There are many aspects that go into paying the balance of a credit card.
Herein we will show you how to PROPERLY pay back your credit card to maximize your credit score and money!
Simply put:
Many misconceptions are out there about credit cards and how they really “build your credit” and we are here to help you understand in this simplistic guide!
Simple format:
The format of the following myths will be as followed:
- The myth
- The elaboration
- A simple example
Simple myth:
You need to keep a consistent balance on your credit card for you to build credit!
This often entails needing to pay interest and not pay off the full balance due each month.
John buys $100 worth of stuff on his credit card. His card has a 10% interest rate. At the end of the month he owes $100. He pays the minimum due, which is $10 and incurred interest.
Simple truth:
You DO need a constant balance to build credit, HOWEVER, you DO NOT need to keep the same balance and you NEVER need to pay any interest.
Simple example:
John buys $100 worth of stuff on his credit card. Two weeks later, John buys $50 worth of stuff. His card has a 10% interest rate. At the end of the month he owes $100. He pays the $100 in full. John will owe $50 by his next billing cycle and he will have a running balance by repeating this cycle. John will NEVER pay any interest and will build his credit by the month
Simple myth:
Paying off my card immediately will build credit faster.
John buys $100 worth of stuff. John immediately goes to the bank and pays $100 towards his credit card. This pays off the balance.
You will potentially build your credit score, but it all depends on the credit card company. Some report immediately and some do not. This is hard to say specifically.
Simple truth:
Simple magic to build your credit:
The best method to build your credit score with your credit card is to keep a balance on your credit card, but not with one purchase, rather by consistent purchases and paying the full balance after a few weeks.
This does 3 things:
- Ensures the credit card company reports to the credit bureau that you owe them $xx.xx dollars.
- You will NEVER have to pay any interest to the credit card company.
- You will build credit by the month.
This will boost your credit score and maximize your credit building. You won’t owe any extra at the end of the month and you’ll feel good about it.
Simple conclusion:
This is the right way to pay your credit card, build your credit, and pay zero interest.
We can only advise, but we highly suggest looking at how you pay back your credit card. Simply pay it back the right way!
Simple Money 