# Is It Good Or Bad To Pay Off My Credit Card As I Use it?



## JimmyV (Feb 13, 2016)

I have a cash back rewards card and would like to use my card for all my purchases for the cash back benefit. So I would like to pay it off as I use it as my spending exceeds my cards limit. 

So I buy something online with my credit card, then go right to my online account and pay it off. I have a credit limit of $2500 but my spending will be around $5000 for the month. Is it good or bad for my credit to do this?


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## RBull (Jan 20, 2013)

JimmyV, wouldn't it make a lot more sense to simply have a limit set to accommodate your spending requirements?


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## newuser (Sep 16, 2014)

RBull said:


> JimmyV, wouldn't it make a lot more sense to simply have a limit set to accommodate your spending requirements?


I assume the OP doesn't qualify for higher credit or simply does not want more credit.

From what I see on my credit report, the credit bureau only sees if you carry a balance or are late in payments. How you arrived at those 2 states are not on the credit report so I doubt it affects your score in any way.


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## Bowzer (Feb 25, 2015)

For a long time I paid off my credit card weekly, basically as I spent the money. When it came time to get a mortgage I had a real good score. I can't remember what it was, but it was high 700s.


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## OhGreatGuru (May 24, 2009)

This is an odd post. I don't like to encourage high limits on credit cards, in case it tempts one to overspend. And the fact you have only a $2500 limit suggests the credit card company has reservations about your credit rating.

OTOH, the low limit may only be because you have not had the card long and the company has little history on you. If you can regularly charge and pay $5K/mo on the card, it indicates you can manage that cash flow. The CC company might be happy to increase your limit if you ask. In time they will do it automatically as you establish a history of paying balances on time.


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## nwmea (Sep 10, 2015)

Here we have a different rule, we cannot spend more than what credit limit has given by the bank or some bank just increased the interest rate if the credit limit is crossed.


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## MrMatt (Dec 21, 2011)

OhGreatGuru said:


> This is an odd post. I don't like to encourage high limits on credit cards, in case it tempts one to overspend. And the fact you have only a $2500 limit suggests the credit card company has reservations about your credit rating.
> 
> OTOH, the low limit may only be because you have not had the card long and the company has little history on you. If you can regularly charge and pay $5K/mo on the card, it indicates you can manage that cash flow. The CC company might be happy to increase your limit if you ask. In time they will do it automatically as you establish a history of paying balances on time.


Initial limits that low are normal.
Keep it paid off, having credit, using it, but always paying off on time is the customer they want.
They'll skim off their handling fee, free loan (they get the money from you before they pay the store) and be happy.

People who carry large CC balances are high credit risks, why would you carry a high CC balance when you can easily move it to a LOC?

Oh, check your credit report.


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## MMcLaurent (May 1, 2015)

I would just request that the lender increases the rate, if you haven't already. Have to keep on top of it, though. You need a good credit rating for so many things now!


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## Video_Frank (Aug 2, 2013)

MrMatt said:


> ... but always paying off on time is the customer they want.


No, it's not. They even have a name for customers like that - deadbeats.



> Deadbeat – it’s what credit card companies call those folks who are responsible and pay off the balance each month. They don’t like those people, not one bit. That’s because they make little to no money off of them. No, credit card companies like you to carry a nice hefty balance and pay only the minimum each month.


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## Eclectic12 (Oct 20, 2010)

JimmyV said:


> ... So I buy something online with my credit card, then go right to my online account and pay it off. I have a credit limit of $2500 but my spending will be around $5000 for the month. Is it good or bad for my credit to do this?


I'd establish a couple of months worth of "charge / pay before deadline" then ask for the limit to be raised.

The down side of paying the charge off immediately is that one is forgoing the free loan.


I don't see how this "charge/pay immediately" cycle could hurt as the credit score is supposed to be rewarding where one has met the debt obligations.


Cheers


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## Eclectic12 (Oct 20, 2010)

OhGreatGuru said:


> This is an odd post. I don't like to encourage high limits on credit cards, in case it tempts one to overspend. And the fact you have only a $2500 limit suggests the credit card company has reservations about your credit rating.


Weird and wonderful things go into the limits.

Being a reliable car loan payer earned a "just send this in and get a CC with $1K on it". Waiting too long to respond meant "apply like a regular customer" which the application resulted in "thanks for applying but you have too much credit as it is so no CC for you".

Going to the student centre, re-applying with the same numbers under the student application resulted in "congratulations, here is you new CC with an $800 limit".


The ironic part was the car loan, the rejected CC app and the successful CC being issued were all from the same bank.




OhGreatGuru said:


> ... If you can regularly charge and pay $5K/mo on the card, it indicates you can manage that cash flow. The CC company might be happy to increase your limit if you ask. In time they will do it automatically as you establish a history of paying balances on time.


