Paying balance before closing statement
 

Just want confirmation that this is correct:

If Statement is due on December 10, 2012 and I charge 2k (CL is 3k) on December 2nd, pay it off December 3rd, will the 2k appear on my credit card report for the statement balance ?

If balance is zero for the closing statement, will this mean that the 2k is not used for my credit card utilization?

I understand that different banks have different rules in reporting the monthly balance to the Credit Bureau.

This Scenario is for Citi Bank

TIA

Correct in my experience w/Citi.

I am wondering what would be the answer for Chase and Amex?

Thanks for asking the question.

Also, if Chase offers 6months interest free and you carry a balance for a few months, how does that affect the credit score and credit utilization?

You're interest free-that's it. Your credit utilization keeps going up as you're not paying it down at all.

Plus you still need to make minimum payment each month.

Plus you should not charge anything on the card that carries balance for any charge would immediately incur finance charge.

This may not be clear to most folks - your charges ACCRUE interest at the moment you make it. However such accrual would not be billed IF you pay your statement balance in full by the due date. The Accrual would then be waived. Else, the interest calculation is from the time you charged, not from the statement close nor the due date. You essentially lose the grace period on all your charges. Congress has done away the double-cycle billing of finance charge, otherwise it would be even worse.

In essence you already get an interest-free "loan" in the form of your charges if you pay off the bill in full by due date. Just that the duration of the "interest free" period is from the purchase date to the due date only.

Plus it most likely not a 0 fee balance transfer. If you are lucky it may be a 3% or below fee. Totally defeat the purpose of the 0% interest.

I don't think you guys are answering his question. His question is whether paying a balance off before the statement cuts will result in a $0 balance on his credit report for the purpose of utilization.

In my experience, the answer is yes 100% of the time, across every bank I've tried (including Citi). I use this tactic heavily to keep my utilization under 5% regardless of the amount I'm actually charging -- I let one reasonable sized balance report (but still <20% of the individual credit line), but pay off all the rest before the statements cut. This is generally agreed to maximize FICO score.

The one variable that I'm not completely sure of is the "high balance" that appears on credit reports. I don't know if that is only calculated when the statement cuts, or whether that's the high balance ACROSS the statement period, in which case that would report 2k even if the actual balance reported is 0. If that's the case, then it still might be a reason not to charge 2k on a card with a 3k credit limit, since the "high balance" would report 67% utilization on that card.

Good point about the high balance. Hopefully it is the amount when the statement closes. I will be getting my free credit report soon so I will check.

Are you saying that the offer for 6 months interest free does not mean interest free? (I am not talking about transferring balances, but I am asking about the charges made on the card)

I figure you must still make the minimum payment, if if they offer 0% interest for the first 6 months and then charge interest that would not be an honest offer in marketing.

Report back when you find out -- I'd like to know either way.

Checked Free Equifax Report today. Here are the findings:

AMEX- High credit based on closing statement amount
Citibank - High credit based on closing statement amount. Mine was "$0 "
When checking my payment information, I paid $3501 a little over 2 weeks before the closing statement.

Interesting tidbits about High Credit and Credit Limit

Chase - not sure because EVERY Chase credit card reported said "account closed at consumers request" (this is true). However, not one of my 6 ACTIVE Chase cards have been reported to the Credit Bureau

Bank of America- an old card (opened 1997) and closed in 2009 showed a high credit of $24400 with a credit limit of $13,800. This was not used for my credit utilization

Check the other two, likely chase is reporting yours to experian now.

Cards are typically reported once a month with the statement closing date, not throughout the month. Timing your balances with your date due along with the statement closing date works in your favor. Remember your statement date is typically different than your due date.

There should have been reporting of my Active Chase Accounts. They have been active from about 4 months to years!!

I have been doing quite a bit of reading on a variety of forums on these topics this month and here's some things I learned. (For whatever it's worth - we know how notoriously unreliable forum postings are ;) )

We all have to remember that it is completely legitimate for any lender to report current balance at any time. The habit of most, as gloreglabert stated, is to report statement balance. However, there are a few - most notably USBank and HSBC - who most often report balance on the first of the month.

Piecing everything together that's been stated and implied publicly, the ideal case would be to have several open cards, with one of them having a large credit line. Then, let that one card show a balance that is < 10% of that individual credit line and also 2-3% of your overall credit.

However, the vast majority of the FICO points would be earned by simply keeping MOST cards at 0 balance and an overall utilization under, say, 20%. Beyond that it's diminishing returns.

I haven't found anything to indicate that "high balance" is actually used in the FICO model at all. The one exception is a true no-preset-limit card that doesn't report any credit limit. On those cards, the high balance is used as the available credit. But if the card reports a credit limit, it doesn't seem to matter what high balance is reported (aside from utilization on the one month the high balance is actually carried).

EDIT: Although, wouldn't you know, I found this just now: http://www.myfico.com/crediteducatio...ons/fico8.aspx
Closed accounts are used for average age and length of credit history but NOT for utilization.

Interesting -- glad you noted that, since I was just running a significant balance on a US Bank card and wasn't planning to pay it off today.

Yes, I don't believe high balance factors into scores at all -- but when you make that inevitable recon call, you don't want anything to catch the rep's eye. ;)

I have a question that is related to the OP question. I have searched the forum, but never found a definite answer to what is the "ideal" credit utilization ratio. I always pay the cards off in full a few days after I receive my statement in the mail.

Normally my credit utilization is about 2-3%, and has never been more than 5%. I could easily pay the cards off before the statement date hits, resulting in a 0% utilization. However there is some controversy in some threads that banks don't want to really see 0% utilization, as they may interpret that means they won't make a dime off of you in merchant fees. Also they may interpret 0% utilization as "why should we extend credit to you, when you aren't using any of the credit that you already have".

Anyone have a good data point as to what the "ideal" credit utilization % is?