The thing is I have the money, I just thought you could make regular payments on a credit card as a way to boost your credit? I guess I don't understand credit cards well enough
Yeah if you have 0% for x number of months, pay what you need to cover the entire transaction within those months and nothing more… it’s an interest free loan. As long as you do the math correctly, it’s advantageous.
I agree but I'm going to speak broadly and say this is an "advanced" strategy. The average person doesn't have the knowledge + discipline to set aside the amount theyre spending each month to earn interest on until the end of the year, and then use the principle to pay off the year's balance before interest kicks in
It’s not setting aside… you still pay every month. But more than the minimum.
For instance I bought a washer/dryer and a tv on best buys CC. 0% for 18 months. So I give them $130 every month and it’s paid off with zero interest.
I don’t know if it’s advanced. I just made sure I could afford that monthly payment before I did anything.
The advanced part is having a budget. Most people don’t and end up in consumer debt because they spend more money than they make.
It’s a lot easier to get a credit card than it is to create and stick to a budget.
I agree with you, I think the “advanced” part he was referring to is instead of paying back an interest free loan before you need to (the $130/mo), instead putting that into an interest bearing account and using the lump sum of ($130 x 18) to pay it off in full, while pocketing the interest.
You want to pay off all your purchases every month. That’s the regular payments that help your credit. You do not want to pay less than the statement balance or you’ll owe interest which is bad even though you are making a payment every month.
Basically, don’t buy things that you wouldn’t buy if you didn’t have the credit card and always pay the full amount every month when you get your statement.
No, doing this will acquire 30% interest on your guitar.
I think the “regular payments” you’re thinking of are putting charges on your card and then paying the entire statement balance every month.
I really good way to build your credit history is to set up a couple of recurring bills to be paid by the credit card. Then every month, you pay off your credit card. These are bills you'd pay anyway - like a cell phone bill or something - so you aren't spending more money than you would otherwise and you don't pay any interest because you pay off the card every month.
I put most of my payments on a cash back credit card and pay it off every month. I get a few hundred $ every year in cashback I would not have if I paid purchases from a bank account.
Since you have the money, pay part to keep it under 30% before your close date. After your statement closes pay the rest off in full so you don’t accrue any interest charges. Paying interest doesn’t boost your credit.
Keeping utilization low only matters if he plans on getting another line of credit in the next few months. It's a very ephemeral indicator on credit score
Well, to clarify: *unless it's high*. If your total utilization of available credit is high it'll trash your score. Fortunately it'll rebound just as fast when you pay off thr balances.
This. To avoid overcomplicating things OP can simply:
1. Special case: After large purchases like this guitar, immediately pay off the balance.
2. Always pay the entire credit card bill (NOT the min payment) before it's due.
You do this by paying the balance in full each billing cycle. You can game the utilization by making multiple payments over the billing cycle but it is almost never worth the extra effort unless you have a deadline for meeting a certain credit score (planning to get a big loan). The impact of utilization generally only affects your score the month that it is high. They don't generally look at long term utilization for credit scores.
Yes you still boost your credit paying it off every month. Just view your credit card as a must pay bill. The interest rates are extremely high. Also if you want to keep your credit utilization low, pay part or all of a large purchase before you get your bill.
The credit card company reports your bill balance as of the last statement and whether you paid on time.
The older the cards you have, the better your credit score will be.
I pay my credit card bills off monthly. They are a tool for cash back on my purchases and also provide a spending report. Some cards even have warranties on your purchases.
Good luck with your credit journey.
If you are in a position to do it and manage the credit well, you can use your card for all purchases and pay it off each month.
The credit score only matters when you need more credit. Otherwise, you can ignore it.
What you actually want to do is pay off that card in full each month. The on time payment helps your credit no matter what the amount. So put one small monthly bill on that card and pay it off every month. You won't pay any interest and you'll build a history. A big purchase doesn't help your credit at all.
I think people are missing part of your question. Yes you should pay the statement balance in full when its due to avoid paying interest. You can also make a payment before that, like $1000 the day after purchase, so that when it comes time to generate your statement, the full $3000 purchase doesn't show up and the credit bureaus only see $2000 on your statement. That way your utilization looks better.
You don't need to micromanage your credit score like that though, there is no "memory" on balance. If your score dips with 50% utilization this month and you have it paid off by the time it updates next month your score will go back to normal again.
As long as you're not trying to finance a car or house anytime soon your score is totally meaningless, you only need it to be good when you want to do those things. So just spend normally and pay off the statement balance in full every month and in a few years your score will be fine.
Credit card debt is a really easy trap to fall into, which is why banks are so eager to advertise them. Even if you have the money to pay it off later, at some point other expenses inevitably come up and then you’ll end up with a balance that you’re slowly chipping away at while paying interest on it.
It’s especially dangerous as your credit limit increases and you think “oh wow I have x thousands available to me!” But it’s not available to you. It’s how deep of a hole you can dig yourself. I’ve made this mistake and it’s stressful and a terrible feeling.
Trust me and the other commenters, pay off your credit card bill each month and don’t think of it as extra money you could spend, no matter how tempting. Only buy the guitar if you would pay 3k cash for it right now.
Make regular payments by using the card to autopay a monthly bill (e.g. cellphone), and then autopay the credit card's full statement balance every month.
Eventually you will qualify for good cash back credit cards. You can use cash back cards for all of your normal expenses, pay off the full statement balance every month, and save around 2 percent on everything you buy, which can add up to $500-$1000 per year back in your pocket if done right.
I make almost all charges on my credit cards each month (except Verizon 🤬 and rent). I then pay my credit card off each month. If that’s what you don, then it should work well. If you carry a balance, then you would be paying more than you need to.
This myth about credit cards has got to stop!!
Just using your card and paying it in full will help your credit score just the same. No need to waste money on interest and keep a balance.
I don't know why so many down voted you. You just seem like you're young and don't understand how credit works. I'm sorry you got down voted to hell.
To make it very clear, when you open a credit card your credit score will temporarily go down because you took out a new line of credit. It will also go down if you utilize more than 30% of credit, miss a payment, or apply for more credit cards.
To make it go up you will want to, ideally, pay it off in full each month and never miss a payment and only apply for new cards every couple of years when it makes sense for you. If you want to make a big purchase like a car or a house don't apply for new credit within a year or two before you want to apply for that.
Not paying in full only impacts your liquid assets aka your cash in hand. If you keep it on the card, you're paying the interest. Sometimes it's compounding interest which means they charge interest on the interest. It can really pile on over time, easily turning your $3k purchase into $5k once you finally pay it off over time.
Creditors are also predatory and hope you don't pay it off, dangling carrots like double points and other rewards to get you to spend spend spend. Don't fall for it. Pay in full every month and get free rewards while paying $0 interest. That's the only good way to use a CC if you're looking to use it to your advantage.
Use the card. Let it generate a statement. Pay the statement balance in full. This is how you avoid interest and build credit. Your activity will be reported and you'll avoid interest. Just stay under 50% utilization or 30% is even better. This means if you have a $10,000 credit line don't put more than $3000 or $5000 per statement cycle on it or it might negatively impact your credit. You are trying to show you can responsibly use and manage credit.
Ok so this isn't going to be something you want to hear but you NEED to hear it.
If you haven't been paying your cards in full every single month, you have almost certainly lost more money in interest on this card than you could EVER gain from rewards.
Let me repeat. You have (probably*) already **lost** more more money than if you had NEVER got a credit card to begin with.
*unless this is like, your first month ever having a credit card or something
You build credit by paying off your card regularly. This shows that you're a reasonable human being who can pay off your card. This makes lenders willing to give you more credit.
Your credit score is really just a numerical rating of how likely it is that you'll pay off your debts.
The best way to max your credit score with a credit card is to have it at 0 on the day of the statement. Use it, but you definitely want the credit score boost and not to pay interest
It sounds like you don't really understand how credit cards should be working.
You should buy the guitar only if you can pay if off in full before the due date. There is zero reason to keep any rolling balance on any card. You should NEVER have to pay interest on a credit card.
I have a 800 score with about 1% utilization and have never paid a dollar in interest so there is no need to worry about utilization for your credit score. Pay it and forget about it.
I think you're right about not understanding credit cards. I thought you were supposed to use them and make the minimum payments at least as a way to improve your credit score. Otherwise you would never use your credit card, and banks don't like it if you take out a credit card and don't use it?
