When to pay Credit Card

First I'm happy to say that aside from my car and my home, I'm debt free. However, I still use a credit card to pay for all budgeted expenses, and then I pay the credit card off at the end of the month. This allows me to take advantage of CC rewards and almost covers my entire Christmas budget. The timing of this action is where I have a question: 

 

Today is 4/27 only 4 days away from the end of the month. All of my budget categories that go to my CC are covered except for my natural gas payment and my mobile phone payment. Both of those are scheduled to be debited on 4/29. 

I've been using YNAB since Jan. and I've been striving to get everything to zero and time it so that on the 1st of the month I'm at zero on my credit cards. 

 

I was thinking this morning of just paying the balance on that CC, but if I do, then it's possible that those 2 charges will be in April and not December. 

 

Does this really matter? If those charges do post in April, will they carry over in my credit card balance in May and then I just pay it at the end of may? Should I be concerned about the timing? 

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  • I have my credit card scheduled to pay the statement balance each month when it is due. No reason to give the credit card company their money any sooner

     do not pay for charges before they hit you credit card

    Like 5
  • corecrash said:
    I've been using YNAB since Jan. and I've been striving to get everything to zero and time it so that on the 1st of the month I'm at zero on my credit cards. 

    I was thinking this morning of just paying the balance on that CC, but if I do, then it's possible that those 2 charges will be in April and not December. 

     Why? What is the logic behind this ambition? I don't understand the need to have it at ZERO.

    Just pay the statement balance on or just before the due date. As long as all your charges are covered by your payment category, only pay what you need to pay when you need to pay it, no more and certainly no earlier.

    Like 3
      • corecrash
      • corecrash
      • 6 mths ago
      • Reported - view

      nolesrule Because while I was getting CC debt free, I noticed that the balance didn't carry over and then I had to do some trickery to pay it off and have it look right in YNAB. That could be my lack of understanding use the app. Now that I don't have CC debt, it's much easier, but I'm not sure how the app will behave if I have a balance and it carries over to the next month. 

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 6 mths ago
      • 3
      • Reported - view

      corecrash Just like any other category The Credit Card Payment category balance carries over if it's positive. When you are in Pay In Full status, the balance should always be a positive amount that is enough to exactly cover your entire CC account balance at all times. So it will always carry over if you are using the credit card payment category correctly.

      If while you were paying things off your balance went negative, then you were paying it off with money intended for use in other categories. Like any other cash overspending, YNAB does not carry over cash-based negative balances and will take it from future To Be Budgeted.

      Like 3
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 6 mths ago
      • 1
      • Reported - view

      corecrash You can see how a CC payment category balance carries over by looking at next month's category balance. There is no calendar-based trickery that happens at midnight on the first of the month behind the scenes.

      Like 1
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 6 mths ago
      • Reported - view

      corecrash When people talk about what happens next month, it's not really calendar-based. It's just budget screen math, using dates for separation of the months. YNAB always reflects the present state of the plan for all of the cash you have right now, and that goes for every single month into the future. If you look at next month right now, that's what it will look like when next month rolls around unless you make changes to your budget or add new transactions between now and the start of next month.

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      • corecrash
      • corecrash
      • 6 mths ago
      • Reported - view

      nolesrule  That helps, thank you. Looking at May, I can see the same balance carry over. I think I'll just start paying the statement balance and not worry about it being at zero since I have the funds to pay it at anytime. 

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      • corecrash
      • corecrash
      • 6 mths ago
      • Reported - view

      nolesrule Although, since I do not get any interest in my checking account, I wonder if there is a benefit of just paying the statement balance and keeping the money in my checking account. I could see this being beneficial if I was accumulating interest. 

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 6 mths ago
      • 2
      • Reported - view

      corecrash You can optionally use this as an opportunity to keep more money in a savings account, and take advantage of the grace period. How much extra interest that might bring in would depend on how much you use your credit card.

