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Quick question: How to pay my credit card bill
streever
Registered User regular
Registered User regular
Hi folks,
I have my first credit card, and finally have good credit (at 30, amazing).
I just got the first bill and am a little confused.
My total balance is 170.33.
My minimum payment is 25.00
The "balance subject to interest rate" is 108.34 (and the interest charge shown is 0.00)
My APR is 24.99 (obviously I don't want to pay any interest at this rate)
How much MUST I pay to avoid any interest charge?
Thank you in advance. I received great financial advice from this forum before, and really appreciate it.
I have my first credit card, and finally have good credit (at 30, amazing).
I just got the first bill and am a little confused.
My total balance is 170.33.
My minimum payment is 25.00
The "balance subject to interest rate" is 108.34 (and the interest charge shown is 0.00)
My APR is 24.99 (obviously I don't want to pay any interest at this rate)
How much MUST I pay to avoid any interest charge?
Thank you in advance. I received great financial advice from this forum before, and really appreciate it.
streever on
0
Posts
That being said, if you can swing it pay the full 170.
Any charge that has been on your account for longer than the grace period (30 days for me) is subject to interest.
You should pay $170.33, honestly, you should never, ever carry a balance if you can avoid it. I say this because I have experienced this first hand.
^^^^ This. Don't fall into the trap of thinking you have money because you have a credit card. Just pay it off, holmes.
With that in mind, does it make sense to ever pay under the full price, or should I always pay the full price?
Thanks folks!
My understanding is that no one actually knows what does/doesn't build credit with that level of granularity? That was the consensus the last time I asked about credit here.
I was told that you do not have to pay your entire balance to avoid an interest charge, and it seemed like everyone agreed with that.
Just to reiterate: I have the money set aside to pay the entire balance, but am just trying to figure out if I can leave some of that money in my savings account (I know it is only going to earn 3 cents of interest, but I'm just trying to establish a real system for this) or if I must pay the entire 170 to avoid any interest charge.
I will be paying it online, too, to save money on cheques/stamps.
You earn points on your credit for longevity of the account and your outstanding balance on it, the less the better. If you max out your card, or even carry a balance, it will come back to haunt you on thinks like loan applications and the like.
Pay the whole balance. Don't think of it as an easy loan machine or a catch-all deferred payment plan. It's just an easy way to buy things without carrying cash or a checkbook. Only buy things you can afford. If you can't pay the whole balance, pay as much as you can and stop using the credit card until you can pay it off, and then stop using it to buy things you can't afford.
Credit card companies love inexperienced first time card holders. They will do everything in their power to get you to rack up huge debt and make them lots of money.
They will likely charge you interest in the full amount, regardless of what the bill says, most of the time those intro APRs and no fees and other bullshit are basically "as long as you pay your bill in full" in hidden/fine print.
Absolutely no offense intended, but it's far more likely that you'll fuck it up long before maximizing your savings account interest will cover the cost of that future oversight.
I am going to just pay the whole thing. My level of confusion regarding the bill is high enough that without some financial advisor sitting here micro-managing it, I think it is safest to just pay the whole thing.
I already set aside all of the money to pay it the minute I made the charge, so it seems silly to not just pay it, if there is any chance of it biting me on the ass.
It isn't due until the 27th, but I'll just pay the whole thing right now.
Again, thank you, and I appreciate you explaining the reasoning and the concept.
Oh, and no offense taken at all: like I said, I'm totally confused about it, and received a lot of conflicting advice, so I really just wanted to ask a lot of questions & get back a lot of answers to sift through. What I've received is a really solid consensus, and that works for me.
That said, you will be well behaved for about a month or two and then you will see one thing and slip up and it will cost you about 6 months worth of interest. Everybody does it. They get the card and promise to be good, and then calculate out whether they can afford something very carefully... but don't account for other expenses. While a slip up can be expensive, I found I learned my lesson after the first one (buying of a tv that took about 6 - 8 months to pay off)
Welcome to Capitalism.
That definitely won't happen to me
With that said, I want to avoid any possible pitfalls, so I am going to pay off the total amount--in full--online on a scheduled day every month prior to the due date. Again, thanks a lot for the help, guys.
This this this this. Always pay off the full balance. The CC company's job is to make money off you by charging you interest on your borrowing, and they will do it any way they possibly can. The only way to avoid eventual disaster is to spend only what you can afford, and pay off what you spend within 30 days.
Credit card companies make money off of you using the card, not off of your fees. Yes, they do actually receive revenue from you paying fees but they get a 1-5% payment from the store you bought stuff from.
Here's an easier way to think about it:
You buy a gadget for $100. The credit card company gets 3% from the transaction, so they get $3. However, they also sent $97 to the gadget store. You're out $100 and you have a gadget; they're out $100 completely (with no fun gadget).
In a month, you're supposed to pay them $100. If you pay them less, they charge you a fee. This is the "hey, where is our money?" fee. They have no real guarantee that you're actually going to pay them the $100, so they charge you interest. Sure, it seems like a good deal that you'd pay up 50 this month and 55 the next month, but really they just want the full $100 as soon as possible.
If you pay every month and incur no fees, they say "this guy is cool, we're never on the hook for his purchases." If you pay fees, they say "this guy doesn't pay things off in full, so we're left holding the bag for him. But he does eventually come through; you just have to wait a while and charge him extra fees."