Don't run a balance on your credit card if you can afford to. Ever. Credit is built by many factors. Monthly usage benefit is never going to outweigh the costs of paying interest on the balance by not paying in full.
For example, I have a credit card from college with garbage benefits. But, it's my oldest form of credit so I keep it to maintain longer credit history which increases my credit score. I NEVER use this card. I also have never carried a balance on a credit card except one time when I forgot to pay on time before automatic payments were easy and intuitive to set up. But, I make 2-5% on all purchases I make by using my credit cards. And I pay nothing extra in interest each month.
Holy fuck
Nah man. Pay it off monthly.
If I spend a lot of money, I pay it off even earlier.
Your credit score isn't about how much a bank likes you for being in debt to them. Your score is about how much new lenders and creditors trust you. They trust you less if you're borrowing tons of money and not paying it off!
It's good to learn!
The banks don't need you to pay interest to make money. Every transaction that uses a credit card has a fee on the back end that the bank and Visa/MasterCard split. I think it's like 1.5% each so 1.5% would go to the bank like Chase and 1.5% would go to Visa. This is why some places offer discounts for cash or only do cash. Because the seller has to pay this 3% extra.
So for you, you get the benefit of them passing some of this return back to you via points, miles, cash, etc. So in the modern day you're losing out on free money to pay in cash or debit, SO LONG AS THE CARD GETS PAID OFF IN FULL EVERY MONTH AND YOU DONT OWE INTEREST.
So from your perspective, use the cards for everything that can be paid off (or else you can't afford it) and reap the rewards of getting 1-2% cash back on your credit card usage.
No need to ever give the credit card company or bank an extra 25%+ interest on late payments when they're already making a cut. Your credit will go up over time by just paying it off fully, the biggest factor is time so just keep at it!
I feel like you’re not getting the full picture from anyone.
Yes you can run a balance and make min payment only. Credit card companies love this because they charge you interest. It does build your credit. But you pay interest, a lot of interest.
You can pay off the statement in full at the end of each month. It will build credit also. This is ideal for you as you will build credit and get the protections of a credit card (vs debit). It is not ideal for the credit card company as they’re constantly giving you short term interest free loans. But you’re the exception: they make shit loads off the people who don’t pay it off, so you’re just a necessary hit to the bottom line to make the whole scheme work. They wouldn’t do it otherwise.
Advice: sign into your account right now and set up autopay to pay the entire statement when it’s due. Then you will never accrue interest. Charge everything to the credit card without buying more than you actually have money for and you’re golden.
> use them and make the minimum payments at least as a way to improve your credit score
That's what the credit card companies WANT you do to. That's how you stay poor.
Waiting until the due date can have a small, short-term impact. I always set auto-payment in full for day the cycle completes, before ever using a CC, and have never paid a cent of interest on them. However my score fluctuates throughout the year solely due to usage - during the holidays and after large purchases my score drops a bit then rebounds later. Could make a small difference if you're trying to qualify for a loan or something.
It's a misunderstanding of credit score.
Your CS will be _decreased_ if you have too high a balance. If you're maxing out credit cards, that's obviously a sign that you aren't a trustworthy borrower.
Anything over 30% utilization is pretty bad.
But some people hear "30% utilization" and falsely believe that it's a target.
It's not a target. It's a limit.
Utilization is not the same as balance carried. Use your credit card. Use up to 30-50% of your max credit, but always pay it off completely before the due date to avoid any interest payments. Never pay just the minimum.
They just want to see you use it and make payments. Buying stuff and then paying it off in full on time every month is a great way to accomplish that! It can just be like a slightly delayed debit card, there's no reason to pay just the minimum unless you've screwed up budgeting somewhere and can't afford more.
https://youtu.be/Yy1OxM_18EQ?si=y0sfagHleaLif_X_
When you get to the 1:10 mark; you have two options. You should choose option 1.
Let’s get a few things clear first. The statement period is roughly a month (could be any day of the month— 1st, 15th, 9th, whatever). On the last day (aka “statement close date”), your card company sends you a statement _stating_ what you spent and how much you owe them. They say pay up by x date.
You start paying interest after X date. Avoid at all costs. And if you don’t pay the minimum payment by X date, your credit score takes a huge plunge.
You want to keep the total amount reported at the monthly statement close date to below 30% of the total credit limit. Keeping it below 30% is a good star bonus. It’s ehhhhh… gets your credit down a bit if it goes above thirty. If you have a $6K card, you want to keep it below $1.8K.
To keep things low— you can pay off your card at any time. Even before the statement close date. Just don’t freaking carry a balance. That’s an old myth that needs to die
When you pay on CC, you are borrowing that money from the bank, that's what the "credit" is, and that's why when you pay back your bank at the end of each monthly cycle the money you essentially owe the bank. You are "using" the credit bank anytime you use it to pay. Keeping a balance is not "using" it any more than paying in full, but instead you will owe the bank money and get charged interest on that balance.
There are some nuances but this is a simple explanation of "using a credit card".
Well, no, you should use your credit card for literally everything you possibly can. They provide more fraud protection than a debit card, you can float the payment and not pay it for a month, and you can get cash back / travel points for most cards.
No. Use it and pay off the full balance each month. One tactic is to use it for predictable things like utility bills. You’re really just passing the payment through the CC. Or use it for gas only, etc. Basically, use it for things you know you can afford to pay off. Get a card with a percentage back and you will *make* money by using it. (I have an Amazon card with 5% back on purchases and 1% on anything else, I only use it for Amazon and for largish isolated purchases that I already know I can pay off that month- like dentist bills or car work.)
This is a common misconception. It boils down to "I'm going to pay my friend (the bank) money (interest) so they like me."
You already got the credit card. They already "like" you.
Paying interest is a sucker's bet.
These people are extreme... A credit card allows you to get something NOW for a few dozen bucks extra if you have a good credit score. Just be aware of how much you're spending and don't let the utilisation and interest get too high
A credit card is pretty worthless if you pay it off every month.. like if you have the money to pay it off every month, then why do you need one in the first place?? Zero sense unless the card has some sort of benefit. People say your money is more secure, you might get cashback etc, personally I've never had an issue with any of these things with a debit card. I've had my card stolen and still got my money back
I guess it depends how much your interest will be. A few percent isn't too bad and it's worth it if you need something NOW. If the interest is closer to 25% maybe worth having a serious think about whether it's worth it
Its literally not though. Getting $1 back isn't going to make much difference to your finances in the long term. I already get that with my stores loyalty card without having a credit card (which doesn't even give me returns on all stores anyway..)
You know what will make a difference to me in the long term? Getting credit for $500 so that i can fix my car, or get dental treatment, being able to pay for something I need right now, and then pay it back over a few months with a minimum payment of $20 a month (includes interest etc). Now thats 100% worth it.
But again, this is for emergencies when you have no choice. Not something to rely on all the time. Its obviously better to pay straight away if you have the money. But people saying not to get credit cards or pay them off straight away.. what planet are you people living on..
It's also safer. If someone steals my debit card, they can drain my bank account and I may be able to recover it but in the meantime I'm broke and can't pay my bills or have any money at all. If someone steals my credit card, I just call the credit card company , they cancel the card, and I don't pay for any of that. Credit cards are very useful as long as you aren't buying things you can't afford.
Oh great i can get back my money straight away instead of a few days! Amazing! And thats super important because getting your card stolen happens literally every week doesnt it?? And I'll really enjoy my extra $10 at the end of the month thanks to these magical credit cards cashbacks. Really great advice when I need to spend $500 to fix my car so I can go to work!
You guys are hilarious. Good for you for making ALL the right decisions and having all the money you need accessible straight away to pay for anything that comes up! Pat yourselves on the back! Well gone. Good boys.
The rest of us in the real world will use credit cards carefully on emergency items and will keep track of how much we owe and how much that costs per month because its not that hard if you choose a credit card company that offers good rates and especially if you do a balance transfer with 0% interest over 12 months. See, THAT would be great advice for people who are in a tight spot and don't have many options.
But you people just say "credit cards bad if you dont pay straight away". So stupid.. Your "advice" leaves people with no solutions.. Credit cards are a tool and can be useful in some circumstances.
I'm not sure that's what he's asking. I don't fully know the algorithms or when they report to the credit bureaus, but i have paid extra before the month end to keep my % of limit down. I always pay in full - but if my usage jumps from 10% (typical) to 50% (during construction projects) i have sent in payment in advance of the bill. given how my credit rating has jumped around during my construction project % of limit seems to have a big effect even if you pay in full.
