Hello everyone! I really need some help here. I just got my Discover It card and I'm really nervous about using it. I did a whole lot of research before receiving this card but now that I have it I'm receiving conflicted advice about paying it off.
To start, I am 18 years old, living at home, I have no bills and I do have a minimum wage job. I got this card to start building my credit before leaving my community college to a university. So far, I only plan to use my card for gas and occasional groceries.
My credit limit is $1,000, which I never plan on meeting. This is where I start getting confused. My mom (who has built her credit to 700+ after having to file for bankruptcy) says I should keep a debt balance of around $25 at all times on the card to build my credit, saying that if I pay off my card in full it'll "ding" my credit. My research has shown that I need to pay off my credit card each month in full and the important part is keeping my utilization between 10%-30% (aka $100-$300 per month), but when I try to bring this up to my mom she gets mad at me and says I'll ruin my credit (this is not bashing her she is just protective over my credit because she does not want me to develop bad credit at such a young age), I don't plan on talking to her about this anymore but it's making me second guess my plans for paying my credit card each month.
My main questions are:
Do I keep a small balance on my card (even if I can pay the full amount)? Should I pay off the card immediately after purchase or when my bill is due? Am I correct about the utilization?
Please note that I do not need advice on anything like rewards or cash back right now!
18 Y/O college student, just got my first credit card, receiving conflicted advice
byu/PharmaKasper inpersonalfinance
Posted by PharmaKasper
23 Comments
Use your credit card for a few things like gas and some groceries. Pay the statement in full every month. You will get to a point where there will be a small balance which was charged after the statement billing period, resulting in some money owed when discover reports to the credit bureau’s. You will get the most points every month for paying on time and paying the statement in full makes sure you aren’t paying interest
Your mother is incorrect.
Treat your credit card bill like it’s a utility bill.
It shows up once a month. When it does, you’ll have about three weeks before the due date. Pay the statement balance in full, every time, before the due date, and your credit rating will take care of itself.
Pay it off every month. Keeping the card long term and not having a late payment will help to increase your credit score.
Do NOT carry a balance just to build credit. You should pay off your statement balance IN FULL every month. This is not the same as your current balance, which could be higher than the statement balance if you made purchases on the card after the billing cycle ended. If you do not pay off the statement balance by the due date you will start to accumulate interest and you’ll end up owing more money.
You failed to grasp a nuance and it is probably the cause of this conflict: “KEEPING” a balance and “CARRYING” a balance are two different things.
If your credit card bill says $300 new balance with $25 minimum, you have 3 choices:
* Pay $300 by the due date. **This is called “paying in full”**
Consequence: You are on time and you also avoid interest.
* Pay anywhere $25.00 – $299.99 by the due date. **This is called “carrying a balance”**
Consequence: You are on time, but you incur interest from this point onward
* Pay less than $25.00 by the due date.
Consequence: You are late! You incur late fee, interest, and (after 30 days) get reported on your credit files for being late
If you use your credit card throughout a month and pay your bills in full but no more than full, you will always have a balance on any given day. For example, if a $300 bill is due on 3/25, but by 3/25, you already spent another $250 on the card ($550 current balance), you still only have to pay $300 because that’s how much the bill tells you to pay by 3/25. After you pay the bill in full, you still have $250 balance that you aren’t required to pay until 4/25.
History is the key to good credit score. Having long history and not missed any payments. Why pays interest if you can paid in full. Live within your mean so you never have to worry not being able to pay in full. Keep a saving for emergency like loosing your job so you can keep paying the debt you owed.
Pay on time every month and keep a reasonable total credit utilization. Those are the keys to a good score. Whether it’s actually paid off overtime month doesn’t even really factor into the score at all.
I have an 800+ credit score and I have never carried a balance on a credit card in over 30 years.
One very important thing to keep in mind is that if you always carry at least a $25 balance and never pay it in full, you will be paying interest for at least a month on EVERY purchase.
