I always try to pay as soon as I have money available, and virtually always at least double the minimum balance.

I'll note that my credit card is used almost exclusively for school textbooks, and other school-related purchases.

STOP STOP STOP

There is nothing wrong with paying interest.
What people need to learn is to:
get the lowest rate possible
understand as you state above how interest is calculated and make purchase based on that -wait until last day of billing cycle to buy a big item-
stop thinking that cash back and points have value, THEY DO NOT
maximize the benefits of their card -insurance, end of year invoice like american express does-
realize that you need a credit card to buy an airplane ticket, rent a car or hotel room easily

buying on time is an important part of the consumer purchase cycle.
what makes it bad is when people overextend themselves.

How about not carrying a balance in the first place? Problem solved.

Note that some credit cards have limits on how many payments you can make per month. With any of mine, it's 2. So you may not want to literally pay whenever you have the money.

"Don't carry a balance" - Yeah no shit. That holier than tho answer was discussed in another recent thread - and I'm probably said it too.

However not everyone is perfect, and lots of people have balances. Every tip for getting out of debt faster should be met with "Don't carry a balance"

It's fairly obvious to the people that need the help. (been there and done paid it off.)

@Ronin-Democrat:

There is a lot wrong with paying interest.

Interest rates are meaningless unless you spend more than you can afford, in which case, yes, you should get the lowest rate possible.

Yes, you do need a credit card to buy an airplane ticket or rent a car... But no one here is disputing that. I'm not sure what you meant by it.

@Featherstonehaugh: Here's a news flash. People who can't pay off their credit cards balances in one month read this blog too.

29 percent on a credit card? Isn't that pretty redonk?

Wow! Talk about blowing things out of proportion to make a point! Who really has 29% interest rate credit cards that's not already maxed out on their starter/loser/deadbeat card?

This idea of strategically timing card payments caught my interest recently. I always pay off my balance each month, but noticed that the bank reports my balance to the credit bureaus immediatly after my monthly bill, before I've had a chance to pay it.

I wonder, would it make sense to pay my card down a week early, so that the bank reports a lower balance and my balance-to-limit ratio on each card is lower on my credit report? Would this be advantageous?

Pretty interesting to say "don't carry a balance" when:

1) Americans carry approximately $5,800 in credit card debt from month to month. If they make minimum payments on this credit card debt, it would take 30 years to pay off and cost them an additional $15,000.
2) Over 40% of all United States families spend more than they earn.
3) The average family has 13 credit cards or other types of payment cards.
4) 92% of United States families spend their disposable income on debt payments.
(taken from [www.nationaldebtassistance.com])

So wow, you really are special to not be among those, in fact, you are a minority. Feel good about yourself, and feel even better putting others down. You deserve that soap box.

Just a technicality, but compounding interest on a daily basis is not the definition of Average Daily Balance. Average Daily Balance is the method for determining on what balance interest will be charged when interest is compounded monthly. If interest is compounded daily, then there is no "average".. it is simply compounded based on the actual balance for that day.

Also, remember that in our modern economy debt is currency. Each of us burying ourselves in debt helps to bring our economy out of deflation.

Do your part and buy more stuff.

@Ronin-Democrat: What a nice fairy tale. Thank you.

Just use a debit card. Simple/

@DePaulBlueDemon: Actually you only need a debit card with VISA or MC to buy an airline ticket or rent a car. Stop speaking about things you don't have the facts. I just bought 3 round trip tickets from Chicago to Hanoi, Vietnam with my debit card. I don't have a credit card anymore.

I have the best option, and it actually pays me interest. I save money in my checking account at 5% a month and then buy it when I have saved enough. I don't have to worry about chasing interest payments or worry about the bank jacking my rates, or adding fees. More people should try it and we would not be in this giant shit hole caused by the misuse of credit.

The problem with that is that if you send them money BEFORE they issue a statement, that payment usually doesn't count toward said statement and you will be hit with a late fee for failing to make the minimum.

@IT-Chick: "The average family has 13 credit cards or other types of payment cards."

Holy freaking crap!

I feel embarrassed about having THREE. (Marital AmEx as main card. Marital MC for backup. Personal Visa for charging birthday presents for the hubster. And sometimes shoes that he doesn't need to know about.) I feel like three is so many I have to justify it!

(And no, I don't carry a debit or ATM card.)

@IT-Chick: I am one of those, and I am proud of it, maybe if more people were like us we would not be in the toilet right now. Those are the statistics should be a wake up call for people, but it's like smoking, you know it is killing you, but you can't quit. It is sad that we have to have instant gratification and have it now, instead of saving for it.

@Addicted To Chocohol: Exactly. Then you earn the interest instead of the bank. But apperently it's like telling a drunk to stop drinking.