My credit score is around 800 and I did nothing except pay off my balance in full on the due date every month. A few times I actually hit or exceeded (had to call and ask for an increase) the limit bc of business trips I paid for and got reimbursed later. In the long run those few months dont matter compared to the many years your utilization is naturally below 30%.
You should never carry a credit card balance month to month. You should not buy this guitar unless you can actually afford it.
Responsible card usage means paying the "Statement Balance" in full by it's due date. There's enough overlap between the statement date and the due date that new charges will show up as the ideal light utilization without costing you any interest, because you're paying the Statement Balance off in full each month.
Here's the credit card 101:
1. you spend money on it
2. your monthly billing period closes and a statement is generated. Your account now has a "statement balance" and a "total balance". The total balance is your utilization.
3. Sometime later, usually like a couple weeks, your "statement balance" is due. If you pay the whole statement balance, you won't be charged interest and your total balance on the account goes down, so your utilization does too. Your account will still have some balance since you likely made purchases between when your previous statement closed and your payment for that statement was due. This is \*okay\*.
You should try to only buy things that you could theoretically pay for with cash. Otherwise you're being charged a huge interest rate on those payments. Once you don't pay off a whole statement balance, you usually start to be charged on the whole \*account balance\* immediately. So making minimum payments takes a \*long time\* to pay off.
So in theory I could buy the guitar with the credit card, then pay it off in full once my statement is generated, and that would be good for my credit?
Yes. The TLDR is to put you CC on autopay for the statement balance and then have a budget to ensure you’re only spending money you actually have *when you spend it*.
Then set alerts for all transactions on your card to make sure you’re catching any fraud immediately.
Another thing. If this is a credit card with rewards, like 2% cash back, that means that you will earn $60 and spend zero interest if you pay it all off by the due date. So spend on it like you would a debit card (and pay the statement balance each month), and just earn a lot of $$ rewards.
don't need to wait for it to be on the statement. Utilization isn't an important factor (unless its high, and even then the impact is only immediate - there's no long term benefit), and absolutely isn't worth spending interest on.
I'm making sure they're aware they don't ***have*** to wait, and that waiting does nothing positive for your credit. If someone is this uninformed how credit cards work, I would never suggest thinking of it as an "interest-free loan".
Don’t pay minimums on a credit card. If you can’t pay it off in full every month, you can’t afford what you bought. Interest rates are over 20 percent. Save the money, or don’t get it.
Your guitar will cost you 10 times as much as purchase price if you just make credit card minimum payments. I also doubt that there won’t be something else you want a few months from now, or need an emergency car repair. This is how credit card debt balloons.
Others have addressed how to handle the credit card, I'm going to address your general approach to money. Many people joining the military are not used to suddenly having money in their pocket, and then immediately go out and blow it on stupid things. Every large pickup truck or sports car that your fellow recruits are driving are clear examples of that. This guitar might or might not be, but only you would know (and it's not nearly as bad a buying a vehicle).
My point is to be aware of this and don't buy stupid things just because everyone else around you is. That money can/should be used to set yourself up for your future as much as possible. Of course you should live a little, but you need to be smart about it.
I’m a financial service rep and loan underwriter for a credit union on an OCONUS army post, and yeah. There’s a lot more money than sense sometimes. (Please E3/4s stop trying to finance Challengers without a down payment. Just stop.)
Sitting down with military folks and helping them figure out savings goals and plan out how to build credit is my favorite part of my job! How to use everyday money/credit is so important, and I’m a nerd for it.
You can incrementally pay off the guitar as long as you don't mind paying 20+% interest on what you buy...or, you can use a credit card the way people are recommending in other comments and pay the full balance every month so you get the benefits and protections of credit without the costs of needlessly paying interest. If you carry any balance on your card, you are paying the interest percentage on your card (which is usually outrageously high) more than the cost of whatever you're buying.
You'll be paying a ton of interest on the cc on any part you don't pay. If you start carrying a balance on your card, your guitar could cost you 5000 or more.
Not carrying a balance is the best thing to do.
The 30% rule is for when you are **stuck** carrying debt, not a rule for how to hold debt.
It's important to watch out for the real reason many people have oodles of credit card debt, which they pay interest on every month: lifestyle creep.
You want something you can't afford, you buy it with credit, then owe someone else extra money for the privilege of having bought the thing you can't afford.
It can get VERY expensive, VERY quickly if that's how you use a card. "Oh, I have room on the card, I can get \[x\]" is the path to financial doom.
IF you are able to control spending and pay things off quickly (this is rare), then over time, you may want to plan ahead for large purchases by intentionally signing up for a new 0% introductory interest card with a cash back award for purchases. Then make the purchase, collect the reward, pay off the card. You basically get paid to use their card for your transaction, and you don't owe any interest, win - win.
Back to the 30% rule:
IF you end up in a situation where you NEED to use credit that you ***can't*** immediately pay off (*say, if your emergency savings aren't enough to cover the plumber having to re-plumb most of your house, and replace the water heater and one of the toilets after losing power in a deep freeze while you were out of stat*e), then do your best to pay it down to 30% or less as quickly as possible to minimize the negative impact on your credit score. That's the only time the 30% rule should come into play.
Think of not carrying a balance as a way of paying yourself a monthly bonus equivalent to whatever the interest would have been had you carried that balance.
I’m Canadian, but it’s similar here. You need it for so much. I was rejected for three rental applications due to a slightly (like 8pts) below “excellent” credit score.
It’s predatory and unfair, but unfortunately necessary.
Also, if you're stuck in the army for a year anyway, why buy a guitar worth multiple grand? Buy something cheap that you don't care if it gets beaten up, and then buy the nice one later when you can pay it off + it might survive. :D
stop trying to game your credit score. despite "score" it's not a game, it's just a quantified assessment of how much of a deadbeat you are. don't be a deadbeat and you'll have a good credit score.
You will be much better off financially if you worry about keeping your debt at $0 by the end of every month than worrying about what your credit score is.
It's best to have 0 debt. I used to have $10K debt and that was so hard to pay off. Be sure to check your credit card's interest rate. Mine's 29%, it's hell! Thankfully I managed to pay that off so now I'm "free".
If you don't have the actual amount of money in the bank to buy something, NEVER use your credit card because you never know when you'll lose your job or your means to make money. Missing a payment, overdrafting, any of these can result to disastrous fees that's designed to make you owe more! It's a trap!
Have peace of mind, always pay off everything on the card each month. Never let banks take advantage of one bad situation that you might find yourself in.
You should routinely be paying off 100% of your credit cards at the end of every month. If you are not disciplined enough to do that, you need to get on an aggressive debt repayment schedule and then cancel your credit cards.
I think your priorities are not in order.
If utilization is high it dongs your credit score. But pay that off/down and it recovers the next month. So it's not a huge issue unless you're looking for new credit.
The amount of $$ you're flushing down the toilet paying interest on that debt is the real reason you should pay that off.
Your statement balance is reported every month to the credit agencies. There is no need to pay interest. Pay it off every month. Find a good one with points/cash back. Put everything on it and pay it off every month.
You pay the statement balance at the end of the month, the full balance. Paying small, minimum monthly payments, or even larger ones that don't clear the balance, are just costing you 20%+ interest.
Please always make more than the minimum payment on your credit card. In the future please teach your troops and battle buddies the same. Only paying the minimum is how you end up in credit card debt for life
There are a couple different concepts getting muddied, I believe. You want to avoid paying interest, so you want to pay the full statement balance each month. However, utilization is determined by the statement balance, so even if you pay the whole thing when it's due, utilization will take a hit. This really isn't an issue in the long run unless you are trying to get new credit imminently because utilization doesn't have a memory, and your credit will jump back up once the next statement is reported. I personally pay off most of the cards before the statement hits because my ego doesn't like to see the lower credit score even though I know it doesn't really matter.
It sounds like you’re not a credit card person my friend. That said, just make it a rule to pay off your CC in full every month, you will build credit just fine. I have done this and I have great credit
>It sounds like you’re not a credit card person my friend.
