I’m young, a poor college student, and trying to build credit- so I got a credit card. I’ve always been responsible with finances so it’s rare I actually need to use it but having it there is good. My question is: would it make sense to use my credit card even when I have the money and immediately pay it back? From what I understand, the more you use your credit card and pay it back on time, the higher your score gets—so in theory, this would be smart… but I know credit scores are pretty complicated and there might be some caveats I’m missing.

update: I am getting lots of conflicting responses, lol... anyone able to weigh in on the actual responses I've gotten?

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Werewolfdad t1_jeby50e wrote on March 30, 2023 at 10:06 PM

> My question is: would it make sense to use my credit card even when I have the money and immediately pay it back?

Yes. That’s how you’re supposed to use credit cards

> From what I understand, the more you use your credit card and pay it back on time, the higher your score gets

Incorrect. Usage has no relation to credit score

Credit Card Basics: https://www.reddit.com/r/CreditCards/wiki/credit_cards_basics

Credit Building: https://www.reddit.com/r/personalfinance/wiki/credit_building

pizzaferret t1_jebzk79 wrote on March 30, 2023 at 10:16 PM

Get a card with 2% or even 3% back on everything; don't go out of your way to make purchases, but if you're gonna buy "X" anyways, use the credit card, get that 2% cashback

Mysunsai t1_jebypyl wrote on March 30, 2023 at 10:10 PM

> the more you use your credit card and pay it back on time, the higher your score gets

No.

Paying on time is good for your score. Paying a bill of $0 is exactly as “on time” as paying a bill of $10,000, and has exactly the same effect.

Actually using the card is, at best, irrelevant, and at worst (temporarily) bad if your utilization becomes particularly high. Though utilization is not remembered month to month, so it’s not something that needs to be managed unless you are actively trying to get a loan.

So long as the card isn’t so inactive that the issuer closes the account, using it or not doesn’t matter.

SativaSunshineX OP t1_jebyz6d wrote on March 30, 2023 at 10:12 PM

Makes sense thank you!

t-poke t1_jeby4nq wrote on March 30, 2023 at 10:06 PM

Yes, using it is a good idea. You only need to pay it once a month. You don’t get bonus points for paying it more frequently.

Pay the statement balance before the due date, that’s it.

RiddicBowers t1_jec0xsc wrote on March 30, 2023 at 10:26 PM

Assuming you have the discipline to not carry a balance on the card then, yes you can make it a good financial decision. CC companies make their money (from the user) off of late fees and finance charges (like 19-29%). However, if you use the card to make purchases you would have made anyway (food, gas, utilities) and will then pay off the entire balance each month you are fine. Better than that is to get a card that pays you some sort of rebate program (cash back, airline miles, etc.). Since you are new to credit and don’t know how best to utilize rebate programs, I would suggest a straight “Cash back” style. Typically 2 or 3% of your purchases credited back each month. Just don’t, and I mean never, carry a balance. This will eliminate any cash back advantage. Oh, and make sure the card had no annual fees either.

pirscent t1_jec2gb9 wrote on March 30, 2023 at 10:36 PM

It definitely makes sense to use your credit card when you have the amount of money you're spending. You probably should only be spending when you have the money to do so. The advantage of using a credit card over debit is that it builds your credit score and has other benefits (such as cash back, airmiles, etc).

Another thing to note is that keeping your credit card utilization under 30% will build your credit score fastest. If you want the cash back benefits of spending more than 30% and you want to build your credit score quickly, you can also pay it down to 30% utilization before the statement date.

Restil t1_jecasi2 wrote on March 30, 2023 at 11:36 PM

I could explain in great detail the why and wherefore, but to make it simple for you:

Use the card for everything you can. Pay it off in full before the due date. If you're close to maxing out the credit limit before it's time to make a payment, pay it down early. During this time, your credit score will fluctuate dramatically. IGNORE IT.

In time, the credit limit on the card will increase as you prove to the bank that you can handle the credit responsibly. It will eventually reach a point where your monthly purchases reach about 20% of your credit line, which happens to be the upper bound of where the utilization factor of your score is. Example: If you always spend $1000 a month on the card, eventually (within a year or two) the credit limit on that card will probably increase to 5000. You might have to request the increase, or it might happen automatically. At this point, your credit score will stop jumping all over the place.

As long as the card has no annual fee, plan to keep it forever. You might at some point quit using it because there are better cards out there with more lucrative perks, but you want to use it to make a token purchase at least once per year to keep the account alive, because the average age of accounts is a moderate factor in your credit score and the the older the average gets, the better your score gets.

Seriously though, the only rules you need to follow: Never spend money on a card that you don't already have as cash in the bank, pay all bills in full and on time, and never close an account that has no annual fee. Do this and your score will take care of itself.