Submitted by FaithlessnessProof92 t3_yhyflq in personalfinance
Recently got my first credit card. I’m tempted to use it for all my purchases because of the cash back bonus. If I pay my balance before the statement closing date to keep utilization low is their anything else that could affect my score?
Just ignore utilization as an issue unless you are going to be applying for a big loan (car/house) in the next few months. Then get your utilization low for that period of time.
No worries if you do this. I and millions of other people do. I use my cards 125-150 times per month, always pay the bill in full by the due date, have never had a late payment which shows on my credit (they don't show as late until you are > 30 days late) and my FICO scores are all 800+.
Shop around for max rewards, and never fall into the trap of buying anything “because you get extra rewards for it.”
As long as you were going to make the purchase either way, you might as well get discounts in the form of cash back.
I get 6% back on my groceries. I’m gonna buy them either way, so why not get across the board discounts?
Only if you have the discipline to pay it off every month. 2% cash back isn’t worth the headache for me. And if you miss one month and carry over a balance the 22% interest is going to eat into that cash back real quick. I know Dave Ramsey isn’t the most popular around here and yes he’s very conservative on debt, but he’s not wrong that not everyone that says they’ll just use a CC for rewards and pay it off every month actually don’t. Actually most don’t.
I'm curious what the statistics really are. I know a lot of people who do pay off every month and collect the rewards (though I also know people who think CCs are for buying things you don't have the money for.)
Just did a quick Google search and got 45% pay in full each month, another 6% only charged one big thing in a year.
I use mine for every purchase. I get cash back and if there is any suspicious activity on my card I will see it and it is another layer of security since I can challenge or report it. That doesn’t mean go leaving your credit card number everywhere but it’s something to have in Your back pocket
Use a credit card for your normal purchases because of the added security and fraud protection using a credit card provides.
Using a credit card for everything and paying it off in full every month before interest accrues is what many people would tell you to be doing if you weren't doing it.
Just don't fall into the trap of buying unneeded things to 'get rewards points' or of spending more than you can pay off.
Yeah I don’t know the exact numbers. But I think a lot more than 45% started out saying I’ll just pay it off every month. Roughly 900 billion in American credit card debt can’t be wrong ….
I get what you are saying...people start small then fall behind and it's so easy to keep buying. But I think there are also lots of people who start out in debt with a big "I-can't-cover-this-(vet/doctor/car repair/new furnace)-bill, so I'll put it on the credit card...that's what it's for." And also a bunch who lose their job and use the CC to hang on while job hunting. I'm not convinced that using CC for everyday purchases is really a gateway drug for debt....it would be a fun question to research.
> If I pay my balance before the statement closing date
If you are responsible enough to use it like a debit card (only charge for money you have now), then this would be a decent idea.
The amount of rewards I have gotten is amazing, just by being responsible and choosing a different card.
If you only plan on paying the minimum and letting the balance grow, this is not a wise option.
Another option is to have a high enough credit limit that your utilization is good regardless. Through a series of events, I've ended up with $25k credit limit across 4 cards. I typically only spend about $1500/mo on those cards. With my limit, that's only 6% utilization and considered excellent by any company's metrics.
The caveat is that you need to have the discipline to have the credit available, but not use it.
It would be interesting I think. But if someone couldn’t afford an emergency unexpected bill like a vet or doctor, they don’t have an emergency fund, so their finances probably aren’t the best. And those are the people most susceptible I would say to falling behind on a credit card. Like I said. If you 100% have the discipline to pay it off every month, go for it. But I think that also means you have a healthy emergency fund so that an emergency doesn’t cause you to not be able to pay it off at the end of the month.
I use my credit card nearly exclusively, and I don't even get cash back. Apart from being contactless while my debit card isn't, there are added layers of security, and I can keep my checkings account balance low and leave most of my money in my savings, only transferring when I really need it. That way, even if someone did manage to steal my debit card, most of my money isn't even accessible. As everybody else says, late payments are the only thing that will affect your score long term. Just ensure financial discipline and don't change your spending habits.
Yup. I have a ton more credit than that (~$100k), and it honestly kinda scares me. But my utilization is solidly under 5%, so I never need to worry about utilization.
Plenty of advantages to using your credit cards. Namely I'm using someone else's money. So if it's lost/stolen/wrongly charged, I'm not out anything. I NEVER use my debit card connected to my bank account anymore. Only thing on that bank statement are credit card payments and rent.
I would also like to know. I have been using CC's for all purchases (except those that tack on a CC fee) since I got my first card at 18...over 20 years and I've never not paid in full except when I had a 0% APR and threw a big purchase on it for that reason.
Cruian t1_iugc073 wrote
>Should I use Credit Card for everything?
As long as there's no extra fees to do so that outweigh any rewards.
>If I pay my balance before the statement closing date to keep utilization low is their anything else that could affect my score?
Even utilization isn't anything you need to worry about: it doesn't "build" credit, it "resets" monthly. Almost all scoring models in use only care about the last reported utilization from each account. No upcoming application means no need to stress over utilization.