You got a credit card, and there is no APR for 12-18 months –Yass live your best life with no repercussions…Wrong.
Credit cards are great especially when you get bonuses for signing up and don’t have to pay interest for a whole year. There is a downside though -plummeting credit score. Using the example above my BOA credit card has a 4k limit. So if I was still in my first year of having the card I would not have to pay interest. However, even though I’m not paying interest if I use more than 30% of my credit and keep my credit usage high for the majority of the 12 months my credit score will drop because I’m maxing out my credit. It’s wild, we can’t WIN.
Here is a quick breakdown to understanding your credit card, and some key dates to remember. I call my credit card “Cautious liberation” cuz its like I’m free but I’m not. A misstep may lead to an uncontrollable debt due to high interest rates and compounded interest plus a shaky relationship with my credit score if I swipe carelessly.
Before we break down the snapshot two things
Credit utilization is usually calculated based on your total outstanding balances compared with your total credit limit across all of your cards. Best practice is to keep your balance below 30% on all of your cards at all times to kill two birds with one stone.
APR( The annual percentage rate) is the extra amount of money you pay to the bank if you do not pay your balance, this is how banks make money from credit cards and how you spin into debt :(.
A.) Current Balance: This is how much is owed.
It’s recommended that this does not use more than 30% of your credit limit. So theoretically I should not go above $1200, anything higher starts to negatively impact credit score. My general rule is if the money is not in my checking then I should not swipe.
B.) Total credit available: How much money the bank has given you to spend that you still have to spend
Pro tip: Set an alert to let you know when your balance reaches 20% of your available credit. That way, you have time to either slow your roll or pay down your card before hitting 30%.
C.) Cash credit line available: How much cash the bank is willing to give you from your credit card.
I’m weary of this because you get charged for taking this cash then also have to pay it back with interest so it just seems like crazy fees all around #issanoforme
D.) Rewards: “Money back”
Many people get credit cards because you get money back for spending money. I currently have 16,438 points or $164.38. I can use this to pay my credit card bill or transfer to my checking. Each credit cards has different ways of accumulating points and redeeming it. Each month you should see the points you earned added.
E.) Total credit available: How much money the bank has given you to spend.
F.) Cash credit line available: How much cash you can take out.
G.) Amount over credit line: The amount of money you have overspent, more than the credit given
This is kind of wild. You can go over your credit limit. So limit 4k, you buy that new pair of sneakers your card doesn’t decline but now you owe $4,200. The bank allows this because they get money through fees, possible hiked interest rate, or overcharge fees. They can also close your account or decrease your credit limit. This won’t happen because we are only using 30% 🙂
- It asks if you want to increase your limit. The bank will naturally increase your limit as time goes on. When I got this card 3 years ago I was approved for $1,500. Over the years I will randomly get an email that the limit has gone up. This method works because the limit goes up without a hard inquiry into your credit, so your credit score isn’t impacted.
H.) Next closing date: The amount of money you have spent therefore will owe this month ( billing cycle)
Billing cycles are usually 30 days. Keeping an eye on this date is helpful so you know when to pay for things. So if you have to purchase something for $200 and that’ll put you over the 30% wait till the 10th. You Can change this date to match your pay schedule or 1st of the month or w/e works for you.
The balance on this day is what is reported to credit bureaus. If my balance is high and I can pay down my balance I try to pay 48 hours before this date ( so it will clear). Find out when your bank reports to the credit bureaus by calling them. It would suck if your reported balance is high, therefore, dragging down your credit score because you aren’t aware of when it is reported.
I.) Last payment date: The last time you paid money to your card
J.) Last payment: How much you paid, last time you paid
K.) Statement Balance: Shows the total amount that you owe up to the end of your most recent billing cycle. This is the balance that you need to pay by the due date so that no interest is applied. You will not be charged interest on your new balance until the next closing date
L.) Payment Due Date: This is the date to pay the minimum. Minimum’s are usually low at around $40. If you can’t pay for the full bill, by paying the minimum you avoid late fees. Pro-tip: Look at your statement, it will show you how long it will take to pay off your balance if you pay the minimum and how much you’ll end up paying in interest.
M.) Total minimum payment due: The total minimum payment due lol.
Pay this no matter what. Yes, even if you must drink water and suffice those as meals
N.) Make a payment: Pay your bills 🙂
BOA payment is a transfer system. I usually have to go to transfer and transfer from my checking to credit card. My chase credit card allows me to pay in the credit section but also has automatic payment options. My gym membership is automated through my chase. So I could do an automatic monthly payment of $93 because I know that will always be there, and it’s also above my minimum amount so issa win win. I haven’t used auto pay yet because I want to actually check how much I’m paying and be cognizant, once it’s automated I’m scared I’ll forget and look up one day to a massive balance because I haven’t been paying the full amount. This is probably irrational but ehh I’m human I’m allowed my irrational fears.
Hopefully, this helps. Take a second and look at your SparkNotes summary ( the pic above), or download your statement and see what dates you need to pay attention to and where your money is going.
Update: By maintaining good credit your credit limit will be raised automatically. This is good because you have more room to play with the 10-30% limit, and if the bank raises your limit automatically, rather than you asking, your credit score isn’t impacted.