How the fuck do credit cards work? I got one recently and I dont fucking understand the payment due dates.
If I make a purchase on may 1st is due at the end of the month, or the month after?
What if I make a purchase on the 28th but have to pay a balance on the 29th?
>pic related its the credit card I got
Do yourself a favor, cut it up and toss it in the trash.
But Generally, the due date is for a period. So if you pay off the May charges by, say June 15th, no interest is added to the May charges.
There is usually a week or two between the end of the period and the due date.
give it to me
Honestly I'm not worried to much, I make enough money to easily pay my credit limit every month (only 1000 CAD). I just need to start getting a credit score, and the points are a nice touch.
So if I make a purchase in may, the payment wont be due until the next cycle at June?
get quads and i will show you a picture of my credit card.
I had $300 in purchases on may, which I paid off in full on the 29th. Did I not have to pay it off until the June cycle?
so crash course in credit cards.
You purchase something. You carry the balance on that card for the purchase now until you pay it off to the entity that gave you the card. Payments are expected within a certain time frame. Usually they do it by month intervals from the day the card is activated unless otherwise stipulated. You can pay off the balance almost at will paying as much or as little as your finances allow until the balance carried is zero. Usually they have a minimum required payment for each period you carry a balance on the card. Fail to pay it and they might give you penalties (although they usually can forgive the first payment or two). Any unpaid principle on the card will be rolled over to the next period with the interest rate on it attached. So next period you can get smacked with the previous principle plus whatever you pick up on this period. This is an easy trap to fall into so be sure you don't charge more to it than you can cover. Otherwise you'll be caught in an increasingly high tidal wave of interest accumulating debt and they will become anxious and possibly discuss other options.
So don't be stupid and think that it's free money and go spend happy. It's not.
Any questions?
Ya, just what pay period do you purchases fall under? if I have make a payment on the first of the month, does it fall under this months pay period, or the month after? What if I make a purchase the day before my payment is due?
Honestly the crux of my questions is, when am I expected to pay off a purchase?
Okay, so they don't necessarily track when you pay off individual items on the card. They lump all of the purchases you make into one sum for the period. As long as you are making the minimum payments for each period then you can effectively take as long as you want.
What's happening here is this: you're saying "I want this TV. With this card, (I'll use Visa as an example) Visa will buy the TV for me by putting it in an amount I will owe Visa, and I will eventually but surely pay Visa back".
So you use the credit card to buy the TV. Say it's 1000 dollars. You now owe Visa 1000 dollars for the period that you can pay off whenever you would like to. You can pay it off now if you have the 1000 dollars available to you. But say you don't.
Ya I understand that part completely. but, for example I made 300$ in CC purchases in may that I paid off on the 29th; my balance showed 0, and min payment showed 0. Did I not have to pay until the next billing period in June?
You aren't expected to pay Visa that thousand dollars within a certain amount of time. You can keep making the minimum payment on the card until that goes away. You aren't paying for the TV, you're effectively paying for a very flexible running loan. You can pay a 50 dollar minimum so you don't get penalized. So you pay 50 dollars. Next period your balance is rolled over with interest. So you paid fifty dollars to that 1000 dollars. You have an interest of 5%. So 1000-50 = 950. 950 + (950x.05) = 997.50 . Your new balance for this new period is now 997.50 dollars.
As for the date.
Again, you could have paid that off in a matter of years as long as you meet the minimum payment. However that's not the best idea because, again, long term interest accumulation is what kills ya.
Honestly I always pay the principle in full so I do not have to pay interest (my card is 19.99% anually). My question is just what they expect when it comes to their billing and payment cycles.
Also what about grace periods (my card is 21 days)
No, you didn't have to pay it off until the due date in June.
So the charges between May 1 and May 31 will be interest free if you pay them off by the June XX due date.
Like if I want no interest charges, how do I know when to make the full principle payment for a purchase in, lets say the first of the month, assuming a 0 balance for the billing period.
Yeah, that's the best way... but even Credit Cards only build 1 type of credit score.
Car loans and houses are another type of credit score...
When you get old enough, you'll see right through electronic and plastic payment systems, the banking system, even credit/ lending in general for what (((they))) really are.
Cash and other real assets like stock, etc. are king.
Not OP. Can someone explain how credit works? Mine goes up and down and I haven't caught on to a pattern yet
Jesus fuck... read the agreement...
But there is a billing period (like May 1 to May 31) and there is a grace period... like a week or two...
The balance on the card at May 31 11:59:59 pm will accrue interest if you don't pay it off before the end of the grace period (the due date in June).
