Personal Finance & Money Asked on January 30, 2021
When is it a good idea to pay more than your monthly credit card balance? When does that help, when is that not worth doing / doesn’t do anything? Why is that a good idea? Does that help your credit in any way? If so, how? In the Money Smart Podcast (from the FDIC), they said it was a good idea, but I did not walk away with clear answers to the above questions.
I feel it is a good idea to pay more than the monthly balance because you are not only saving money on interest but you are also improving your credit score in the long run. By doing this, you can request a larger credit amount in the future for larger purchases.
Best,
Abdy
Answered by Abdy Sajous on January 30, 2021
When you are paying your credit card each month you are typically given 4 options:
So why would somebody pay the first number, if it isn't required and paying the statement balance would avoid interest and penalties?
If they are close to the limit, then paying the current balance will bring the balance down to zero. If they know they will have a big item or series of items they will be putting on the card in the next few days this can make sure they don't hit the limit. People do this just before their vacation, they do this if they know they will be putting their kid braces, or their annual life insurance bill on the card.
Some people actually go even further and will even overpay the current balance amount. In some cases that will give them a temporary boost to the biggest item they can put on the card. Not all cards will allow this. It also isn't a permanent thing. If the card is seldom used and you don't use the excess amount they will eventually send you a check to bring the amount back to zero.
I have never over paid. In the one case where I considered it, I requested via the website for an increase in the limit and it was granted in minutes.
Some people will pay more often than monthly to keep their utilization number down. I haven't ever done this because if the high utilization is a infrequent occurrence, then the hit to your credit score isn't sticky and the numbers will bounce back the next month. If you are always going over 30% utilization, and you aren't having problems paying your bills, then ask for a higher limit. That will give you the room you need.
Answered by mhoran_psprep on January 30, 2021
There are three typical levels of payment
There are a few exceptions where overpayment or pre-funding can make sense:
One more thing: you can put money on your credit card whenever you want to you. You don't have to wait for a certain date or combine it with your regular monthly payment.
Answered by Hilmar on January 30, 2021
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