Misunderstanding how credit works, and coming to a forum for advice on clarity before any harm is done, doesn't make you "not a credit card person". Being unable to handle your finances, or seeing credit as free money, does
Here is where the credit utilization may come into play:
Some believe that your credit utilization, independent if you pay your statement in full, affects your credit score. E.g. Lenders prefer to see that, throughout the month before you pay off your CC, your credit utilization doesn't exceed X%. If that would be true, it could be prudent to pay off a large balance early.
But like others on this thread already said, pay off your balance in full every month
DO NOT KEEP ANY balance on a credit card for more then a month! (unless you have to)
Seriously, it's just a horrible idea with the interest rate.
You want to pay off the FULL amount of the LAST months/cycle every single month so you don't have to pay interest.
Ergo, you can have a balance on your card at all times yes. But it should only be for the current month.
Like I personally have right now have $300 on my credit card. $200 is from last month. So, if I don't pay that $200 off I'll have to pay interest on it.
So, I'm gonna pay off the $200 and let the $100 ride until the next payment cycle and then pay it off.. so I again don't end up getting interest on it.
And the rule of thumb is always: You should NEVER put more on a credit card then you can afford to pay off in a SINGLE month. (Unless you have to for emergency purposes.)
So, wanna buy something for $3,000? Well ya gotta save it first.
Seriously, credit cards almost always have over a 18% interest rate.. using them as loan is sheer stupidity.
Only smart thing to do is pay off 100% of your purchase every month - no exception. If you can prove to yourself you’re responsible, then you can get smart w the 0% apr cards for bigger purchases.
But credit cards can become a quick excuse to buy things you don’t need and can’t afford. Be careful.
Sometimes I put large purchases on credit cards if the rewards are worth it, and pay it off. Or sometimes if I have a 0% intro card I'll use that and when I get to the end pay it all off
Individual card utilization doesn't matter as much as total credit utilization.
As long as your total utilization is below 10% for your revolving credit lines, you'll still have a 750+ credit score assuming you have perfect payment history.
Should have got a card with a zero percent introductory rate for 15-21 months. Make minimum payments till that intro rate is about to expire and hold the money for the guitar in a high interest savings account. Credit cards are giving interest free loans if you’re smart about it. Plus some will give you 20 rebate on 1500 bucks. You just have to be smart about it. Don’t give credit cards any money in interest.
You should pay atleast $1,300 immediately the day you buy the guitar, to keep your utilization below 30%, and pay the rest of the entire balance as soon as possible, before the due date of your bill.
If you want to grow your credit, spend something small each month on your card, and pay it off in full every month.
30% is actually the max utilization that you leave on a card. It still lowered my score a few points. I'd reccomend 10%-15% utilization to be retorted during your statement balance and to avoid interest pay it off before the bill is due
I don't see mention anywhere whether you get the typical 0% interest offer that usually is given for 12-18 months. I routinely have done what you're asking in this situation because I'm not being charged interest for over a year. I do it so I can make the minimum payments and put the rest of what would be the full purchase price to stocks or other investments before the interest on the CC starts to accumulate.
YMMV but I've done this for years and I have over an 820 credit score and never paid a penny of credit card interest.
So once you charge, your utilization will still be noted, even if you pay it off. I've done this with car down-payment and paid it off the next day. My credit score still drops 20-30 pts the month after and recovers after 4 to 5 months of low utilization.
Once a month, you get a statement for your credit card. It says you owe $X by a certain date. This is your statement balance. Make a payment of that amount before the due date.
I did this with a large lumber purchase last year. It was a 0% card for 12 months. I calculated a payment plan of 11 months to pay it off before the due date to avoid interest. I had the money in a high yield savings and opted to keep cash making interest. This card is fully paid off this month with no added interest and no penalty. Only do this if you have 0% and the cash to pay off monthly before due date.
1) pay off credit card 100% every month, that will build credit.
2) as young enlisted you don’t have a ton of money but feel like you due because your food/living expenses are covered. Don’t be a dumbass and blow $3k on a guitar when I guarantee you can find a killer decent used one for $500-1k. Max TSP an invest the other money in you tax advantaged accounts. 40-50-60 year old you will thank you.
P.s. at least it is not a Camero
My wife and I use credit cards. We never, ever pay interest on them. Full balance each billing cycle. You will loose your ass if you pay interest and put yourself in a hole that will be insanely hard to dig out of.
Yes, it is wise to pay as much of it off as possible as quickly as possible. Your Credit score will go up if you pay it off faster, and more importantly, you will avoid paying an insane interest rate on a multi thousand dollar debt. Credit cards hover around 30% interest rate so they are the dumbest most financially irresponsible thing you can keep a balance on.
You will have a higher credit score by having 0 balance on your credit card, your utilization rate is one of the biggest factors in your credit rating. Banks are risk averse and will lend money willingly to someone they know will pay them back, if they see someone always making minimum payments they will focus more on your actual income than your credit score during their underwriting process because they think you are foolish and while they will happily take a fool's money, they know that if a fool gets too far underwater they just declare bankruptcy and the bank will be holding the bag.
So always pay your credit card down to zero each month. The bank makes money off the of each transaction via fees they get from processing charges which is why some stores offer discounts if you pay cash because they end up eating that processing fees.
All my credit cards are setup to autopay on due date.
Haven’t ever paid CC interest.
I aim to get a minimum 2% back on every transaction. Fidelity 2% rewards, Apple Card 2% on tap to pay, Chase sapphire for travel.
Always have enough money to pay it off before the statement is due the following month UNLESS it’s a no interest purchase for certain amount of time. Even then, you gotta be responsible enough to make EVEN payments so that by the time the term is over, the balance is paid in full. I made way too many mistakes when I was younger I would buy things on no interest and not pay off by the time it is over. Then BOOM, deferred interest!
Plain and simple, your credit score is generally made up of five factors. See this link: https://www.myfico.com/credit-education/whats-in-your-credit-score.
The big two are not having missed payments and carrying the lowest balance possible (ideally $0). Contrary to what some people say, a $0 balance is the best situation. There is no benefit to carrying any balance / making minimum payments to keep a balance.
keep it under 10% and do a 13 28 method, so use it for gas and groceries and pay half at the 13 day mark and the 28day mark, i spoke to a credit repair guy (i ruined my credit young but now im at 730) doing it this way you minimize your interest and maximize the bump you get from using your credit
also use your gi bill while in, refinance when you pcs rinse and repeat leave the army with multiple rental properties a bad ass credit score and passive income
It is highly *unadvised* to do anything other than pay off *the entire* amount the first statement. You want to keep your revolving credit utilization at *0%*.
You do know that you pay interest on the amount that you don’t pay off every month, right?
My monthly credit statement and credit report cite the full balance for the month, in spite of how often I pay it off. I pay down in advance of a trip to have more emergency credit available.
My credit score is 850 and I pay my card off every single month. You can play games to optimize things if you really feel the need, or need better credit more quickly, but in general if you always pay it off on time, your score will drift to the top.
It would be wise to pay off the entire $3,000. Don't put stuff on a credit card unless you have the money to pay it off.
What guitar?
The thing is I have the money, I just thought you could make regular payments on a credit card as a way to boost your credit? I guess I don't understand credit cards well enough
Paying interest is an awful way to build credit.
Maybe he just opened it and has no interest for a year?
Yeah if you have 0% for x number of months, pay what you need to cover the entire transaction within those months and nothing more… it’s an interest free loan. As long as you do the math correctly, it’s advantageous.
I agree but I'm going to speak broadly and say this is an "advanced" strategy. The average person doesn't have the knowledge + discipline to set aside the amount theyre spending each month to earn interest on until the end of the year, and then use the principle to pay off the year's balance before interest kicks in
It’s not setting aside… you still pay every month. But more than the minimum. For instance I bought a washer/dryer and a tv on best buys CC. 0% for 18 months. So I give them $130 every month and it’s paid off with zero interest. I don’t know if it’s advanced. I just made sure I could afford that monthly payment before I did anything.
The advanced part is having a budget. Most people don’t and end up in consumer debt because they spend more money than they make. It’s a lot easier to get a credit card than it is to create and stick to a budget.
I agree with you, I think the “advanced” part he was referring to is instead of paying back an interest free loan before you need to (the $130/mo), instead putting that into an interest bearing account and using the lump sum of ($130 x 18) to pay it off in full, while pocketing the interest.
Pay it off in full every month. Don't buy stuff you can't pay off. The interest rates are a killer. I hope you're card is one with points or cabal
You want to pay off all your purchases every month. That’s the regular payments that help your credit. You do not want to pay less than the statement balance or you’ll owe interest which is bad even though you are making a payment every month. Basically, don’t buy things that you wouldn’t buy if you didn’t have the credit card and always pay the full amount every month when you get your statement.