Kikes in banks make finding this shit out not obvious for a reason, but it's not really that tricky to understand.
Basically the thing is "Meet the minimum payment for every pay period at least, don't exceed your credit limit, pay off your principle as the most you can reasonably afford each period, and avoid accumulating interest, and you're golden.
The grace period. Basically that is "when you get your your bill for the charges you have 21 days to pay it before we apply any financial fees like accumulating interest or penalties to it."
Ok that helps a lot, the other question I have is for grace periods. My card offers a 21 period, does that mean if I get my bill on the 15 of June I wont get charged interest until after 21 days?
Here is the information they sent me
Ya they don't have billing or payment periods in the agreements. They sent me 20 pages, I scanned most of them and checked online. Nothing
That's exactly what it means. When you receive your bill they will allow you to pay it off completely for 21 days before applying fees or penalties.
Thank you!
Like look how much shit they gave me for this 1 CC. Nothing is said plainly font is too small to read, and shit is confusing, even to me a business student.
Credit cards are intended to come with a lot of strings attached. Only use it for the essentials and don't go spend happy until you make enough to justify what you purchase. Otherwise the interest will crush you. Good luck.
No one even acknowledges my trips or my question. *sigh*
Ya thankfully I dont really need to make "big" purchases. Almost all my spending is going out with friends or eating out. I have a job paying quite a bit, so I can easily pay off a $1000 principle.
Well wait a fucking second and I'll tell you.
What exactly do you mean by Credit? Do you mean Credit score or the money you owe?
Credit score and how to build it and maintain it using a credit card.
Ya, I have invested in some bonds an mutual funds, but I just recently got a CC to build a Credit score. I've never made big purchases, as my father usually covers my big expenses (clothing, and tuition). I don't have or want a car, and wont be moving out of my house until next yea.
So how credit works is:
You start off as an unknown so your ability to borrow is restricted heavily. You start using credit card (a "rolling loan" essentially) or have a loan for something (an "Installment based loan"). How you handle that feeds info to a company. Your score is determined by five factors
How good you are maintaining your payments on the loan and what amounts you pay.
How much debt you accrue
How long you have your accounts
What type of accounts they are (savings accounts are much more stable than IRAs are more stable than stocks and so on)
And if you've ever had inquiries or investigations into your accounts.
All this is used to evaluate your credit score. A general rating of how good you are at managing credit and how much you can be trusted with debt. The higher your score, the lower risk you are, the more debt you will be entitled to accrue as long as you keep making the required payments to pay them down in what the lender defines as a timely fashion.
That's the basics.
Oh, the companies are Experian, Transunion, and Equifax. At least in the USA and Canada. Idk if that's different outside the country.
Ok I understand so far. How do I get my credit score to continue to rise? I read that you have to use the card but I've used it a decent amount of times and a lot of the times my score remains the same. I missed one payment of my phone bill for 84 cents once and my score went down like 20 points i think. Oh and thank you for taking the time to explain user
Did that answer the question?
Partially
So general tips:
Pay bills on time
Catch up on your payments if you miss any and stay current
Keep balances on your cards low and pay large rather than trying to spread it to other accounts.
Don't try shenanigans with extra cards to raise your limit or close unused ones. They will notice and disapprove harshly.
Don't open a shit ton of accounts all at once
If all else fails contact a debt councilor or mediator to negotiate a way to pay down debts in a way you can manage.
And you're welcome. I am a business finance student so yeah. That's a thing I know a bit about. Tidays a lucky day.
Thanks man
- from OP
So if I owe a lot I should pay all or most at once? And in general I should keep the balance low? Got ya, but should I avoid spending at all or will that hurt my credit? Someone mentioned something in response to a similar question and said that you should almost never use a credit card and should instead just set-up an automatic payment for something like Netflix which is only 10 bucks a month. But I tried not using and my score just remained the same. Perhaps I'm missing something
FUCK everyones advice about paying it gradually off. You will fuck up one time and they will charge you for what you owe quite high. Just pay what you bought every month.
It's better to keep a lower balance on your final monthly statement. So like if I use 700 of my 1000 limit, I'll make an early payment of say 650. So when the billing cycle closes for that month the balance owed is only 50. That's 5% of my limit. Lower % is better.
OP here, use your CC just pay it off asap. Do not leave it unpaid.
Not necessarily that you should always try to pay it off all at once or keep the balance low. But those are best practices.