I don't think there is any "might" ... I have had to fight to keep the CC limit down.


Cheers


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## Eclectic12 (Oct 20, 2010)

Video_Frank said:


> No, it's not. They even have a name for customers like that - deadbeats.


I thought it was more "keep as big a balance as you can keep paying" ... they like the juicy interest charges (what are they, 26% now?) but also don't like bankruptcies. From what my friends in the industry have commented, they want the sweet spot.


Cheers


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## Video_Frank (Aug 2, 2013)

I think the CC companies like 'revolvers' - card more or less maxed out, making the minimum monthly payments. For sure there's a sweet spot - i.e. 'just enough rope'.


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## Spudd (Oct 11, 2011)

Eclectic12 said:


> I don't think there is any "might" ... I have had to fight to keep the CC limit down.


Actually, the law changed within the past few years, and now they have to ask your permission before increasing the limit. 

http://www.fcac-acfc.gc.ca/eng/resources/publications/yourRights/Pages/CreditCa-Lescarte-1.aspx


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## Eclectic12 (Oct 20, 2010)

Video_Frank said:


> I think the CC companies like 'revolvers' - card more or less maxed out, making the minimum monthly payments.


That's the thing ... with consumer credit being so high, I have difficulty believing that their back office is unaware that a couple of these types laid off in Alberta and a couple of thousand more in Montreal by Bombardier means some of the revolvers may not be able to keep making payments.


Cheers


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## Video_Frank (Aug 2, 2013)

Eclectic12 said:


> That's the thing ... with consumer credit being so high, I have difficulty believing that their back office is unaware that a couple of these types laid off in Alberta and a couple of thousand more in Montreal by Bombardier means some of the revolvers may not be able to keep making payments.


Meh ... it's built into the system, I suppose. If a customer really can't pay I suppose it'd go to repo or debt collection. It's also why bad credit score customers get high interest rate / low credit limit cards.


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## ThinkingCapital (Feb 16, 2016)

There generally shouldn't be an issue when it comes to your credit score if you pay down your credit card shortly after you spend the money. The credit bureaus are mostly concerned with your limit, how much is outstanding and how often you pay on time.


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## djkelly (Feb 18, 2016)

Paying off a monthly balance is paying off a balance. That's what the credit score would be interested in. 

This strategy makes little sense to me as it wouldn't change the minimum balance you must pay and just makes more work for you. I suggest setting it up with your bank so the card is just paid off automatically. No fuss. 

Of course having a limit that's half of your planned spending is a complicating factor - and troublesome. I'm not sure why the bank would only qualify you for that amount. You might want to ask for something closer to your anticipated spending - assuming you're a good credit risk for that amount.


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## Eclectic12 (Oct 20, 2010)

djkelly said:


> ... Of course having a limit that's half of your planned spending is a complicating factor - and troublesome.


The way I read it ... the low limit is what prompted the "buy / pay off / buy / pay off" cycle so that the reward $$ is not capped by the credit limit.

What is not clear is whether raising the credit limit was considered or has been investigated.


Cheers


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## Rusty O'Toole (Feb 1, 2012)

I do it all the time. Pay for everything with a rewards card, pay it off early every month, pay no interest and get a couple hundred $$$ bucks every month. I enjoy using my card at big businesses because I know they have to pay a fee. At small mom and pop stores I use cash or a debit card.


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## MrMatt (Dec 21, 2011)

Video_Frank said:


> No, it's not. They even have a name for customers like that - deadbeats.


Yes, I've read that before, and I'm sure they'd love to have people who reliably, but just barely pay off their cards.
The people scrambling and paying interest are profitable, but they're higher risk.

But those who pay on time every month aren't bad.
Lets say you spend $500/month, they charge their 3%, you get your 1% cashback, they end up with $10 to manage your account, plus the time between when you pay and when they pay the merchant (which varies, and at near 0% interest has little value), subtract out $3/month for the mailed statement and they're still making money.

I put a lot more on my card, but they make a few hundred dollars a year from me, which isn't too shabby for a low risk, minimal investment.


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## larry81 (Nov 22, 2010)

Tell you credit card company that you want to automatically pay your card in full at the end of each billing cycle. they will send you a form. One less thing to worry about.


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## Video_Frank (Aug 2, 2013)

Interesting chart here - it shows 29% of credit card users are 'deadbeats' or, as they call them, transactors. 41% are revolvers and the remainders are dormant.


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## Numbersman61 (Jan 26, 2015)

larry81 said:


> Tell you credit card company that you want to automatically pay your card in full at the end of each billing cycle. they will send you a form. One less thing to worry about.


The only automatic payment that I authorize from my bank is my monthly condo fees. I think there is just too big a risk that someone will screw-up and make an improper withdrawal from my bank account. I've gone paperless wherever possible and always review charges before making payment. This forces me to review my statements to ensure that their are no improper charges.


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