      What I mean is you already have the money reserved in your budget, but you don't need it right now in your checking account. So move it to savings. Meanwhile, you're probably going to be paid again before you have to pay the CC bill, and that money will go into the checking account. That money could be used to pay the CC. And if for some reason that money doesn't appear, you can always move it back from savings.

      Like 2
      • Alemap
      • Everything should be made as simple as possible, but not simpler -Albert Einstein
      • alemap
      • 6 mths ago
      • Reported - view

      corecrash , you could also setup your CC payments to ACH from your savings account (if your CC gives you that option) and then you don't have to worry about timing transfers from savings to checking.

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 6 mths ago
      • Reported - view

      Alemap This is true but keep in mind that a savings account be law (at least in the U.S.) can have no more than 6 withdrawals (including transfers) per month.

      Like
      • Alemap
      • Everything should be made as simple as possible, but not simpler -Albert Einstein
      • alemap
      • 6 mths ago
      • Reported - view

      nolesrule , yep--am aware. Note that the limit is for online/"convenience" withdrawals only.  In-person withdrawals are not subject to that limit--and also not really available right now ;-) and there are no limits on deposits in any form.

      Like
      • ynabHammer
      • ynaBHAMMER
      • 6 mths ago
      • Reported - view

      nolesrule 

       

      I either pay the statement balance or the entire balance to ZERO, depending on what I have planned for that month. I Always pay before the billing statement ends, that way it's reflected before they send it to the Credit Reporting agencies. The bottom line is I never pay interest, and of course, I always pay on time. 2-3 days before its due to allow for my Bill Pay to process. If a transaction makes it in outside of that, its no biggie, because it will get picked under the next statement cycle, either way, no interest paid. In fact "Nick True" Has a great YouTube video talking about this very same topic. 

      Like
    • nolesrule Interestingly (to nerds like me, at least), the Fed recently suspended this rule indefinitely. However, that doesn't mean banks aren't allowed to levy the fee, I think.

      Like 1
    • corecrash It's also beneficial in other ways. Having the most cash on hand while having as little liability on your "personal balance sheet" is the best place to be.  It just makes you more nimble in case of emergencies while still covering your debts and limiting the pressures of outstanding liabilities. 

      Like
    • nolesrule There are some online banks with "high yield" checking accounts.  You can use those accounts as savings.  Anyway, you just want the extra interest, with no transaction limit.

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 5 mths ago
      • 4
      • Reported - view

      Ramon Olivero Yes, that's true. usually they require some monthly hoop jumping to get the high yield though, which is why I tend to ignore them. My preference is to take advantage of the set it and forget it accounts.

      Like 4
      • Wiecked
      • Happy Happy
      • Orchid_Tiger.5
      • 5 mths ago
      • Reported - view

      Matthew That's such a random thing to suspend. 

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      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • Reported - view

      Wiecked it was pretty random to exist in the first place.

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      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 5 mths ago
      • Reported - view

      dakinemaui Is it, though? Thinking aloud here. Interest comes from the bank lending the money they have on deposit. If an account can be easily emptied, they are taking more risk, ergo, they can lend less of that money safely, ergo, lower interest rate. If there’s greater certainty the money will stay, better ability to safely lend it out, ergo, higher interest rate. If you promise a higher rate, it makes sense to restrict ability to withdraw.

      It makes sense to me. But I don’t know if that is grounded in anything. Suddenly I want to research the history of deposit accounts. 

      Like
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 5 mths ago
      • Reported - view

      WordTenor research the history behind Federal Reserve Regulation D

      Like
      • dakinemaui
      • dakinemaui
      • 5 mths ago
      • Reported - view

      WordTenor If I am promised a higher rate, I'm going to leave it there on my own. No need for the gov'ment to dictate/restrict anything. 

      Like
  • In normal operations, there are no reasons to pay off a card before it is due. The two most common reasons to do so are:

    1. Big charge coming up and you need the balance available
    2. Credit check coming up and you want your debt load to be a lower percentage (this is marginal, and not really worthwhile to focus on). Keep in mind many banks will report your balance a couple times a month, and being at $0 on the 1st doesn't give you an advantage here.