Credit reports are, essentially, a basic measure of how good you are at handling debt on a loan. It is best if you avoid the option of minimal payments as it both signals you have a stronger chance of paying off any debt you accrue in future and it helps you avoid interest. Keeping the balance low is a sign that you aren't over exerting your spending power or spending excessively and irresponsibly. As for automatic payments it's not common that banks offer that to credit cards. At best it can help you avoid penlaty fees for not making your minimum but an active role in managing your debt is better because you can actually adjust how much you pay each period instead of letting it accrue unchecked.
In my personal experience I bank through Chase and have things set-up with my direct deposit in a way that every 2 weeks I get paid my account automatically pays an amount of my choosing (usually little more than the monthly minimum) toward my credit cards, utilities, etc. I have...6 credit cards now I think? Having an large standing balance is bad but as long as you make your payments on-time your credit will go up.
>Have credit card.
>Example credit of 500
>Spends it all.
>Credit initially drops. 488
>Make on-time payments + little extra.
>Credit goes up every month.
>488/494/500/506. Etc
>Final credit boost from paying off the standing balance is moderately bigger. (566-588)
Point is, credit cards are great but it's a long term game.
It's not that you SHOULDNT use a credit card. It's that you shouldn't be STUPID with a credit card. You should always consider if you can pay off what you by with slightly more because of that rolling interest. That's what often traps people into debt. They think they can pay if off and eventually the debt piles on because of rolling interest makes them pay that much more.
My current score 710 after having "credit" for 3 years and paying the way I do.
Don't think of the purchases you make relating to the due date of your payments. Think of it as the balance credit card dictating your due dates.
If your payment due date is on the 15th of every month
Then on the 15th if there is an amount of credit used, say $100, then you either pay off that balance or put an amount of money towards it to cover the minimum payment.
Youre using a pool of money that needs to be paid back over time. And your due date dictates when you pay an amount of money.
Now, of course, Ive tried to make this as simply as I could. I'm a Sup Forumsusiness graduate and I kinda make a living explaining this shit.
Ill lurk the thread for a bit if you or anyone else has similar questions or really, anything questions related to financing n shit
Yay! A fellow business grad! I'm not alone!
Question.
whats the credit score you start off with?
Im OP, going into my seconed year of my BBA degree. I honestly understand financial markets more then I did CC. I want to thank everyone for the help understanding.
My credit score is pretty decent right now. I've avoided relying on it for things that are not necessary. I pay my stuff on time. I'll see if that works to raise my credit. What puzzles me is that I did all the things people suggested such as paying on time, paying in full and not borrowing more than I could afford and it didn't do jack. But when I made random purchases and built up like 70 dollars of debt for things like poutine and coffee my score went up by a significant amount. A higher amount than in the past. I sure do hope I'm making sense, I've only had a few hours of sleep and I'm currently at my menial labour job
Different for everyone. It depends on your history for six months after you open your account.
They generally want you to use your CC often, showing a history of you paying on time.
Experian, Equifax, and TU works in mysterious ways I guess?
There really isn't a determined Credit Score for any one individual. If you go your whole life while never using a single form of credit, it would be an "N/A" for lack of a better phrase.
But it is almost impossible to go your whole life while never using credit in some way.
Many things can determine your credit. Credit Checks, Credit Cards and Balances, Inquiries, etc.
Most forms of credit hurt your credit score, but with good payments, proper usage of cards, paying back loans, etc you can raise your score.
I hope that kinda explains it.
I see. thanks!
thanks. i won't get one yet. maybe wait a year or two
Sup Forumsusniess guy here
Just as a note, if youre going to use a credit card to raise your score, the best way to go about it is to use roughly 30% of the cards available balance, and pay back the minimum payment plus interest on the balance.
Has done my clients wonders for their credit. Two payments like that and you'll see a significant jump in your credit.
why not pay back the principle in full?
Why would a credit card company want you to do that?
They make money from you spending their money and not paying it back in full.
A credit card company makes money off of the interest on the card.
Paying them back in full doesn't incentivize them to report back to Equifax.
You giving them money does.
That explains everything
They charge stores for the privilege of accepting visa.
It hurts because it's true.
Whoever said that Sup Forums was full of retards was at least somewhat wrong
theres hundreds of thousands of people who browse Sup Forums from all walks of life. You can find what you need most of the time.
I know it kinda blows my mind. I asked Sup Forums to translate something for and they did within minutes. It would have taken me close half an houf
>When you receive your bill they will allow you to pay it off completely for 21 days before applying fees or penalties.
Except that's 100% wrong.
The grace period relates to how interest charges are calculated when you carry a balance from month to month. It has NOTHING to do with when your payment is due.
can you give an explanation of what the grace period is and how ti works?