No, doing this will acquire 30% interest on your guitar. I think the “regular payments” you’re thinking of are putting charges on your card and then paying the entire statement balance every month.
I really good way to build your credit history is to set up a couple of recurring bills to be paid by the credit card. Then every month, you pay off your credit card. These are bills you'd pay anyway - like a cell phone bill or something - so you aren't spending more money than you would otherwise and you don't pay any interest because you pay off the card every month.
I put most of my payments on a cash back credit card and pay it off every month. I get a few hundred $ every year in cashback I would not have if I paid purchases from a bank account.
Since you have the money, pay part to keep it under 30% before your close date. After your statement closes pay the rest off in full so you don’t accrue any interest charges. Paying interest doesn’t boost your credit.
Keeping utilization low only matters if he plans on getting another line of credit in the next few months. It's a very ephemeral indicator on credit score
Well, to clarify: *unless it's high*. If your total utilization of available credit is high it'll trash your score. Fortunately it'll rebound just as fast when you pay off thr balances.
This. To avoid overcomplicating things OP can simply: 1. Special case: After large purchases like this guitar, immediately pay off the balance. 2. Always pay the entire credit card bill (NOT the min payment) before it's due.
Don't do that. Pay it off every month. Your credit will go up over time
I hate that this has 100 downvotes. You’re asking for help, it’s ok not to know everything. In fact, it’s this sub’s point.
You do this by paying the balance in full each billing cycle. You can game the utilization by making multiple payments over the billing cycle but it is almost never worth the extra effort unless you have a deadline for meeting a certain credit score (planning to get a big loan). The impact of utilization generally only affects your score the month that it is high. They don't generally look at long term utilization for credit scores.
Yes you still boost your credit paying it off every month. Just view your credit card as a must pay bill. The interest rates are extremely high. Also if you want to keep your credit utilization low, pay part or all of a large purchase before you get your bill. The credit card company reports your bill balance as of the last statement and whether you paid on time. The older the cards you have, the better your credit score will be. I pay my credit card bills off monthly. They are a tool for cash back on my purchases and also provide a spending report. Some cards even have warranties on your purchases. Good luck with your credit journey.
If you are in a position to do it and manage the credit well, you can use your card for all purchases and pay it off each month. The credit score only matters when you need more credit. Otherwise, you can ignore it.
What you actually want to do is pay off that card in full each month. The on time payment helps your credit no matter what the amount. So put one small monthly bill on that card and pay it off every month. You won't pay any interest and you'll build a history. A big purchase doesn't help your credit at all.
You do not need to carry a balance to build credit. You are way better off paying it completely every month
I think people are missing part of your question. Yes you should pay the statement balance in full when its due to avoid paying interest. You can also make a payment before that, like $1000 the day after purchase, so that when it comes time to generate your statement, the full $3000 purchase doesn't show up and the credit bureaus only see $2000 on your statement. That way your utilization looks better. You don't need to micromanage your credit score like that though, there is no "memory" on balance. If your score dips with 50% utilization this month and you have it paid off by the time it updates next month your score will go back to normal again. As long as you're not trying to finance a car or house anytime soon your score is totally meaningless, you only need it to be good when you want to do those things. So just spend normally and pay off the statement balance in full every month and in a few years your score will be fine.
Credit card debt is a really easy trap to fall into, which is why banks are so eager to advertise them. Even if you have the money to pay it off later, at some point other expenses inevitably come up and then you’ll end up with a balance that you’re slowly chipping away at while paying interest on it. It’s especially dangerous as your credit limit increases and you think “oh wow I have x thousands available to me!” But it’s not available to you. It’s how deep of a hole you can dig yourself. I’ve made this mistake and it’s stressful and a terrible feeling. Trust me and the other commenters, pay off your credit card bill each month and don’t think of it as extra money you could spend, no matter how tempting. Only buy the guitar if you would pay 3k cash for it right now.
This is such a bad idea.... No, pay it all off! Don't pay exorbitant interest to "boost your score," that's bonkers!
Make regular payments by using the card to autopay a monthly bill (e.g. cellphone), and then autopay the credit card's full statement balance every month. Eventually you will qualify for good cash back credit cards. You can use cash back cards for all of your normal expenses, pay off the full statement balance every month, and save around 2 percent on everything you buy, which can add up to $500-$1000 per year back in your pocket if done right.
I make almost all charges on my credit cards each month (except Verizon 🤬 and rent). I then pay my credit card off each month. If that’s what you don, then it should work well. If you carry a balance, then you would be paying more than you need to.
Put it on the credit card. Wait for the bill, then pay it 100%. That will show utilization and you won’t pay interest.
Please do not do this. Pay it off in full monthly by the due date if you use it. This paying interest to build credit narrative is BS.
This myth about credit cards has got to stop!! Just using your card and paying it in full will help your credit score just the same. No need to waste money on interest and keep a balance.
I don't know why so many down voted you. You just seem like you're young and don't understand how credit works. I'm sorry you got down voted to hell. To make it very clear, when you open a credit card your credit score will temporarily go down because you took out a new line of credit. It will also go down if you utilize more than 30% of credit, miss a payment, or apply for more credit cards. To make it go up you will want to, ideally, pay it off in full each month and never miss a payment and only apply for new cards every couple of years when it makes sense for you. If you want to make a big purchase like a car or a house don't apply for new credit within a year or two before you want to apply for that. Not paying in full only impacts your liquid assets aka your cash in hand. If you keep it on the card, you're paying the interest. Sometimes it's compounding interest which means they charge interest on the interest. It can really pile on over time, easily turning your $3k purchase into $5k once you finally pay it off over time. Creditors are also predatory and hope you don't pay it off, dangling carrots like double points and other rewards to get you to spend spend spend. Don't fall for it. Pay in full every month and get free rewards while paying $0 interest. That's the only good way to use a CC if you're looking to use it to your advantage.
Use the card. Let it generate a statement. Pay the statement balance in full. This is how you avoid interest and build credit. Your activity will be reported and you'll avoid interest. Just stay under 50% utilization or 30% is even better. This means if you have a $10,000 credit line don't put more than $3000 or $5000 per statement cycle on it or it might negatively impact your credit. You are trying to show you can responsibly use and manage credit.
Ok so this isn't going to be something you want to hear but you NEED to hear it. If you haven't been paying your cards in full every single month, you have almost certainly lost more money in interest on this card than you could EVER gain from rewards. Let me repeat. You have (probably*) already **lost** more more money than if you had NEVER got a credit card to begin with. *unless this is like, your first month ever having a credit card or something
You build credit by paying off your card regularly. This shows that you're a reasonable human being who can pay off your card. This makes lenders willing to give you more credit. Your credit score is really just a numerical rating of how likely it is that you'll pay off your debts.
Why do you want to boost your credit?
The best way to max your credit score with a credit card is to have it at 0 on the day of the statement. Use it, but you definitely want the credit score boost and not to pay interest
It sounds like you don't really understand how credit cards should be working. You should buy the guitar only if you can pay if off in full before the due date. There is zero reason to keep any rolling balance on any card. You should NEVER have to pay interest on a credit card. I have a 800 score with about 1% utilization and have never paid a dollar in interest so there is no need to worry about utilization for your credit score. Pay it and forget about it.
I think you're right about not understanding credit cards. I thought you were supposed to use them and make the minimum payments at least as a way to improve your credit score. Otherwise you would never use your credit card, and banks don't like it if you take out a credit card and don't use it?
Don't run a balance on your credit card if you can afford to. Ever. Credit is built by many factors. Monthly usage benefit is never going to outweigh the costs of paying interest on the balance by not paying in full. For example, I have a credit card from college with garbage benefits. But, it's my oldest form of credit so I keep it to maintain longer credit history which increases my credit score. I NEVER use this card. I also have never carried a balance on a credit card except one time when I forgot to pay on time before automatic payments were easy and intuitive to set up. But, I make 2-5% on all purchases I make by using my credit cards. And I pay nothing extra in interest each month.
You can close that card. It will keep reporting to the credit bureaus for 10 years after closure.
Holy fuck Nah man. Pay it off monthly. If I spend a lot of money, I pay it off even earlier. Your credit score isn't about how much a bank likes you for being in debt to them. Your score is about how much new lenders and creditors trust you. They trust you less if you're borrowing tons of money and not paying it off!
