Money Girl answers 8 frequently asked questions about credit cards and gives tips to maintain and build credit.
Another factor that’s used to calculate your credit scores is the length of time that you’ve had credit accounts. So, I don’t recommend closing a card that you’ve had for more than 5 years. You might just use it to make a small purchase from time to time that you pay off in full, just to keep it active.
Credit Card Question #8: Sundarapandian asks, “I want to buy airline tickets for $4,500, but my credit card only has a credit limit of $5,000. So the charge would exceed 30% of my available credit limit. If I pay if off right away, would it still hurt my credit?”
Answer: Paying off a big credit card charge quickly can help you avoid a high utilization ratio and protect your credit. The amount used in the calculation is generally your previous month’s statement balance.
The idea is that if you pay off the balance before the statement’s monthly closing date, it couldn’t be reported to the credit agencies. So, I definitely recommend that you pay off a big credit card purchase as soon as possible, instead of waiting until the statement due date.
Also, when a card offers you a higher credit limit, always take it. Having more available credit relative to your balances will cut your utilization ratio and raise your credit.
Get More Money Girl!
Want to know the best financial and productivity tools that I use and recommend to save time and money? Click here to check out 35+ tools I recommend!
To connect on social media, you’ll find Money Girl on Facebook, Twitter, and Google+. Also, if you’re not already subscribed to the Money Girl podcast on iTunes or on the Stitcher app, both are free and make sure that you’ll get each new, weekly episode as soon as it’s published on the web.
There’s a huge archive of past articles and podcasts if you type in what you want to learn about in the search bar at the top of the page. Here are all of the many places you can connect with me, learn more about personal finance, and ask your money question:
- Money Girl on Facebook
- Laura on Facebook
- Money Girl podcast on iTunes (it’s free to subscribe!)
- Money Girl on the FREE Stitcher app
- Email: email@example.com
To learn about how to get out of debt, save money, and build wealth, get a copy of my award-winning book Money Girl’s Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don’t. It’s available at your favorite bookstore as a paperback or e-book. Click here to download 2 FREE book chapters now!