Also, figure out how long accumulated interest takes to become principle that the company can then charge interest to. This is called a grace period and if you don't plan on paying your balance every month this is important to know.
Honestly my boy, just get a cashback rewards card and pay the balance off. It's basically like having a 1% card that you can take with you wherever you go.
Ya, I will never not pay the principle in full, I dont see the reason not to.
I mean I work for a pretty big credit card company OP so I guess I can try to help. What questions do you have that haven't been answered yet?
My grace period is 21 days, so after the 21 days the interest joins the principle? Let us say I have 500$ in my balance at 20% annually. I get $8.5 in interest. After 21 days would my new principle be 508.5 with 20% interest charged to it?
Really the last question i have is this one right here.
Thats the last thing that i want to understand before heading to bed.
Are you asking if you are charged interest on interest? If so then yeah, but typically interest is added when your account cycles so either 30 or 31 days depending on the month (save for February). So let's say you had a $500 balance and you were charged $8.05. $508.05 would be your new balance that you are then charged interest on, but there's other variables too. Each credit card company charges interest differently. Mine charges interest on a daily basis at a fraction of what the APR is. So in your case it would be 20%/365 x Average Balance x Days in Cycle. Your best bet would honestly be just to ask for a interest calculation explanation letter. What credit card do you have OP?
As for grace periods those usually refer to late fees and what not.
Also that calculation I gave would only apply if you have a card with the company I work for, that's why you should probably find out specifically how yours calculates interest. I'll assume you went with a big bank's credit card since it's your first?
My CC is the the picture on OP. I really just want an indepth explanation on grace periods if that s possible.
Tbh my experience with grace periods isn't a lot just because we don't really have them but that's because we're pretty lenient with adjusting stuff. But it sounds like you're wondering about being charged interest on interest, which, yeah you would be charged that in the following cycle once it has been added to your balance.
My advice OP is to just pay your statement balance in full each month to avoid interest. It's the safest way to build credit. Also NEVER do a cash advance.
>Paying them back in full doesn't incentivize them to report back to Equifax.
I don't think that's how it works. It's all automated. I've paid off balances monthly consistently and get reported monthly.
>can you give an explanation of what the grace period is and how ti works?
Sure. Your account is always in one of two states: paid in full, or not paid in full. As long as you pay the full statement balance (the amount listed on your monthly bill), then your account is "paid in full." If you pay less than the statement balance (i.e., carry a balance to the next month) then your account is "not paid in full."
Note: this has nothing to do with whether whether you pay late (which makes you delinquent), which is very bad.
There is big benefit of keeping your account "paid in full" which is that interest charges do not start until at least 21 days after they are incurred. This always gives you time to pay the next statement balance in full and remain in "paid in full " status.
On the other hand, if you start to carry a balance ("not paid in full") then you start accruing interest from the date of every charge, even if you later pay in full. This can rack up massive interest charges for people who carry a balance, because some charges will be carried for many months depending on how their payment is applied.
The 21 days may seem confusing because there are two cycles: the billing cycle, and the charge cycle. The billing cycle is the 30 days between your due dates. The charge cycle is a 30 day period that ends about 9 days before your due date. Charges incurred in the charge cycle are included in the next bill.
Here's a made-up example:
6/1 bill due
6/12 buy item A
6/18 buy item B
6/21 charge cycle ends (5-21 to 6-21)
6/22 bill printed and mailed
6/27 buy item C
7/1 bill due
On the 7/1 bill, you'll have to pay items A & B but NOT item C (which will not be due until 8/1). And as long as your account is in "paid in full" status, you'll owe no interest on items A&B.
Hey all, there's this dude I hate, tried to steal my gf ages ago n msgd her all the time even though knew we were together, but he thought he was the shit cos he had some money, etc, basically ruined the relationship.. She was a slut anyway turns out...
Anyway, the place I work takes credit cards over the phone for orders, normal practice, we just write them down n toss the paper later after we put the order through... So he rang up the other day and made an order, not knowing who I was... I haven't thrown that piece of paper with his cc details away yet... Any ideas on how to fuck him over? Go on the onion net n give it out or?
>Paying them back in full doesn't incentivize them to report back to Equifax.
As someone who know what they're talking about, you're 100% wrong. Your balances and payments are reported to all three credit reporting agencies whether you pay in full or not. In fact, they're reported approximately every 5-7 days. Just get yourself a free credit report and you can confirm this for yourself.
In case you like pictures better, this shows what I tried to explain.
Rolling
They use a magnetic code to send your account routing number to a reader, and the reader then uses this information to withdrawal a certain amount of money