change (i.e. you don't charge anything, make any payments, have any fees/rewards/etc post, and so on) when this cycle ends on 1/16 then the balance of $189.62 will be reported to the CRAs. That amount will be due on 2/13 (and on that date you will be nearing the end of the cycle after this one).

It might help if you chart out a few cycles to see how this works.

• 11/17 (presumably) old cycle start
• 12/13 (presumably) cycle prior to old cycle due date
• 12/16 old cycle end, balance on this date is reported to CRA's and becomes statement balance for this cycle
• 12/17 current cycle begin
• 1/13 old cycle payment due
• 1/16 current cycle end, balance on this date is reported to CRA's and becomes statement balance for this cycle
• 1/17 next cycle begin
• 2/13 current cycle due date

This pattern repeats.

tl;dr - It seems like you're paying your current balance by the due date of the prior cycle and that's why you have a 0 balance reporting which is not your desired outcome.  Take note of the statement balance and its associated due date if you're going to stick with your current approach for managing reported utilization.

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@Anonymous wrote:

okay, I was going to post a picture of what the credit card account was telling me, but I do not see an area on the message field to attatched a photo.

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There's an Insert/Edit Image button that looks like this in the editor   I just used it to insert the image of the button.

[Anonymous]

Takeshi74

Thank you so much for helping me out. I really didn't expect someone to break it down for me like that, and I am so grateful that someone took the time to help me. Yeah I think that is what happened in regards to my cycles.

So basically, at this point I need to wait for my next statement to come to me showing s balance and pay it before the following due date that is associated with that statement?

Thanks again!

[capitalkid]

I use two dates in reference to my cycles.  The Pay By Date (Due Date) and the cycle Closing Date.  I mostly use the cycle closing date as my guide.  I Pay right after my closing date, which is always 23-25 days before the payment is due depending on the lender.  But it is Technically due anytime after each closing date but must be paid before the DUE DATE, so in order to simplify things I use CD as my guide.  I have it all plugged into a spreadsheet.  You can tell when the statement has cut, because it will list a $ amount under minimum payment due where previously it said Minimum Payment 0$, also there will be a PDF of the new bill in your documents online-even if you get paper copies they mostly all do this.  After the statement has cut there will be whatever your min is listed in place of the 0$ that was there before.

However If you have an account that allows for skipped payment, some of these do this automatically as a courtesy, alot of credit unions will have this option, usaa, NFCU, NASA, ect, then it will list all of your current stuff and say 0 $ Due under minimum payment.  This type of thing will give you an option to skip a payment if you choose.  I have this feature on my USAA statements.  

It says my Closing date, due date, balance, and will list 0$ Due.  I also pay this after each closing date, regardless of the 0$ due.

The Info is also printed on the statement and listed in each online account.  I Dont wait for any bills.  I go online the day after each one of my statements is cut and pay.  Bills come a week to 1.5 weeks after being cut.  Sometimes my statements take longer than that and sometimes for whatever reason i wont get a statement, it gets lost in the mail or delivered to wrong address or something.   For whatever reason with my Sears MC acct, I have not received a statement from them Since August of 2013, even though I am not on paperless billing.  I can see them in my online account, but they just dont get here.  I have this ongoing dialog with Sears that does not ever seem to resolve itself, but the payments have never missed a beat because I use this method.  I have most of my bills synced to a certain time of the month to make things simpler also.  

EX

Care Credit.  Balance is 3200$, Minimum Payment due is 107$. Payment Due Date Jan 10th.  Closing Date is Dec 14th.  Actual Payment 200$, date paid 12/15/2014.  I have the money budgeted in each spreadsheet for the month ahead of time.  I log in on the 15th of each month and pay the bill, even though the payment is not due for 23 or so more days.  Its done and there is plenty of room to fix anything that may happen in between, not that it has so far.  

Anyway, seems to work.

[Anonymous]

Hi there,

Can you answer a questin for me. I had two credit cards Matrix ( horrible credit card) and Best Buy I closed both accounts and I'm paying off small balances on each. Should I have kept the accounts open and just paid off the balances? Someone told me that I should never have closed the accounts.

Thanks !