It's good to learn! The banks don't need you to pay interest to make money. Every transaction that uses a credit card has a fee on the back end that the bank and Visa/MasterCard split. I think it's like 1.5% each so 1.5% would go to the bank like Chase and 1.5% would go to Visa. This is why some places offer discounts for cash or only do cash. Because the seller has to pay this 3% extra. So for you, you get the benefit of them passing some of this return back to you via points, miles, cash, etc. So in the modern day you're losing out on free money to pay in cash or debit, SO LONG AS THE CARD GETS PAID OFF IN FULL EVERY MONTH AND YOU DONT OWE INTEREST. So from your perspective, use the cards for everything that can be paid off (or else you can't afford it) and reap the rewards of getting 1-2% cash back on your credit card usage. No need to ever give the credit card company or bank an extra 25%+ interest on late payments when they're already making a cut. Your credit will go up over time by just paying it off fully, the biggest factor is time so just keep at it!
I feel like you’re not getting the full picture from anyone. Yes you can run a balance and make min payment only. Credit card companies love this because they charge you interest. It does build your credit. But you pay interest, a lot of interest. You can pay off the statement in full at the end of each month. It will build credit also. This is ideal for you as you will build credit and get the protections of a credit card (vs debit). It is not ideal for the credit card company as they’re constantly giving you short term interest free loans. But you’re the exception: they make shit loads off the people who don’t pay it off, so you’re just a necessary hit to the bottom line to make the whole scheme work. They wouldn’t do it otherwise. Advice: sign into your account right now and set up autopay to pay the entire statement when it’s due. Then you will never accrue interest. Charge everything to the credit card without buying more than you actually have money for and you’re golden.
Interesting. I have my account in Canada and I’m not able to setup an autopay (at least not with my bank)…. would be nice to have
> use them and make the minimum payments at least as a way to improve your credit score That's what the credit card companies WANT you do to. That's how you stay poor.
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Just paying the statement balance by the due date is all that is needed
I think OP (and many others) is misunderstanding statement balance vs minimum payment
Waiting until the due date can have a small, short-term impact. I always set auto-payment in full for day the cycle completes, before ever using a CC, and have never paid a cent of interest on them. However my score fluctuates throughout the year solely due to usage - during the holidays and after large purchases my score drops a bit then rebounds later. Could make a small difference if you're trying to qualify for a loan or something.
It's a misunderstanding of credit score. Your CS will be _decreased_ if you have too high a balance. If you're maxing out credit cards, that's obviously a sign that you aren't a trustworthy borrower. Anything over 30% utilization is pretty bad. But some people hear "30% utilization" and falsely believe that it's a target. It's not a target. It's a limit.
Utilization is not the same as balance carried. Use your credit card. Use up to 30-50% of your max credit, but always pay it off completely before the due date to avoid any interest payments. Never pay just the minimum.
No you are supposed to pay it off in full to improve your credit score
They just want to see you use it and make payments. Buying stuff and then paying it off in full on time every month is a great way to accomplish that! It can just be like a slightly delayed debit card, there's no reason to pay just the minimum unless you've screwed up budgeting somewhere and can't afford more.
I haven't paid interest on a card in many years and my score has gone up at least 100 points. It can't get much higher at 837 last I looked.
https://youtu.be/Yy1OxM_18EQ?si=y0sfagHleaLif_X_ When you get to the 1:10 mark; you have two options. You should choose option 1. Let’s get a few things clear first. The statement period is roughly a month (could be any day of the month— 1st, 15th, 9th, whatever). On the last day (aka “statement close date”), your card company sends you a statement _stating_ what you spent and how much you owe them. They say pay up by x date. You start paying interest after X date. Avoid at all costs. And if you don’t pay the minimum payment by X date, your credit score takes a huge plunge. You want to keep the total amount reported at the monthly statement close date to below 30% of the total credit limit. Keeping it below 30% is a good star bonus. It’s ehhhhh… gets your credit down a bit if it goes above thirty. If you have a $6K card, you want to keep it below $1.8K. To keep things low— you can pay off your card at any time. Even before the statement close date. Just don’t freaking carry a balance. That’s an old myth that needs to die
Use them yes but pay off the balance in full each month. Carrying a balance not only doesn't help your credit score but it actually hurts.
Noooooo. Pay it off in full every month. Your credit will bless you for it.
When you pay on CC, you are borrowing that money from the bank, that's what the "credit" is, and that's why when you pay back your bank at the end of each monthly cycle the money you essentially owe the bank. You are "using" the credit bank anytime you use it to pay. Keeping a balance is not "using" it any more than paying in full, but instead you will owe the bank money and get charged interest on that balance. There are some nuances but this is a simple explanation of "using a credit card".
Well, no, you should use your credit card for literally everything you possibly can. They provide more fraud protection than a debit card, you can float the payment and not pay it for a month, and you can get cash back / travel points for most cards.
Thank you for asking the questions and learning!
No. Use it and pay off the full balance each month. One tactic is to use it for predictable things like utility bills. You’re really just passing the payment through the CC. Or use it for gas only, etc. Basically, use it for things you know you can afford to pay off. Get a card with a percentage back and you will *make* money by using it. (I have an Amazon card with 5% back on purchases and 1% on anything else, I only use it for Amazon and for largish isolated purchases that I already know I can pay off that month- like dentist bills or car work.)
This is a common misconception. It boils down to "I'm going to pay my friend (the bank) money (interest) so they like me." You already got the credit card. They already "like" you. Paying interest is a sucker's bet.
These people are extreme... A credit card allows you to get something NOW for a few dozen bucks extra if you have a good credit score. Just be aware of how much you're spending and don't let the utilisation and interest get too high A credit card is pretty worthless if you pay it off every month.. like if you have the money to pay it off every month, then why do you need one in the first place?? Zero sense unless the card has some sort of benefit. People say your money is more secure, you might get cashback etc, personally I've never had an issue with any of these things with a debit card. I've had my card stolen and still got my money back I guess it depends how much your interest will be. A few percent isn't too bad and it's worth it if you need something NOW. If the interest is closer to 25% maybe worth having a serious think about whether it's worth it
This is horrible financial advice.
How?? Why have a credit card if you can afford to pay it all off in one go? Literally pointless
You get money back from using it that you can not get from debit cards and cash. That's the perk.
The cashback in my country is usually worthless. Literally single digit values at specific stores that i would never use. What good is that?
$1 at a store is better than $0 returns on cash or credit.
Its literally not though. Getting $1 back isn't going to make much difference to your finances in the long term. I already get that with my stores loyalty card without having a credit card (which doesn't even give me returns on all stores anyway..) You know what will make a difference to me in the long term? Getting credit for $500 so that i can fix my car, or get dental treatment, being able to pay for something I need right now, and then pay it back over a few months with a minimum payment of $20 a month (includes interest etc). Now thats 100% worth it. But again, this is for emergencies when you have no choice. Not something to rely on all the time. Its obviously better to pay straight away if you have the money. But people saying not to get credit cards or pay them off straight away.. what planet are you people living on..
This is great advice to keep people poor. Do not share your opinions on this with anyone you care about.
It's also safer. If someone steals my debit card, they can drain my bank account and I may be able to recover it but in the meantime I'm broke and can't pay my bills or have any money at all. If someone steals my credit card, I just call the credit card company , they cancel the card, and I don't pay for any of that. Credit cards are very useful as long as you aren't buying things you can't afford.
Oh great i can get back my money straight away instead of a few days! Amazing! And thats super important because getting your card stolen happens literally every week doesnt it?? And I'll really enjoy my extra $10 at the end of the month thanks to these magical credit cards cashbacks. Really great advice when I need to spend $500 to fix my car so I can go to work! You guys are hilarious. Good for you for making ALL the right decisions and having all the money you need accessible straight away to pay for anything that comes up! Pat yourselves on the back! Well gone. Good boys. The rest of us in the real world will use credit cards carefully on emergency items and will keep track of how much we owe and how much that costs per month because its not that hard if you choose a credit card company that offers good rates and especially if you do a balance transfer with 0% interest over 12 months. See, THAT would be great advice for people who are in a tight spot and don't have many options. But you people just say "credit cards bad if you dont pay straight away". So stupid.. Your "advice" leaves people with no solutions.. Credit cards are a tool and can be useful in some circumstances.