I pay all my cards off every month and have never paid interest on any of them. Paying 29% interest on every credit card transaction is a great way to end up in bankruptcy eventually.
Don’t listen to your mom. Just pay off your balance in full. Always.
> Do I keep a small balance on my card
Absolutely not.
> Should I pay off the card immediately after purchase or when my bill is due?
Do you pay your water company every time you flush the toilet? No. Pay when the bill is due.
> Am I correct about the utilization?
No. Utilization does not matter. Read this: https://old.reddit.com/r/personalfinance/comments/11jzhcz/im_teaching_financial_literacy_and_the_basics_of/jb51g23/
It’s important that the credit card provider report SOME utilization to the credit bureaus. You DO NOT want the reported balance to be $0 every month. They will think you are not using the credit at all, and that will not help your credit score. Show you are responsible with credit by maintaining a low but non-zero utilization each month.
Use the card as you need, let the balance be reported to the bureaus at the end of the statement period, and then pay off the statement balance in full before the due date. This way, you don’t pay interest, and you get score boosts over time.
Always pay in full by the due date.
Never carry a balance month to month.
Be advised, your mother is giving you bad and costly advice.
Pay off your bills regularly and consistently before the due date. I’ve never had to worry about my credit score and I’ve done this. And I’ve never had to worry about debt because of this either.
your mom is wrong, paying off your credit card balance will Not hurt your credit score.
2 simple Credit Card rules to follow:
1) Never buy anything on the Credit Card unless you already have the money in your bank acct to pay for that item.
2) when the bill comes, instead of only paying the minimum amount listed as due on the CC bill, Pay off the CC in full, every single month. i pay mine off in full every 2 weeks on payday (my credit score is over 800).
what hurts your credit score is late or missed payments.
Your research is correct, and your mom is wrong. Keep your utilization below 30% and pay it off every month. There’s no need to keep an interest-accruing balance on the card.
for the love of god, PAY OFF YOUR BALANCE EVERY MONTH
and DO NOT spend more than you can afford to pay off that month
take it from someone who got a Discover card in college, developed crappy habits, and took 30 years to figure it out
develop good habits now and keep them for life. You will save yourself so much trouble and money
“I should keep a debt balance of around $25 at all times on the card to build my credit”
No. There is no benefit to carrying a balance. You only need to use cards enough so that they are not automatically closed due to inactivity. Typically you only need to use any card a few times per year.
“My research has shown that I need to pay off my credit card each month in full and the important part is keeping my utilization between 10%-30%”
No. This is also wrong, you need to keep the utilization below a certian point, likely between 20-30% but you **do not need to carry a balance at all**. Just keep it under that amount.
I pay the statement balance in full every month. Leaving a balance on the card will cause you to have to pay interest, which is a waste of money.
Plenty of great advice already in the thread, just wanted to add that while you should absolutely monitor your credit score, don’t get flustered when it jumps up or down each month. My credit ranges anywhere from 790 to 840 with no apparent pattern, often jumping or falling 20 points in a single go.
Pay the statement off every month.
She’s right! As someone who just tried the “pay it off every month” it tanked my credit majorly 😭 same with the fact that I don’t have a mortgage or student loans. you have to have debt to have better credit isn’t that crazy? But yes, pay most of it off by don’t get trapped paying off a huge percentage rate.
I’m at 800+ credit score and I never carry a balance.
Your research is correct. Your mom doesn’t know what she’s talking about.
Keep no balance. Find the reporting date. The due date is not the same. The reporting date is when they tell the 3 credit agencies your usage. Find that date and pay the bill before that date every month in full. The entire keep a balance garbage that out there needs to stop.
Paying before the due date is also fine but the hack is to always pay before the report date.
Your credit score is just one thing that is taken into account when you get a loan for a car or various other things.
Pay for everything with your Discover and pay off the balance every month and bank the 1% you get back. It’s free money. Your credit score will take care of itself.