Paying off credit card as you use it - good or bad?

[markr867]

I just booked a flight to Puerto Rico for my cruise next March. The flight came to $621 and I put it on my credit card to get cash back. I just recently opened this card and it is my first big purchase on it.

I am the type of person who HATES owing anyone money, and I wanted to go ahead and make a payment on the card in full just to get rid of it since the balance isn't due until July 1st.

Will that not help my credit score if I keep paying it off right as I use it and never carry any balance? I also only have a $4000 credit limit (I have excellent credit but I'm only 22) and I'm worried having $600 used out of $4000 might be a high utilization rate and might hurt my credit score.

[disneysteve]

First, welcome to the site.

Second, there is another thread about the questionable benefit of carrying a balance in order to help your score. You can find it here: http://www.savingadvice.com/forums/p...ood-score.html

Third, regarding your worry about utilization, the general rule I always see touted is to not exceed 30% of your credit limit. Since your limit is $4,000, that would mean not charging more than $1,200 so your $621 charge is not a problem at just over 15%.

Fourth, and most importantly, you don't really owe money to anyone if you pay on time. Think of your utility bills. You use electricity and water and phone services every day but you don't actually pay for them until after they send you a bill. You don't send a check to your phone company every time you make a call. You don't need to send a check to your credit card company every time you make a charge. Just pay your bills in full and on time every month and you'll be fine.

[kork13]

Fourth, and most importantly, you don't really owe money to anyone if you pay on time. Think of your utility bills. You use electricity and water and phone services every day but you don't actually pay for them until after they send you a bill. You don't send a check to your phone company every time you make a call. You don't need to send a check to your credit card company every time you make a charge. Just pay your bills in full and on time every month and you'll be fine.

Probably the best I've seen it explained... Bottom line, don't worry about paying off your credit card after every charge. In general, it doesn't make a difference, and is much more trouble than it's worth. There are other potential benefits to delaying payment (playing the "float").

That said, I do occasionally make early payments if I know that I'm going to be charging alot in a given month. I've charged a few thousand dollars before, so I'll send a payment part-way through the month in order to keep my balance from being outrageously high (at times >50% of the card's limit). That's only in an effort to not have an anomalous month widely skew (by 2-3 times average) the "high balance" that is reported on my credit....there's some discussion about the reporting of high balances in the other thread already mentioned by Steve.

[jpg7n16]

I personally pay my CC off every other week. Sometimes every week.

I just happen to check my budget on the weekend, so while I'm logged in checking my transactions on my CCs, I just schedule a payment.

I don't know if that helps or hurts my credit score, but I honestly don't care. Credit score is not that important to me.

[ecoadapt]

You really have nothing to worry since it's not what you need to worry at all. Like they said, you don't owe anyone anything. That's the nature of their business.

[markr867]

Thanks for the advice guys. disneysteve, I never thought of it that way and it definitely makes sense. I'll just wait until the bill to pay it from now on.

[snafu]

Terrific metaphor DS. Unless you are planning a major purchase perhaps mortgage or car loan, a week by week FICO type score isn't an issue. Those that choose to prepay charges before they are posted are not enhancing their credit score but likely feel better.

[BuckyBadger]

Neither good nor bad. Just completely unnecessary.

[JoshuaHeckathorn]

I just booked a flight to Puerto Rico for my cruise next March. The flight came to $621 and I put it on my credit card to get cash back. I just recently opened this card and it is my first big purchase on it.

I am the type of person who HATES owing anyone money, and I wanted to go ahead and make a payment on the card in full just to get rid of it since the balance isn't due until July 1st.

Will that not help my credit score if I keep paying it off right as I use it and never carry any balance? I also only have a $4000 credit limit (I have excellent credit but I'm only 22) and I'm worried having $600 used out of $4000 might be a high utilization rate and might hurt my credit score.

One of the nicest benefits of a credit card is the grace period, so why not use it? As long as you're keeping your credit utilization ratio under 30% or so, just pay the balance in full by the due date.

[BMEPhDinCO]

Good comments above (and ones I wish I'd known when I first got my CC)!

One thing though - if you are new to CC, you may want to pay it off sooner so you don't forget about it and then it goes into default and adds interest. I do this with a store card I rarely use (2-3 times a year) since I'm always afraid I'll forget to pay it. Thus it's "buy, wait 24 hours, pay, done".

But on my regular cards, I just pay at the end of the month. I don't necessarily wait until the statement date or due date, I just pay on the 30th (or similar day) of every month.

As mentioned, though, if you are going to be using more of the credit, then you may want to pay off big charges at first so the UTI never gets too high.

Oh, and one thing more - if you are traveling, I find it's easier to pay everything on the card before you leave, so if something happens, you have all that credit available and you know you won't be late on the bill!

[Jtuxyan]

I just booked a flight to Puerto Rico for my cruise next March. The flight came to $621 and I put it on my credit card to get cash back. I just recently opened this card and it is my first big purchase on it.

I am the type of person who HATES owing anyone money, and I wanted to go ahead and make a payment on the card in full just to get rid of it since the balance isn't due until July 1st.

Will that not help my credit score if I keep paying it off right as I use it and never carry any balance? I also only have a $4000 credit limit (I have excellent credit but I'm only 22) and I'm worried having $600 used out of $4000 might be a high utilization rate and might hurt my credit score.

There's been a lot of good advice above -- and a link to another thread -- about the benefits of keeping some on balance to improve your credit score. But I'd add in all bold and flaming caps, you should never pay interest on your credit card if you can avoid it. It is a bad habit that will ruin you if you let it.

Use your credit card like a debt card -- pay it off right away. You'll accumulate a credit score more slowly, but you'll be safe.

[BMEPhDinCO]

Use your credit card like a debt card -- pay it off right away. You'll accumulate a credit score more slowly, but you'll be safe.

Not true - the score doesn't build slower if you don't pay interest. It really doesn't matter when you pay it - we are just suggesting that if, for example, you charged $1k on the card and earn interest on that $1k for 25 days before paying the card, it's a better move as long as it's done responsibly.

[scubatim84]

As long as you pay off the statement balance in full on each monthly statement you get, you won't pay interest charges.

Granted, it's worthless right now to use this tactic, but it may even be to your benefit to wait until your bill is due before paying it if the money alternatively would have been sitting in a savings account. It's not much of a difference when it's < 1% interest for most savings accounts, but in normal circumstances, hey it's a few extra bucks here and there in interest for you.

[snafu]

Presuming you pay bills electronically, you can create the payment on-line dating it one or two business days before the 'due date' clearly stated on the bill. I note the 'reference number' shown for verification.

[cogz]

I tried this, but started getting lazy and now have let my balance run over. Also, my credit rating seems to differ depending on the credit chekcing company so I have no clue if it's effecting my credit rating.