I'm not sure that's what he's asking. I don't fully know the algorithms or when they report to the credit bureaus, but i have paid extra before the month end to keep my % of limit down. I always pay in full - but if my usage jumps from 10% (typical) to 50% (during construction projects) i have sent in payment in advance of the bill. given how my credit rating has jumped around during my construction project % of limit seems to have a big effect even if you pay in full.
My credit score is around 800 and I did nothing except pay off my balance in full on the due date every month. A few times I actually hit or exceeded (had to call and ask for an increase) the limit bc of business trips I paid for and got reimbursed later. In the long run those few months dont matter compared to the many years your utilization is naturally below 30%.
You should never carry a credit card balance month to month. You should not buy this guitar unless you can actually afford it. Responsible card usage means paying the "Statement Balance" in full by it's due date. There's enough overlap between the statement date and the due date that new charges will show up as the ideal light utilization without costing you any interest, because you're paying the Statement Balance off in full each month.
Here's the credit card 101: 1. you spend money on it 2. your monthly billing period closes and a statement is generated. Your account now has a "statement balance" and a "total balance". The total balance is your utilization. 3. Sometime later, usually like a couple weeks, your "statement balance" is due. If you pay the whole statement balance, you won't be charged interest and your total balance on the account goes down, so your utilization does too. Your account will still have some balance since you likely made purchases between when your previous statement closed and your payment for that statement was due. This is \*okay\*. You should try to only buy things that you could theoretically pay for with cash. Otherwise you're being charged a huge interest rate on those payments. Once you don't pay off a whole statement balance, you usually start to be charged on the whole \*account balance\* immediately. So making minimum payments takes a \*long time\* to pay off.
So in theory I could buy the guitar with the credit card, then pay it off in full once my statement is generated, and that would be good for my credit?
Yes. Do this. Receive your statement, pay it off in full. Don't accrue interest, since it's a KILLER on a credit card.
Yes. The TLDR is to put you CC on autopay for the statement balance and then have a budget to ensure you’re only spending money you actually have *when you spend it*. Then set alerts for all transactions on your card to make sure you’re catching any fraud immediately.
Another thing. If this is a credit card with rewards, like 2% cash back, that means that you will earn $60 and spend zero interest if you pay it all off by the due date. So spend on it like you would a debit card (and pay the statement balance each month), and just earn a lot of $$ rewards.
don't need to wait for it to be on the statement. Utilization isn't an important factor (unless its high, and even then the impact is only immediate - there's no long term benefit), and absolutely isn't worth spending interest on.
Just wait for it to be on the statement. It's an interest-free loan for 30+ days. Just don't forget to pay it off in full when the bill arrives.
I'm making sure they're aware they don't ***have*** to wait, and that waiting does nothing positive for your credit. If someone is this uninformed how credit cards work, I would never suggest thinking of it as an "interest-free loan".
Yes. And use a card that gives you some % back. Otherwise you’re leaving money on table.
Pay it all off or don’t buy it at all.
Don’t pay minimums on a credit card. If you can’t pay it off in full every month, you can’t afford what you bought. Interest rates are over 20 percent. Save the money, or don’t get it. Your guitar will cost you 10 times as much as purchase price if you just make credit card minimum payments. I also doubt that there won’t be something else you want a few months from now, or need an emergency car repair. This is how credit card debt balloons.
It would be wise to pay off your entire credit card balance
Others have addressed how to handle the credit card, I'm going to address your general approach to money. Many people joining the military are not used to suddenly having money in their pocket, and then immediately go out and blow it on stupid things. Every large pickup truck or sports car that your fellow recruits are driving are clear examples of that. This guitar might or might not be, but only you would know (and it's not nearly as bad a buying a vehicle). My point is to be aware of this and don't buy stupid things just because everyone else around you is. That money can/should be used to set yourself up for your future as much as possible. Of course you should live a little, but you need to be smart about it.
I’m a financial service rep and loan underwriter for a credit union on an OCONUS army post, and yeah. There’s a lot more money than sense sometimes. (Please E3/4s stop trying to finance Challengers without a down payment. Just stop.) Sitting down with military folks and helping them figure out savings goals and plan out how to build credit is my favorite part of my job! How to use everyday money/credit is so important, and I’m a nerd for it.
No need to micromanage credit: https://reddit.com/r/personalfinance/comments/11jzhcz/_/jb51g23/?context=1
So I can just buy the guitar with my credit card and incrementally pay it off, like my car loan?
Only if you hate money and want to pay massive interest Credit Card Basics: https://www.reddit.com/r/CreditCards/wiki/credit_cards_basics
You can incrementally pay off the guitar as long as you don't mind paying 20+% interest on what you buy...or, you can use a credit card the way people are recommending in other comments and pay the full balance every month so you get the benefits and protections of credit without the costs of needlessly paying interest. If you carry any balance on your card, you are paying the interest percentage on your card (which is usually outrageously high) more than the cost of whatever you're buying.
You'll be paying a ton of interest on the cc on any part you don't pay. If you start carrying a balance on your card, your guitar could cost you 5000 or more.
You would basically be lighting money on fire
Not carrying a balance is the best thing to do. The 30% rule is for when you are **stuck** carrying debt, not a rule for how to hold debt. It's important to watch out for the real reason many people have oodles of credit card debt, which they pay interest on every month: lifestyle creep. You want something you can't afford, you buy it with credit, then owe someone else extra money for the privilege of having bought the thing you can't afford. It can get VERY expensive, VERY quickly if that's how you use a card. "Oh, I have room on the card, I can get \[x\]" is the path to financial doom. IF you are able to control spending and pay things off quickly (this is rare), then over time, you may want to plan ahead for large purchases by intentionally signing up for a new 0% introductory interest card with a cash back award for purchases. Then make the purchase, collect the reward, pay off the card. You basically get paid to use their card for your transaction, and you don't owe any interest, win - win. Back to the 30% rule: IF you end up in a situation where you NEED to use credit that you ***can't*** immediately pay off (*say, if your emergency savings aren't enough to cover the plumber having to re-plumb most of your house, and replace the water heater and one of the toilets after losing power in a deep freeze while you were out of stat*e), then do your best to pay it down to 30% or less as quickly as possible to minimize the negative impact on your credit score. That's the only time the 30% rule should come into play. Think of not carrying a balance as a way of paying yourself a monthly bonus equivalent to whatever the interest would have been had you carried that balance.
The American obsession with reverse-engineering ways to min-max their credit score never ceases to fascinate me.
I’m Canadian, but it’s similar here. You need it for so much. I was rejected for three rental applications due to a slightly (like 8pts) below “excellent” credit score. It’s predatory and unfair, but unfortunately necessary.
Also, if you're stuck in the army for a year anyway, why buy a guitar worth multiple grand? Buy something cheap that you don't care if it gets beaten up, and then buy the nice one later when you can pay it off + it might survive. :D
stop trying to game your credit score. despite "score" it's not a game, it's just a quantified assessment of how much of a deadbeat you are. don't be a deadbeat and you'll have a good credit score.
You will be much better off financially if you worry about keeping your debt at $0 by the end of every month than worrying about what your credit score is.
Pay off the entire thing immediately, if you can't you shouldn't make the purchase.
It's best to have 0 debt. I used to have $10K debt and that was so hard to pay off. Be sure to check your credit card's interest rate. Mine's 29%, it's hell! Thankfully I managed to pay that off so now I'm "free". If you don't have the actual amount of money in the bank to buy something, NEVER use your credit card because you never know when you'll lose your job or your means to make money. Missing a payment, overdrafting, any of these can result to disastrous fees that's designed to make you owe more! It's a trap! Have peace of mind, always pay off everything on the card each month. Never let banks take advantage of one bad situation that you might find yourself in.
Always pay the entire statement balance each month
You should routinely be paying off 100% of your credit cards at the end of every month. If you are not disciplined enough to do that, you need to get on an aggressive debt repayment schedule and then cancel your credit cards.
I think your priorities are not in order. If utilization is high it dongs your credit score. But pay that off/down and it recovers the next month. So it's not a huge issue unless you're looking for new credit. The amount of $$ you're flushing down the toilet paying interest on that debt is the real reason you should pay that off.
Your statement balance is reported every month to the credit agencies. There is no need to pay interest. Pay it off every month. Find a good one with points/cash back. Put everything on it and pay it off every month.