@Collie: With a DEBIT card and not a CREDIT card, you can rent a car, but you have to put down something like a $300 deposit.

@Addicted To Chocohol: And lose the protection credit cards give you, or allow a third party to have direct access to your account to make withdrawals that may/may not have been approved, but are hard to contest? No.

Ben Stein uses credit cards A LOT, but he PAYS THEM OFF IN FULL so he doesn't pay interest.

The key is to not buy crap you can't afford.

@Collie: I'm with Collie. I also carry no credit card debt on 3 cards. I'm very proud to not have excess debt because of uselss purchases that will end up costing you triple the price when paid over decades. Just because the average Americans carry such large amounts of debts and have way more credit card accounts than necessary, doesn't make it okay and people need to realize that if you can't afford something now, 30 days from now, or a year from now, don't buy it!

@Ronin-Democrat: The problem with paying interest is it's money going in the wrong direction. Unless you have income coming in from your debt, in an amount greater then your debt service/interest amount, interest is an expense just like your coffee at starbucks. Step one, pay down your debt, step 2 save your money, step 3 earn a return. The bad thing about paying interest is it means you got 2 more steps to go!

@Collie: However, if you are using a debit card while on travel, you place yourself at more liability for fraudulent charges.

In my experience, most credit VISA and MC cards immediately refund fraudulent purchases, and send something for you to sign after a month or so.

As for debit cards... my account was fraudulently charged while overseas. I had to go to the branch back home to sign a notarized statement that it was so, and the amount was never refunded, since they never found the perpetrator (it was under $20, I just wanted a new card number after that).

Also most credit cards offer free car rental insurance (liability, at least), in most countries.

I have 0 balance on my credit cards, but owning them is not at all a liability for me, since they are an asset when dealing with over seas retailers who I do not know are honest are not.

@Ronin-Democrat: I agree, but I think you need to clarify what you're stating. You need a bit of debt to make large purchases, so you can make use of the items currently instead of simply saving it. The interest is the convenience so that you don't have to save now. This is for items like a fridge, car, homes, washing machines, items that are necessary and a huge investment, but will save money in the long run. Instead of saving and not using the item, you can use the item now.

Debt is also OK if it's a relatively small amount of interest compared with how much you're earning by placing the money elsewhere. If you paid off the house, you're losing money. By paying the debt, you're not making use of the money that can earn you interest. You can take out a loan for say 7%, and place that money in a place where it can earn you 10%, so it's a 3% interest that you're gaining, as opposed to letting the money sit there and think, well, at least I own my house free and clear.

Here's the thing: MOST PEOPLE ARE IDIOTS. They use their credit cards for everyday purchases, and they don't think about the money that they will eventually have to pay back. These are the same people that must resort to literally freezing their credit cards. For them, it is best to not borrow and save, since they do not have the willpower to handle debt responsibly.

A smart person (*cough* Ben Stein *cough*) can use their credit card for everyday purchases that should really be paid with cash (food, underwear) and pay off their ENTIRE debt, so interest doesn't matter. These are the type of people credit card companies hate because they do not make money off of them. This is a smart thing do to because not only can they analyze their budgets, but they earn points and the warranty protection that the card provides, as well as safe guarding their checking account from unauthorized access.

My Point? Yes, I agree, HAVING DEBT CAN BE BENEFICIAL FOR THE CONSUMER. But it needs to be done smartly.

If you make your payments in full every month you can also make this work in your favor by doing the opposite of what is advised. If you wait until right before the due date to pay, that's another 2-3 weeks of interest that you are getting and the credit card company is not :)

@sinfonian94: No they just put a hold on the card, that clears when you return the vehicle. I do it all the time. And it is usually $200, some hotels do the same thing. It is still better than carrying a balance and paying interest.

CC companies are trying to collect as much interest from their current customers as possible. I usually pay off my discover card every month, but last month I did not pay 150.00 of my balance as I was expecting a refund for the merchandise. The statement cut off for the current month and I was hit with a 20.00 interest charge. I couldn't figure out why. Turns out my agreement had changed and I forgot since the was the first balance I carried over in a couple of years. If I did not pay my entire balance on the previous statement, they could charge me interest on the previous balance and the balance on the current statement. I charged about 800.00 on the current statement so I got to pay interest on all that too. I have now taken the Discover out of my wallet.

I have started paying my credit cards 2x a month (in accordance with payday). I started using the snowball spreadsheet so I know how much to pay back to each card every month, and my checking account company has options for paying automatically twice a month.

Seems to be working out well for me, and I'll pay even less interest than the spreadsheet calculates.

@Cat_In_A_Hat: I knew I was weird, but glad I am not the only one. I am one of the unfortunates that got laid off and since I have no debt other than my house, it was not as devastating as it could have been. It has allowed me to readjust my career path, and now I have a new job (making less money). Debt is the problem with our country, every body says we need to spend, which I agree with to a point, but we need to spend cash, not credit. That is what got us into this mess.

