Tuesday, November 28, 2006

Credit Card Tidbits

Two things about credit cards:

1) I like the balance on my credit card's web interface to read $0.00. Right now it reads $5.95. The outstanding balance is a shipping charge for a product that was supposed to have been refunded. I'm in contact with customer service--perhaps I've improved at dealing with customer service; I've certainly been persistent--and the rest of the charge has been credited, but not that $5.95 yet. My billing cycle ends today. I'm not actually sure what happens if I leave that $5.95 (as well as today's online shopping charge, which I can't pay yet as it hasn't registered yet) unpaid. Am I immediately charged finance charges? I'm not so interested, unsurprisingly, in being immediately charged finance charges. Much as I mentioned in my post about the Roth, it boggles my mind how much it's the pragmatic details of these things that are elusive.

2) My credit limit on my only card is $400. That's kind of embarassing, somehow. It also means that if I want to keep my debt utilization ratio to under 1/3, which I do, I can't actually put more than $134 on the card. (I'm actually not entirely sure if that's true, because I'm not sure if Chase gauges my debt utilization by the balance at the end of the month (that would be zero) or by the accumulated charges over the course of the statement period. I've definitely put about $300 on the card this month, all told--of course, I also schedule full payment as soon as I make a charge, in slightly neurotic fashion. The point is, it would be good to have a higher credit limit, just so I could feel sure. And the Chase card web interface has a quick-and-easy "increase credit limit" page, in which you can request a higher limit. I'm not sure if that triggers a hard credit inquiry--I don't want a ding in my credit score, especially if they're not going to bump my limit up. Probably I should just wait until I've had the card longer than two months.


Paul Kerl said...

Hi--I saw your blog post on pfblogs.org and thought I would comment on your situation--

If you're worried, why not pay the 5.95 and have it credited later? The worst that can come of it is that you have a starting balance of -5.95 for the next month after everything is credited. It's not worth worrying about if you can do this.

Secondly, why not open another credit card, with which you most likely have a much higher credit limit ($2000+ most likely)? This could just sit around, and will decrease your utilization no matter what.

Good luck!

Anonymous said...

Since you are good about paying off your balance, you may not be charged unless it is still sitting there at the end of the next month (many cards have a grace period if you you start the month paid off--check your agreement).

Otherwise they usually calculate it based on the average daily balance for the month. In your case this will be between $0 and $300. So it's still good that you keep it paid off because it will not stay at a high level, making the average lower.

Example: spend $50 on November 2 and $30 on November 7. Assume billing cycle starts November 1.

If you pay off the $50 on November 4, you have 0, 50, 50, 0, 0, 0, 30, for an average of 18.57 for the week.

If you wait until November 8, you have 0, 50, 50, 50, 50, 50, 80, for an average of 47.14.

Do this average using all the days of the billing cycle. Multiply that number by your APR and divide by 12 to get your finance charge.

Paul has a good point though--why not pay off the $6 if you can and not treat it as refunded until it's refunded?