    Outside of those two reasons, better to hold the money as long as you can in one of your own interest bearing accounts and pay the CC when due. I myself have a day of the month I just sign in and pay my cards, then don't worry about it again until the same day the next month (though I try and import at least weekly).

    Like 4
      • dakinemaui
      • dakinemaui
      • 6 mths ago
      • Reported - view

      Karabats In my experience, CCs report the statement balance each month.

      Like
      • dangerosity
      • Aquamarine_Piranha.9
      • 6 mths ago
      • 1
      • Reported - view

      Not the case overall, although that consistency would be nice. One card of mine reports on the 1st, and another reports twice, around the 11th and the 23rd. None of those dates are my statement balance.

      Like Karabats said, the best strategy for me is to log in once a month and pay the balances. Lets me hold on to money a bit longer. 

      Like 1
    • Karabats There is a 3rd, important reason. CC Cash Advance. I do not know if it is like this in USA, but in Canada, they start charging you interest as soon as you have the money. Which cause the interesting situation that if you wait to the due date to pay your CC balance, you will pay more interest. 

      How did I find out. A while ago I went Mexico for a trip.  I needed cash and my regular Debit card did not wanted to work, so I have decided to get a cash advance from my Visa. This card release its statement around the 11th of every month (+/- 1 day), with a due date around the 7th the month after. 

      I always pay my complete CC Balance when it due, and I was using the automated system my bank allow me to use. Allow me to bullet-point for clarity purposes:

      • On the October 11th of that month, I received my usual CC statement. The bank system schedule the payment automatically for November 6th.
      • Around October 16th (same month), I did my cash advance....
      • On November 6th, the automatic payment cleared the balance due on the October 11th . Obviously, the cash advance had not made with to a statement yet... but interest was counting. So the money paid was for previous transaction, and did not counted against the cash advance.
      • Then November 11th statement come, and I see an interest charge. Then I remember that there was immediate daily interest on Cash-Advance! I hate paying interest, but I remembered I had not choice. The amount was small anyway.... 

      And then, I made a stupid mistake 😣. Not sure what I thought, but my brain decided that this small "interest charge" was accounted for, and I would simply clear it on the next automated payment, that got schedule for December 6th...  and immediately forgot about it. 

      And if you have been following, you know what's happened:

      • On December 6th, the automatic payment cleared the balance due on the November 11th statement. 
      • Life is good, all is cleared. 
      • December 11th statement come.... with again a very small interested charge!!! 

      And this, simply because I forgot that on that interested would have been running from October 16th to November 11th,  the day that the cash-advance would have been fully cleared... Oh, and also the bank always clear the cash-advance last.... 

      So what did I learn from this? If *ever* I need to do a cash advance with my CC, I will log in my bank account ASAP, and clear the CC full balance right away.

      Like 1
      • dakinemaui
      • dakinemaui
      • 6 mths ago
      • 4
      • Reported - view

      Eric Poulin Mentioned it up-thread somewhere, but I wanted people who read your "cash-advance" post to see it... (which is spot on, BTW).

      I would recommend switching to riding the CC float rather than a real cash advance. Riding the float will be interest-free as long as the amount is within the amount of normal, budgeted CC purchases.

      Relevant to other comments, if you normally pay the entire account balance to zero, you CANNOT immediately switch to riding the CC float. I strongly urge people to not pay more than the statement balance. Options are good.

      Like 4
      • Karabats
      • Karabats
      • 6 mths ago
      • Reported - view

      Eric Poulin Great point and important on cash advance! I remember digging into that when I first got a CC and thinking: "Well, never going to use this!" and never thought about credit card cash advances again.

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    • dakinemaui nolesrule

      Fully agree with both of you. I have been doing this for a long time.... but as you may read on my example on this thread, the exception is if you do a cash advance. I would usually never do this with a CC, but sometime it may happened. And if it does, pay it in full immediately. 

