There have been lots of questions and confusion in the comments of my latest budget post regarding my credit card. Rather than responding to all the individual queries, I thought I would clear it up here.
Credit Card Details
My line of credit on my only credit card is $5,000. This past fall, I was able to pay down the rolling balance from continually maxed out at $5,000 to $3,700. And I’ve kept the maximum balance at that $3,700 range for the past few months.
How I Use It
I use the credit card as a rolling line of credit. Meaning, I use it but pay it off immediately. And I use it a lot every month. I pay a number of my monthly bills with it as well as use it for gas and groceries.
This is why I don’t have a minimum payment for the credit card in my budget. I pay the minimum in my usage and payment strategy. But have been good at no longer growing the debt this fall.
I realize that this is not the recommended use for a credit credit. But I do this for two reasons:
- One it gives me added protection from having my bank account cleared out again. (This has happened at least twice in the last 4 years.) I am very careful about using my debit card or anything that has direct access to my cash.
- It also allows me to keep paying on this debt and not growing it any further.
I hope this clears up the questions about my credit card, why I didn’t budget a minimum payment for it and how I use it. If there is anything I missed, please ask in the comments and I will do my best to answer.
I do know that I am not willing to close this last credit card account, even when I do get it to $0. But I will definitely always have the cash to pay it off. I just feel safer using it when traveling and for the added security with larger purchases, car rentals and more.
Editors note: One way you might consider improving your credit score is something called tradelines. When you get a tradeline you’re basically paying a fee to be added to someone else’s credit. Buying tradelines isn’t for everyone. It costs money and unless you want to spend thousands of dollars a month, its only going to be a partial solution. So you’ll want to be sure your bills are paid on time and your credit card utilization is low.