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Fenatyc

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Should charges on a CC be paid back before the end of the statement period?
If I use my credit card to purchase things during a certain statement period, should I pay these charges back before the end of the statement period OR pay it back during the next statement period before I have to pay interest on it? Which of these options will help my credit score?

Last statement period, I had charges to my credit card and I paid them back this statement period well before the day that I would have to pay interest on the charges. However, I logged into Credit Karma today and saw that my credit score had dropped 4 points. I'm trying to determine why my credit score dropped.

It is my understanding that using your credit card increases your credit score, as long as you make payments on time and don't go over your credit limit. If that is the case, then why did my credit score drop? I did more than just making the interest payment on time; I paid off the entire debt before there was any interest to pay. If you pay back charges before the end of the statement period, then that activity will not be reported (correct?) and, thus, it seems to me that your credit score would drop since it appears that you aren't using your credit card. Is this correct? If it is, then wouldn't it be better to wait until the next statement period to pay back any charges from the current statement period? If it is better to wait, then, again, why did my credit score drop?

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It's not the total charges but the percentage of usage that can affect credit score.  If the credit limit on a credit card is $5000 and you charge no more than $1000, you only used 20% of available credit so that should not have negative impact on credit score.

You've got the payback and interest accumulation thing mixed up.  In short, pay the total balance due as shown on the statement when you get it.  You will NOT be paying interest the next month on charges made but not yet showing.  It is only when you do not pay the total amount due as shown on the statement that you accrue interest.  Just pay as I told you and keep usage below 20% and you will not accrue interest and will have an improved credit score. 

Reply by
Fenatyc

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Thanks for the response.

I think you've misunderstood what I'm asking. I'm not mixing up interest with payback, I know the difference. Let me give an example: Let's say your current statement period ends July 5, and you charged your credit card on July 1. You will only have to pay interest 30 days after the charge, regardless of when the statement period ends, so if you want to avoid interest (as I'm sure anyone would), then you need to pay the charge back before July 31. What I am asking is "Is it better for your credit score to pay back the charge before July 5 or some time between July 5 and July 31?" From the looks of it, it appears to me that credit card usage isn't reported unless you have an outstanding balance at the end of a statement period, which in this case is July 5.

I didn't know about this 20% rule, I'll keep that in mind. I know not using a credit card is also bad, so should you charge between 10% and 20% every month? Also, if I use 50% on my credit limit every month, should I pay back part of it before the end of the statement period so that it looks as if I only used 20% of my credit limit?

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Interest is not charged from the date of purchase.  The "closing date" on a credit card is the date they total all charges made during that period and make up the statement, which they mail out.  Then all payments have to be made prior to the "Due date" or else interest WILL start accruing.

Credit card usage is what percentage of the available credit you have has been charged.  I don't recommend charging 50% in hopes of getting a sufficient pay-back to lower my usage rate prior to the closing date because I have had too many "Murphy's Law" days in my life to want to be so risky.  If you want to live so dangerously and can keep such close track on your expenses and closing dates that you can play this silly game, be my guest.  At 67, I've got my PhD in what doesn't work.  

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