      Like 1
      • dakinemaui
      • dakinemaui
      • 6 mths ago
      • Reported - view

      Eric Poulin Agreed. There is no grace period for a cash advance for any of the CCs I've ever held. Moreover, I think it might kill the GP for successive purchases (not sure about this).

      This is, in fact, another argument for only paying the statement balance. This allows you to reallocate from the CC Payment category and switch to riding the CC float instead of making a real cash advance. This will be interest free as long as the "advance" is within your normal budgeted spending patterns.

      Like
    • dakinemaui I was not familiar with the term "CC Float", so I search for this. The YNAB definition is interesting: "The "float" is a term for any situation where you think of yourself as a paid-in-full credit card user, but in fact, you don’t have enough money on hand right now to pay your credit card in full and also budget for future spending."  

      If I get this right, I am in a "CC Float" situation if I have to wait for the income to pay my CC balance each month. This is interesting as I do wait last day to pay my balance, but only for the reason you mention up this thread; to keep this money in my bank account and put it to use (I have an atomically small interest rate on my checking account, and no fees if I keep a minimum amount there). 

      If my French Canadian brain may ask, what does "Kill the GP" mean?  My Google attempt to search for that exact sentence did not help, and neither in the forum.  

      Like
      • dakinemaui
      • dakinemaui
      • 6 mths ago
      • 1
      • Reported - view

      Eric Poulin GP meaning "grace period". My worry is that a cash advance would cause subsequent purchases to start incurring interest immediately.

      Like 1
      • dakinemaui
      • dakinemaui
      • 6 mths ago
      • 2
      • Reported - view

      Eric Poulin  

      In the YNAB context, Riding the CC float is characterized by not having enough money reserved to immediately pay the statement/account balance upon the statement closing date. (They are the same value at that time.) However, you do have funds reserved on the due date. How that happens varies.

      Ideally, budgeted purchases made in the roughly 4 weeks before your payment is actually due will have sufficiently raised it, enabling payment without overspending. In such cases, you are less than 1 month "behind".

      YNAB missed this aspect of using budgeted purchases in their description. If you have to wait for additional income in order to reserve enough for the payment (YNAB's depiction), you are in a severe case that is more than 1 month behind. Even more severe would be when you have to use income received after the payment to clear the overspent CC Payment category.

      Like 2
    • dakinemaui Got it! Thanks for all the details!

      Like
      • dakinemaui
      • dakinemaui
      • 6 mths ago
      • Reported - view

      While often painted in a negative light, Riding the CC Float is merely an intermediate stage in the progress to paid-in-full status: interest bearing debt -> interest free debt -> no debt/PIF.

      Going the other direction, you can think of it as a 0% loan for whatever amount you can consistently make in budgeted purchases on the card each month. ("Consistently" is important because you have to repeat each month to increase the payment category.)

      Use those "loan proceeds" as you see fit.

      Where are those funds? They're in the CC Payment category. You'll note the category balance for a PIF user fluctuates between about $X (on the statement closing date immediately following a payment on the due date) and $2X (just prior to the next payment). At all times, there is at least $X just sitting there. It would be better to reallocate -- still avoiding interest -- than make a cash advance.

      To "get off the float", simply budget to put those funds back into the CC Payment category.

      Like
  • For me the money is in the budget when I make the transaction, it comes out of the budget when it posts to the cc, and it comes out of the account whenever the autopay pulls it. I have my cc on autopay for the statement balance 2 days before the due date. (there is no option for autopaying the account balance) but thats all thats required to avoid interest, and on any given day I have the cash on hand to pay the balance to 0 at a moments notice. 

    And as others have said keep that money where you can make interest for as long as you can without paying interest on the card, combined with your cash back makes a nice bonus.

    Like 2
  • As most have said, YNAB should have no effect on when you should pay your credit card. You should pay your statement balance on or (slightly) before the due date. YNAB works perfectly fine with the normal credit card payment flow.

