Leave balance on card? Professional advises

Leave balance on card? Professional advises
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#1

Hello everyone,

I am currently using a professional credit repair company.

I was advised to get two new credit cards, I had 0. I have opened the new cards and the company instructed me to charge less than 20%, even better if less than 10%, each month.

That’s no problem. Then they said to pay the balance but, the way I understood it, it sounds like they want me to leave a small balance, like a couple dollars, unpaid. So I think they are advising me to pay each month but not pay in full.

I need to pay one of the bills. The cell tower near me is down and I can’t currently call them. I am using WiFi right now.

Can anyone tell me if leaving a small balance on a credit card is a technique that is commonly used? And is it beneficial?

Thanks!


#2

It’s been a common belief for sometime that you need to keep a small balance on your credit card to build credit. But that’s not true. The moment you used your credit card you “borrowed” money. If you pay it in full, you have shown that you can pay it back and that is what builds up your credit history. If you do keep a balance make sure to keep it under 25%-30% of your credit limit as how much you use of your credit limit (credit utilization) is more important that keeping a tiny balance.


#3

Thanks for replying!
So my secured card limit is $500, and there was a $35 fee to open the card. I opened the card and paid $33 of the $35 before the statement date.

When I got my statement, my balance was $2. I paid that off today, earlier than the date it is due.

Does this sound like the best way to do this?

I plan on charging my $17 Netflix bill to the card every month and that’s all. Should I charge more or is one small charge a month ok? Limit is $500.

Then I plan on paying off most of the $17 before the statement comes, is that a good idea or does it matter? Is it better that the statement shows $17 or $2? I don’t know if it makes a difference if I pay a chunk of the balance off before the statement comes.

I will then pay my card off in full before the due date each month.

Any pointers or tips? Is my plan ok?

Thank you so much!


#4

This is a solid plan! The point of a secured card is to show that you can handle credit responsibly. Putting a single recurring charge on the card and paying it off in full every month is exactly what we recommend:

  • A $17 charge on a $500 credit line gives you a credit utilization well below 10%. That’s excellent.
  • Paying on time every month establishes a positive payment history.
  • Paying in full every month saves you money on interest (and interest on secured cards is very high).

After a few months of having the card, it’s smart to check your credit report to make sure everything looks good and your payments are being reported.