Can you help me understand credit cards?
I have been using my amazon credit card for a year or so but I never am late on paying my bill. Well I was thinking of buying a 700 dollar couch but I won’t be able to pay it off for at least one month. What kind of bill or damage to my credit score can I expect if I don’t pay in full for a month?
You won’t damage your credit score by keeping a relatively small balance on a credit card. The only way you hurt your credit score in this scenario is if you miss a payment or two on this credit card – meaning you don’t pay the minimum payment or any payment. That will hurt your credit.
March, 17th 2010 at 1:05 am
if u pay at least the minimum then ur good. try to pay it all off so u dont get a lot of interest. u just get interest no damage to ur credit score.
References :
March, 17th 2010 at 1:50 am
Part of your credit score is based on how much you owe compared to your available credit and your reported income. If $700 is more than about 25% of your available credit it will hurt your score but how much depends on how much credit is available.
References :
http://money.howstuffworks.com/personal-finance/debt-management/credit-score1.htm
March, 17th 2010 at 2:37 am
Ok, so you buy this couch. Then you can’t pay for it. So say you pay $300 back against the couch. At the end of the time period for payment, your interest (whatever it is on the card) will start to kick in IMMEDIATELY, for the entire $700. So even if you payed $699 towards the couch, you’d be stuck paying interest on the entire purchase price.
For example, if your interest rate is 18%, thats $126 a month in interest. The credit card statement might only say your minimum payment is $130 (maybe even less). If this is the case, $126 of your money goes to interest repayment, and a pathetic $4 goes to paying off your couch. Imagine how long it would take at $4 a month to pay off a couch? In this scenario, it would take the person 100 months (8.3 years) to pay off the couch, and the person would pay $12,600 in interest. Do you see how the interest alone is way more expensive then the original cost of the couch?
Why can’t you wait a couple months to save up, then buy the couch?
References :
March, 17th 2010 at 2:50 am
You won’t damage your credit score by keeping a relatively small balance on a credit card. The only way you hurt your credit score in this scenario is if you miss a payment or two on this credit card – meaning you don’t pay the minimum payment or any payment. That will hurt your credit.
References :