November 19, 2017


The following is how to pay your credit cards effectively without falling into the vicious payment cycle.


Cycle Date / Closing Date: This is when the creditor ex. Chase sends your account balances to the credit report for monthly reporting. 

Due Date: The payment due date is the monthly date when at least a minimum payment is due to be paid on a credit card account.

The reason most of us always have a high balance showing on our credit reports is because we all pay our bills on the due date or a few days before. The problem with this is the creditor has already reported your high balance on the cycle date which is almost always before the due date.Example: You have chase credit card with a limit of $1000. Your due date is the 25th of the month and your cycle date is the 7th of the month. 

Say you get your credit card at the beginning of the month, January, and you max it out before the due date, the25th. You always get the first month without payment. We always think this is great because we can just leverage the credit limit and make the minimum payment next month. So, your balance rolls over to the next month,February, and hits the cycle date of the 7th; the maxed out balance reports to the credit bureaus affecting your credit score negatively, causing you credit damage.Finally, you come to the due date of the 25th and pay your credit card down $700 bringing it below 50%. Well, you have 12 more days until your cycle date on the 7th. Most likely you will charge gas, food or whatever on the credit card. Now your card is maxed out again reporting the high balance to the credit bureaus affecting your credit negatively. We call this the vicious cycle. The creditors want you to have high balances so your credit scores are lower and they make more money off of higher interest rates.

Below Are Some Steps to Help You Avoid This Problem!

1st - You will need to call the creditor and find out the cycle date.

2nd - You will need to pay the high balance 2-3 days before the cycle date so that your new credit balance reports to the credit bureaus.

3rd - You will need to make sure you are keeping your balances below 10% in order to maximize your credit scores on a monthly basis.

        A. FICO has shown studies that clients with a 780 credit score and above maintain around 7% utilization on their total credit card debt. (I.E. If you have a $1000 limit you would want your utilization or balance to be $70).

        B. If you cannot pay your credit cards below 10% don’t worry. Put together a plan and work your way down below 50% first on each card. Each time you reduce the high balance the credit scores will continue to increase.

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