In light of this discussion, I’m curious how our credit card ‘balance’ is calculated. With the garage fire earlier this year, our credit card balance has been consistently over $5k.
Now, we always pay our amount due, in full, monthly. Always have, always will. But even when we pay the amount due, there is already another balance because of current month activity.
So at any point during the month, there is always a balance on our credit card.
Do these reports show us as not owing anything on our credit card because we always pay the monthly balance in full or do they show us owing $Xk because there’s always an amount on our card on any given day?
I’ve had the same questions regarding debt and average credit card balances when new numbers are published. They really need to break it down into average balance carried over each month, not average balance in general. We have decent household income and put everything we can on cards, which are then paid in full each month. Balance can be anywhere from $3-$6k each month, but I’ve never paid a cent in interest.
Has your FICO been dinged?
Is it important in terms of getting a loan for repairs, etc?
I don’t need an answer… But…
If so, you might try this (social media) hack.
FICO gets a report of your credit balance vs your total credit limit each month on some day, which iirc is about the 18th or so.
Your total credit - balance gives the AVAILABLE credit, and is a big calculation in the FICO.
If you are incurring a larger balance vs your total credit, then your CC is reporting you have LESS available credit.
The hack: pay the current balance before the report to FICO, so that your reported AVAILABILE credit is higher.
I heard this hack a few months ago, and wondered if it was good.
Let us know?
Last time I looked closely at the T&C, cash advances always accrue interest from the day the advance is made. Interest accrues on purchases from the day of purchase, but is forgiven, if the balance is paid in full by the statement due date. If the balance is not paid in full, then accrued interest is not forgiven.
Our FICO score is very solid. It bounces around a few points here and there, but no big changes.
We don’t have much debt. Our house has been paid off for decades (only bought 1 house in my life). Credit cards are paid in full every month. A small ($12k) home improvement loan which is interest free (OK, twist my arm) if paid off in 36 months. It will be paid off in month 34.
We’re shopping for a new car (long story). Ms. Wolf wants to pay cash. I dislike debt, she despises it (long story). My take is that it depends on what interest rate they offer. We will see. I always get the last words in any argument. Usually, “yes, dear.”
So I don’t think our FICO is impacted much. At least we’ve never had an issue, so it doesn’t seem that critical to us.
Most credit cards these days offer a free FICO score (my credit union does as well) so I check it fairly often. Like you, I put as many expenses as possible and pay it them every month. I do a decent amount of credit card churning, so lots of opening and closing cards compared to most people. All that has essentially zero effect on my FICO. My score changes by at most one or two points a month.
As noted before, the “supply side economic miracle” of the last 40 years, is a mirage, built on a mountain of debt. Remember when Greenspan was testifying, in the very early 2000s, when the US actually was running an on-budget surplus? He said that paying down the US government debt would be a bad thing, because so many interests use US Treasuries as the benchmark to evaluate risk and interest rates against. A lack of US debt would throw markets into chaos. Of course, the new regime that had just come into office wanted to hear exactly that, because the plan was for multiple rounds of tax cuts for the “JCs”, which would make that “troubling” surplus evaporate, and restore stability to the financial markets.
jerryab2, thanks for the link. The comments I was referring to, defining a lack of US Treasuries as a problem, were actually made at a bond industry conference, a few months later. My defective memory thought they were made in testimony. The message is clear: the financial market honchos would have to get off the golf course, and, even worse, change the way they do things.
The Treasury market serves a number of useful purposes (in addition to providing many of you with profitable employment). Most obviously, Treasury debt provides an asset that is free of credit risk–a characteristic that is desirable for many investors, especially in times of economic or financial turbulence. Treasury yields also provide a benchmark for the quoting and pricing of risky debt. In addition, the size and liquidity of the Treasury market allow market participants to hedge interest rate risks easily and at low cost. Moreover, the liquidity of these securities enables participants to make rapid adjustments to their portfolios in times of market volatility.
Of course, the resulting adjustments (to a lack of Treasuries) will not be perfect and, in some cases, will impose costs on financial market participants, especially during the period of transition to new products and procedures.
Still, the lack of Treasury securities might be a bigger problem for international investors than for domestic investors, because they may be less well informed about U.S. corporations. As a result, international investors–especially official ones–may have a strong preference for U.S. government instruments. In such circumstances, foreign investors may reduce, on net, their holdings of overall dollar assets as Treasury securities are paid down.
@steve203 It does not work that way. Some households that have no recurring balances have 10s of thousands of credit.
The majority of households with an average of $5.7k or so in credit are maxed out on average. There are households with $10k maxed out. There are households with $2k maxed out.
But the folks who pay on time and have larger incomes are not part of the problem. They also save money and won’t consume as wildly.
When looking for a retail slowdown we are talking a marginal slowdown in spending. That can be a contraction. The logistics of a retail chain have to supply the entire population.