That's massively simplified, but you can think of it like loaning money to a friend. Would you rather loan money to a friend who said "Can I borrow 5 bucks" and you know he'll pay you back in a week? Or to the friend that you have to harass every week until he gives you 10 for your trouble?
So that's a verbose way of saying "pay the thing in full." You've already spent your money, so you might as well follow through on the transaction.
I think you made a mistake. The credit card company in the situation above isn't out $100, only $97... hence the $3 profit they get at the point of sale. But I'm just being picky.
Do you get rewards or anything like that for using the card? If so, i'd pay as many bills/expenses as possible on it, and then pay it off right afterwards. If not, just use it as a gas card (and pay it off) until you've got the credit history to get into a nicer program. Also, credit cards often give you an extended warrantee when you buy stuff through them. and some even have stores associated with them that give you discounts on stuff.
I don't own a car, so I am literally just using this card on grocery shopping (200/mo), and for my monthly utilities (about 150/mo for heat, electrical, internet, water, etc). So, 350/mo which I'll pay off right away.
The Express card is really just for the rewards/sales/discounts--I've received 50$ dollars in coupons already and only had it for 2 weeks and used it for 60 dollars of items, so it seems like a great deal.
If my credit rating gets much better, I may cancel the amazon card and try to get a better card, but that one also has good benefits--and Amazon is pretty much the only place I shop for books/non-grocery/non-clothing items, and it gives triple points for those.
I don't travel much, so I'm not looking for frequent flyer miles.
If you were running a small business and we were talking about a half a percent of interest on tens of thousands of dollars every month, it might be different.
CC companies make money from the merchant by convincing lots of people to use their cards, in the form of transaction fees, and that is a giant portion of their revenue stream. However, they make money off you by obfuscating the fee structure so you end up paying fees to them and charging you interest on the loans they make to you.
Paying the full balance avoids fees and interest.
$100 in savings account at 3% interest= $3 extra for you at the end of the year
$100 credit balance at 24.99% APR = $24.99 you owe the credit card company at the end of the year
You lose $21.99 if you don't pay your credit card balance off. Divide by 12 for the monthly impact (assuming interest only accrues to the principle).
I had it at 97 but changed it when I realized that they get the $3 in profit only after you pay them, in the simplified version, because I'm not sure if the fee comes out of the $100 or if they charge the vendor. So it's under the assumption that even though they make $3 off of you, they don't make that until you give them the whole $100 (and then they pass on 97).
Really? Some of the local variety stores have like "25cent fee for debit/credit"
Yeah it's supposed to be illegal to charge more for a credit purchase, but usually only with the big two. Not so for debit as debit is basically an ATM withdrawal, though I'm not sure on the technicalities of that. Well, maybe not illegal but it is definitely against the ToS of the merchant. My former boss got dinged because he charged a straight $5 more to cover the merchant fee on the transaction.
Not that big of a deal. The total is due on the 27th. Glad I discovered this now, because if I went to pay it on the 26th, I'd have to pay extra.
They require you to "schedule" the payment at least 2 days from the current date. So, my balance will be paid on the 17th. Still, bizarre.
This is true with pretty much all cards.
People wonder why everyone has bad credit. I'm not going to say that it is entirely the credit cards fault, but man. A system that suggests you pay 20 out of 170.33 owed, and that you pay it 2 weeks late? sure seems like a system designed to encourage failure.
What really gets people is the ~30% APR. You figure if you hold a balance of $1000 on your bill on the year, that's $300 extra without calculating APR on interest. With interest? That's practically another grand (I think it calculates to something like $700).
You figure most Americans carry a $10,000 credit card balance, that's >3,000 a year in wasted money. For what? So you can buy a big screen TV 3 months earlier than you could realistically afford it? Tell you what Holmes, you could buy 3 big TVs with that or 1 really big TV. In a year. Or you know, get another house after 5 years.
I say this now after struggling with it for a better part of a decade as a dumb kid and finally coming to the realization I dun goofed. I wish someone had told me this sooner, though, in my situation it was nearly unavoidable because of a medical issue. Though I didn't help it with buying extra stuff on top of it.
Yea, this stuff is CRAZY. I mean, I feel like it is important to have a decent credit rating, for any number of reasons: so I have the cards, and I'll use them, but I am definitely scheduling online payments which will pay the entire balance before it is due--and only using them on budgeted, fixed costs. If I don't have the money, I won't be breaking out the plastic.
I actually didn't get a really high-level position I applied for, because of my non-existent credit rating, which is why I got credit cards. It turns out having no credit is basically having bad credit. I was asked to apply to be the technical director of a really well-regarded museum, and after an exhaustive 2 month process, they decided to hire me--pending a background check which we all assumed I'd pass--the institute had just added a strict credit requirement, however, which I failed. Now, my state is pushing to make that illegal, but still. I don't ever want to lose out on another opportunity again because of my credit.
There must've been some penalty fees included in those charges because %30 APR compounded daily on $1K balance is more like %35 (EAR), not %70.
Generally, it was an example, but over the course of a credit cards life if you're carrying a balance like that you'll get hit with some weird finance charges.