Is it possible to pay off credit card balance after making a purchase?

James: Is it bad to pay off credit card balance after making a purchase?
I’ve recently begun using my credit card for all of the purchases I make, largely to build credit and also because it’s safer than paying with my debit card. My credit card is with my bank company, so I can instantly transfer money from my checking into my credit card. I don’t like having a balance on my credit card, so anytime I make a purchase using it, I transfer money from my checking into my credit to pay off the balance right away. I’m just wondering if there are any drawbacks to doing this?

Answers and Views:

Answer by Ttrtrtrtrt
nho

Answer by Robert T
What you are doing is the smartest thing you can do. However, banks are kind of funny about credit. It seems they want to make a little money off of you, in the form of fees and interest charges. If you are paying your balance every month, the bank is not getting interest charge income it would be getting if you just made a large purchase or two, and paid it off more slowly. Credit is basically defined as the ability to borrow money. The more you borrow and pay back with interest (on time, of course), the more likely the creditor will be willing to loan you more money, more often. Eventually, this will lead to more and more available credit. This process is commonly called “building credit.”

Get into debt (use your card). Do NOT uncomfortably approach your credit limit. You want to keep a little contingency room on your balance, for unforeseen expenditures. Maintain a balance. Remember, you want to build credit. Keep it light at first, and build it up a bit as you get used to constantly owing interest. Just remember to keep enough in your savings or checking to pay off the amount.

After about six months of carrying a balance, pay it off, go into the bank and ask to borrow $ 2,000 for something you don’t need. Tell the loan officer you want a signature loan and this will be used for building credit. Banks like this. They may or may not provide alternatives, such as a secured loan (the bank holds your bank account hostage up to the total loan amount), or either increasing or decreasing your loan amount. Your goal is unsecured loan for credit building purposes. The loan officeer will be more than happy to assist you, especially since they will be looking at your credit card history…”carries reasonable balance over time, pays it on time, stable…maybe we can make a loan”. Your loan officer will be able to give advice on how to get into debt with them and pay it back with interest. The interest rate may be high, but don’t let that scare you. That is why banks and credit card issuers make loans; so they can generate reliable interest income. The better credit rating you have, the more money you can borrow, and at a lower interest rate. If you are just starting out, they are taking a chance on you, so expect a higher interest rate.

You can even apply for another card to keep for emergencies and large purchases. If you get another card, use it. Just make sure you are able to pay it off.

Once you establish credit by buying a few big ticket items, such as a car, motorcycle, furniture or a trip to Europe, you can go back to what you are doing right now, paying off the balance every month and guarding your credit rating like a hawk.

I personally think that having credit and not needing to use it, is a very powerful financial tool.

Answer by Alex
The first answer is a good one, except I don’t agree with carrying a balance and paying interest.

The bank makes money every time you use the credit card – they charge the vendor a fee. It’s not “bad” to pay off your balance immediately, but you may want to change a little to build credit. What shows on your monthly statement is what shows on your credit report. If you’re paying everything off asap, your monthly statement probably shows zero balance. So your credit report will show that you have been making on-time payments (good thing), but another creditor would look at that and think you were not actually using the card.

If you’re just starting out and don’t plan to apply for more credit in the near future, keep doing what you’re doing. Your bank is making money and will probably raise your credit limit after a while (good for your credit report). If you do plan to apply for credit in the next 6 months and have the credit limit to cover your spending, cut back to paying it off every week or every time you get paid.