    Like
  • I have my credit card accounts setup to automatically pay the last month's statement balance on the due date, so that I don't have to do anything to make sure I don't pay a dime of interest.  This works very well for me and I highly recommend it.  There's no human error involved.  You don't need to pay the balance down to zero, just make sure to pay the last statement balance by the due date and you'll be fine.

    Like 3
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 6 mths ago
      • 2
      • Reported - view

      PhysicsGal Yep, I do the same. You do have to make sure you always have enough in your payment account. I use scheduled transactions and the running balance to ensure this.

      Like 2
      • ynabHammer
      • ynaBHAMMER
      • 6 mths ago
      • Reported - view

      Wiecked 

       

      And Credit Utilization, want it under 30%, 10% is best tho

      Like
      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 6 mths ago
      • Reported - view

      ynabHammer The new FICO model changes this *slightly* but this still doesn’t matter very much. For the most part, that ratio is not backward-looking. 
       

      If you use YNAB you have the ability to pay your card to zero at any time. So, you just pay it to zero before you apply for whatever new credit product you want. When your credit is pulled, it will show that the ratio is good. In addition, if you’ve been managing your credit card well using YNAB, you are likely to become eligible for higher limits. You can then combine cards, or request a limit on your main card where by the highest balance you usually hold is less than 30% of the limit. 

      Like
      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 6 mths ago
      • Reported - view

      Actually reading more, the 10 T makes it even *less* important to pay to zero. It looks at 24 months of history, so if you paid your statement balance in full for 24 months, and this month you happen to have just paid for a big cruise, they are more likely to assume that the cruise will be paid in full on the next statement, despite that right now you have a big balance. 

      Like
      • corecrash
      • corecrash
      • 6 mths ago
      • 1
      • Reported - view

      WordTenor What is 10 T? 

      Like 1
      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 6 mths ago
      • Reported - view

      corecrash There are two new FICO models, FICO 10 and FICO 10 Trend, or 10T. The 10T uses 24 months of trend data. So if you've paid your card in full for the last three months but the 21 months before that you carried balances, your score (at least on that part) won't be as good as someone who paid their card in full for 24 months straight. 

      And I'll amend the above: according to Motley Fool, more weight will be placed on credit utilization than used to be. But I cannot find anywhere that says that credit utilization is part of the trended metrics, just like in previous models. It's a one shot--what does the utilization look like today? A PIF YNABer always has the ability to pay it to zero before they need to apply for credit, so credit utilization is not actually an issue for us. 

      Like
  • This has given me the opportunity to shift my thinking about my finances. After reading all of your replies, I'm shifting from thinking about it from a month to month perspective to just one big pool of time and money. I suppose it doesn't matter when something occurs YNAB just keeps going and carrying balances over. I have scheduled an auto pay for my CC to pay the statement balance when it's due. 

    Like 6
  • WordTenor said:
    In addition, if you’ve been managing your credit card well using YNAB, you are likely to become eligible for higher limits. You can then combine cards, or request a limit on your main card where by the highest balance you usually hold is less than 30% of the limit. 

    Yes, I periodically ask for increases in my limits even though I have no need for them just for credit utilization purposes. My limits are so high that I average 1% to 3% credit utilization in spite of the fact that I put most of my monthly expenses on credit cards and automatically pay the statement balances on their due dates.

    Like
      • WordTenor
      • I have the honor to be your obedient servant
      • WordTenor
      • 6 mths ago
      • 2
      • Reported - view

      Superbone Same. I actually can't fathom what I would be allowed to pay for using a credit card that would actually take me over 30% of my limit at this point. Car dealerships usually don't want the credit card transaction fee. I suppose I could fly my parents first class to visit my brother in Asia? That would come close. But I don't have the cash for that anyway. 😂

      Like 2
      • Karabats
      • Karabats
      • 5 mths ago
      • Reported - view

      WordTenor Can do a "balance transfer", get the check to your bank account, then write a check to car lot. That would do it.

      Don't do this :P

      Like
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