Paying Credit Card in full or not

In message , jpd writes

I pay mine off every month, and pay no interest or annual fee.

If you enjoy paying interest, pay the minimum allowed.

Its beyond me why people choose a credit card as a way of borrowing money...the rates are horrendous..but I suppose the temptation is always there. I have a credit card...but only because in my day (in the 60's) they didn't have debit cards. Needless to say my advice is pay it all back evry month..never borrow money via your card.

As usual in these matters the best course is neither one extreme nor the other. Don't just pay the minimum payment, but dont pay off the full balance either. That's what I do and I've never had any trouble at all.

Can you explain why there is any advantage in leaving some money owing and paying interest on the balance?

But surely you wouldn't have had any trouble if you had paid it off in full and that way you would not have paid excessive rates of interest either.

If my statement balance says 100 I always pay back 100 within 2 or 3 days of receipt of the statement..............if I don't then I would get deeper and deeper in the brown stuff.

You have the convenience, and depending on what you`re doing the interest isn`t that bad. For example, I used to do a lot of mystery shopping which meant I had to spend out a lot of money each month, and claim it back the following month. At the time I didn`t have access to £2000 to pay the bill off when it came in, so I`d make the minimum payment and then when my claim came through I`d pay the bill off in full, plus the few quid interest it had cost me. I only needed a few extra days between the payment being due and getting the money back from the mystery shopping company, so this was an excellent way of doing it. I couldn`t think of anything as easy for borrowing such a sum of money for a couple of days.

Generally excellent advice, and now I`m in a position to do this I do it. Every time I spend money on the card, I put money into a bank account to pay the bill off in full.

I can't understand it either. Maybe leaving a bit unpaid increases your credit score or some such piece of arcane data to help future borrowing.

What would be your rationale for leaving a bit unpaid?

Rob Graham

At 16:16:25 on 11/04/2009, BigGirlsBlouse delighted uk.finance by announcing:

1. 0% for 12 months is quite a good interest rate
2. Anything higher is paid in full each month
3. Earning cashback / loyalty points
4. Convenience
5. Section 75

Conversely, I very rarely use a debit card.

1. I like using someone else's money for a month - my cash earns interest in the meantime rather than sitting in a current account earning roughly nothing.
2. Doesn't enjoy the same protection as credit cards.

At 10:24:26 on 12/04/2009, robgraham delighted uk.finance by announcing:

Doing his bit to keep the banks afloat?

You should always pay it off in full by the due date. If you leave £10 left to pay, you might find you have an interest charge of a lot more than £10.

It doesn't. All that gets recorded on your credit record is whether or not you paid at least the minimum amount by the due date each month.

I read somewhere, that if you pay the balance in full each month, they are likely to close your account (like a certain Credit Card company did last year?). If you don't pay the full balance, they will increase your Credit Limit.

Urban myths.

Yes, Egg did close some accounts and a couple of people on Watchdog were saying that they paid their bills off every month in full while Egg claimed they were only closing the accounts of "bad risks". Who knows what exact criteria they were using to reduce their costs but it is hardly good science for concluding that if you pay your balance in full, credit card companies are "likely" to close your account.

As for credit card companies increasing limits if you do not pay your card in full - not anymore they won't and they haven't done that for some years.

RBS used to charge £10 pa if you paid in full every month. Not sure if they still do. Can't remember if there was a minimum interest charge ie £10. If not then paying £1 interest to avoid a £10 fee could be seen as worth it.

Natwest don't. If you did have such an account, you would be better closing it and changing to another card.

Even if you can get 3% interest somewhere, that would be 0.25% a month or 20p after tax for each monthly expenditure of £100.

Just so you can get to use a credit card, pay surcharges, completely forget about the expenditure, only to be reminded of it again weeks later when you've already spent the money on something else.

Plus once or twice a year, being a couple of days late in paying off the statement and coughing up £12 a time in charges and 2% a month interest.

How often are these things disputed?

That's the aspect I wouldn't like, the sword of Damocles every month. ;-(

Quite a few people have had to resort to ombudsmen/consumer programmes/newspaper finance columns lately in disputes between themselves, ATOL and CC providers over collapsed holiday companies.

ATOL and CC companies are playing tennis with the liabilities.

Which when you spend a couple of grand a month on a credit card adds up over the course of a year. £50 is £50, whether it comes from interest or doing actual work.

What surchagres do you pay on a credit card? Maybe if you`re uying a car, but I pay for pretty much everything I buy on my credit card and don`t pay any surcharges for it. I keep the receipts in my wallet, and then take them out when I`m moved the money into the bank account to be used to pay off the credit card. A nice simple system.

Direct debit to make the minimum payment to ensure you don`t get any charges, and take care to check the bills when they come in, and pay them on time. Hardly something likely to go wrong a couple of times a year unless you`re incompetent.

An unusual situation, compared to the good results I normally get when I have to involve the credit card company. Ultimately I can complain to a company, but the CC issuer has a much bigger stick to smack them with when push comes to shove :-)

By all means stick to using debit cards, cash or whatever you like, but I`ll stick to using my credit card. The interest I gain isn`t a lot at the moment, but the clubcard points certainly mount up.