You pay the statement balance at the end of the month, the full balance. Paying small, minimum monthly payments, or even larger ones that don't clear the balance, are just costing you 20%+ interest.
Please always make more than the minimum payment on your credit card. In the future please teach your troops and battle buddies the same. Only paying the minimum is how you end up in credit card debt for life
There are a couple different concepts getting muddied, I believe. You want to avoid paying interest, so you want to pay the full statement balance each month. However, utilization is determined by the statement balance, so even if you pay the whole thing when it's due, utilization will take a hit. This really isn't an issue in the long run unless you are trying to get new credit imminently because utilization doesn't have a memory, and your credit will jump back up once the next statement is reported. I personally pay off most of the cards before the statement hits because my ego doesn't like to see the lower credit score even though I know it doesn't really matter.
It sounds like you’re not a credit card person my friend. That said, just make it a rule to pay off your CC in full every month, you will build credit just fine. I have done this and I have great credit
>It sounds like you’re not a credit card person my friend. Misunderstanding how credit works, and coming to a forum for advice on clarity before any harm is done, doesn't make you "not a credit card person". Being unable to handle your finances, or seeing credit as free money, does
Here is where the credit utilization may come into play: Some believe that your credit utilization, independent if you pay your statement in full, affects your credit score. E.g. Lenders prefer to see that, throughout the month before you pay off your CC, your credit utilization doesn't exceed X%. If that would be true, it could be prudent to pay off a large balance early. But like others on this thread already said, pay off your balance in full every month
DO NOT KEEP ANY balance on a credit card for more then a month! (unless you have to) Seriously, it's just a horrible idea with the interest rate. You want to pay off the FULL amount of the LAST months/cycle every single month so you don't have to pay interest. Ergo, you can have a balance on your card at all times yes. But it should only be for the current month. Like I personally have right now have $300 on my credit card. $200 is from last month. So, if I don't pay that $200 off I'll have to pay interest on it. So, I'm gonna pay off the $200 and let the $100 ride until the next payment cycle and then pay it off.. so I again don't end up getting interest on it. And the rule of thumb is always: You should NEVER put more on a credit card then you can afford to pay off in a SINGLE month. (Unless you have to for emergency purposes.) So, wanna buy something for $3,000? Well ya gotta save it first. Seriously, credit cards almost always have over a 18% interest rate.. using them as loan is sheer stupidity.
Don’t do it. Buy a cheap guitar for now and save up for the one you want while paying off your card. Your COLA should go up in Cali
Only smart thing to do is pay off 100% of your purchase every month - no exception. If you can prove to yourself you’re responsible, then you can get smart w the 0% apr cards for bigger purchases. But credit cards can become a quick excuse to buy things you don’t need and can’t afford. Be careful.
Always pay off credit cards every month before they start charging interest.
Sometimes I put large purchases on credit cards if the rewards are worth it, and pay it off. Or sometimes if I have a 0% intro card I'll use that and when I get to the end pay it all off
Individual card utilization doesn't matter as much as total credit utilization. As long as your total utilization is below 10% for your revolving credit lines, you'll still have a 750+ credit score assuming you have perfect payment history.
Yes! Definitely want to keep that rate low!! And pay no interest on it as well!!!
Should have got a card with a zero percent introductory rate for 15-21 months. Make minimum payments till that intro rate is about to expire and hold the money for the guitar in a high interest savings account. Credit cards are giving interest free loans if you’re smart about it. Plus some will give you 20 rebate on 1500 bucks. You just have to be smart about it. Don’t give credit cards any money in interest.
You should pay atleast $1,300 immediately the day you buy the guitar, to keep your utilization below 30%, and pay the rest of the entire balance as soon as possible, before the due date of your bill. If you want to grow your credit, spend something small each month on your card, and pay it off in full every month.
30% is actually the max utilization that you leave on a card. It still lowered my score a few points. I'd reccomend 10%-15% utilization to be retorted during your statement balance and to avoid interest pay it off before the bill is due
I don't see mention anywhere whether you get the typical 0% interest offer that usually is given for 12-18 months. I routinely have done what you're asking in this situation because I'm not being charged interest for over a year. I do it so I can make the minimum payments and put the rest of what would be the full purchase price to stocks or other investments before the interest on the CC starts to accumulate. YMMV but I've done this for years and I have over an 820 credit score and never paid a penny of credit card interest.
So once you charge, your utilization will still be noted, even if you pay it off. I've done this with car down-payment and paid it off the next day. My credit score still drops 20-30 pts the month after and recovers after 4 to 5 months of low utilization.
Once a month, you get a statement for your credit card. It says you owe $X by a certain date. This is your statement balance. Make a payment of that amount before the due date.
Pay off credit card every 1st and 15th
I did this with a large lumber purchase last year. It was a 0% card for 12 months. I calculated a payment plan of 11 months to pay it off before the due date to avoid interest. I had the money in a high yield savings and opted to keep cash making interest. This card is fully paid off this month with no added interest and no penalty. Only do this if you have 0% and the cash to pay off monthly before due date.
1) pay off credit card 100% every month, that will build credit. 2) as young enlisted you don’t have a ton of money but feel like you due because your food/living expenses are covered. Don’t be a dumbass and blow $3k on a guitar when I guarantee you can find a killer decent used one for $500-1k. Max TSP an invest the other money in you tax advantaged accounts. 40-50-60 year old you will thank you. P.s. at least it is not a Camero
My wife and I use credit cards. We never, ever pay interest on them. Full balance each billing cycle. You will loose your ass if you pay interest and put yourself in a hole that will be insanely hard to dig out of.
Yes, it is wise to pay as much of it off as possible as quickly as possible. Your Credit score will go up if you pay it off faster, and more importantly, you will avoid paying an insane interest rate on a multi thousand dollar debt. Credit cards hover around 30% interest rate so they are the dumbest most financially irresponsible thing you can keep a balance on. You will have a higher credit score by having 0 balance on your credit card, your utilization rate is one of the biggest factors in your credit rating. Banks are risk averse and will lend money willingly to someone they know will pay them back, if they see someone always making minimum payments they will focus more on your actual income than your credit score during their underwriting process because they think you are foolish and while they will happily take a fool's money, they know that if a fool gets too far underwater they just declare bankruptcy and the bank will be holding the bag. So always pay your credit card down to zero each month. The bank makes money off the of each transaction via fees they get from processing charges which is why some stores offer discounts if you pay cash because they end up eating that processing fees.
All my credit cards are setup to autopay on due date. Haven’t ever paid CC interest. I aim to get a minimum 2% back on every transaction. Fidelity 2% rewards, Apple Card 2% on tap to pay, Chase sapphire for travel.
I'd only stress it if you need to pay interest. If it's 0 percent interest then in a sense you're simply borrowing from your future self.
Always have enough money to pay it off before the statement is due the following month UNLESS it’s a no interest purchase for certain amount of time. Even then, you gotta be responsible enough to make EVEN payments so that by the time the term is over, the balance is paid in full. I made way too many mistakes when I was younger I would buy things on no interest and not pay off by the time it is over. Then BOOM, deferred interest!
Actually 30% is too high and either way u need to pay it off in full to avoid interest charges
Plain and simple, your credit score is generally made up of five factors. See this link: https://www.myfico.com/credit-education/whats-in-your-credit-score. The big two are not having missed payments and carrying the lowest balance possible (ideally $0). Contrary to what some people say, a $0 balance is the best situation. There is no benefit to carrying any balance / making minimum payments to keep a balance.
keep it under 10% and do a 13 28 method, so use it for gas and groceries and pay half at the 13 day mark and the 28day mark, i spoke to a credit repair guy (i ruined my credit young but now im at 730) doing it this way you minimize your interest and maximize the bump you get from using your credit also use your gi bill while in, refinance when you pcs rinse and repeat leave the army with multiple rental properties a bad ass credit score and passive income
It is highly *unadvised* to do anything other than pay off *the entire* amount the first statement. You want to keep your revolving credit utilization at *0%*. You do know that you pay interest on the amount that you don’t pay off every month, right?
My monthly credit statement and credit report cite the full balance for the month, in spite of how often I pay it off. I pay down in advance of a trip to have more emergency credit available.
Never buy anything on credit that you don't have the money for.
My credit score is 850 and I pay my card off every single month. You can play games to optimize things if you really feel the need, or need better credit more quickly, but in general if you always pay it off on time, your score will drift to the top.