@Ronin-Democrat: There is nothing wrong with paying interest...other than the fact that you are paying more than you spent. Why would you not try to pay off your bills in a way that minimizes interest? If you want to wait until the last day possible to pay off your bill so that you can accrue more interest than you would have paid if you paid off your bill right away, go ahead; I am going to continue paying as much as I possibly can on my credit card with each pay check and minimizing my interest.

@goodywitch: Your explanation contradicts your initial response. You are agreeing that paying interest is a good thing, but then you call people who use their credit cards idiots unless they pay them off immediately so that they don't have to pay interest.

@goodywitch: exactly! just be a responsible person and spend less money than you earn. Pay the bill in full every month, and there is no problem. The little interest I would earn using a debit card makes it totally worthless to go that route, however, by earning 2x-5x rewards w/ my card, i approach a fairly good return on the money I spend. Plus, I get things like free warranty extensions, travel/rental car insurance, purchase protections, etc. I'll never give up my cards.

@HawkWolf: That gets so annoying with my Shell card. It won't let me make more than one payment per two week period. Right now I am still in the one year interest free period, but I know that what they call a security device is really just a way of making sure that I don't go home and pay off my card whenever I get gas.

@khiltd: right, but you don't have to wait for the statement to arrive at your address. your payment will apply the day after (or for some companies, the day of) your statement being generated. It usually takes about a week for the statement to get to you.

@say what?!: oops, i meant, "your statement is generated"

@Featherstonehaugh: The school semester just started which means I just had to buy books and I have extremely limited availability during school. I can't exactly have no balance on my credit card right now. Until the end of the semester, my money in is going to roughly equal my money out so I'm going to have to just ride things out until the end of the semester and make payments as early as I can to keep my balance as low as possible until the semester ends and I get more hours and have less expenses.

@Ronin-Democrat: Of course cash back has value. It just isn't value worth considering if you're retaining a balance on which you have to pay interest. If you don't pay interest, you can save yourself a worthwhile little wad of money by working the cashback system.

@Addicted To Chocohol: You do know what a ronin is, don't you?

I have no idea why this guy is banging out such utter nonsense, but not paying interest is WAY better than paying interest. I bet this Ronin-Democrat guy lights stacks of $100 bills on fire because he likes watching them burn. That doesn't mean we have to.

@Featherstonehaugh: "How about not carrying a balance in the first place? Problem solved."

AND then you have more time to go post self-righteous comments on Blogs!
its a Win-Win!

@Collie: True, but for many people, myself included, a $200 bite out of my checking account hurts.

@Eyebrows McGee: Same here. I have my regular credit card, my gas card since it gives me a discount at the gas station that is always the cheapest around my house anyway, a Wal-Mart card that only gets used if I have to make a purchase over $250 at Wal-Mart so I get 0 interest (I always pay that off before the end of the 0 interest), and my debit card. Beyond that, I don't really see a reason to have more cards other than to increase my total amount that I can borrow. About the only other card I can imagine me getting right now is an Amazon card since I do a lot of shopping off of their, but I don't remember there being that many benefits to getting an Amazon card.

We dont have CC's but used this same principle to pay off our car. Final payment will be sent next week, 6 months early and the money we used to make the payments is going to savings. Havent missed it for 3 1/2 years, wont miss it for next ??? more :)

@khiltd: That is something that you would have to check with your particular card. The other thing is that if you get paid twice a month, one of those paychecks should come before your due date is up.

@balthisar: Someone who missed a payment, or got nailed by universal default, back when all the cool companies were doing it. I'll agree though-most people with decent credit can do better.

@danep: The credit card company still gets interest from you. Even if you pay the card off in full, they collect interest for the 2-3 weeks that you did not pay the card. They just don't add that amount until some arbitrary date, like the end of the fiscal year.

This advise is sort of like buying gas every day whenever gas prices are going up and as infrequently as possible when gas is going down.

@ceilingFANBOY: No, it's not contradictory. And I didn't call people who use credit cards idiots, I called MOST PEOPLE idiots, there's a difference =P

People who pay interest on everyday items are silly, because it's a recurring cost. You're paying interest on something that you will have to pay again, essentially paying more overall for those items. These types of people should not use credit cards, because they don't have self control.

Debt for large items that are not a recurring cost (fridge, car, washing machine), make sense because it'll take time to save to get them, and you may as well use them in the meantime. THIS is the part of the consumer cycle that the original commenter was talking about. These people use debt responsibly.

You can use credit cards to pay for everyday items if you pay them off in full, to not incur the interest and still have the benefits. These people don't even have debt, they're just using a credit card in lieu of cash.