TheKid is going to get braces in the next few weeks and I have saved up for a while now to pay for a good chunk of the cost. When we go in Monday I will be paying $1500.00.
Here’s my questions -
As noted, I’ve been saving up in my low interest earning savings account. I can just transfer the funds to my checking and write a check.
Or
For the first time in 18 years I now have plastic (VISA). I had royally screwed up my credit when I was just out of my teens and trying to restablish that I am not a plastic loser has been difficult. At this time there is 0% interest, but that promo deal will end in December. Since obtaining the card I have made one large purchase with it - my computer. As of today there’s only $200 left due (paying way more than the minimum due every month).
Would I be best off just writing a check, or would I be better off putting it on credit but paying it off before December to help my credit ratings look a tad better?
I thought just paying it would be best, but my sister says otherwise.
But IF you do so, make sure your charge isn’t even close to your limit, and that you really do pay it all off first bill. And, early, right after you get the bill.
I don’t think a single credit card helps your credit all that much, unless you don’t pay the bill that is. They look for bigger ticket items (cars) and longer period of on time payments. (a year +) At least, that’s the way I understand it, but I’m not in the credit business.
I’d say, bury the card and pay cash. Save the card for emergencies, like unexpected car repairs, etc.
Those that are telling you to use cash are taking into account your admittedly bad history with money. Those that are telling you to use the card are looking strictly at the most advantageous situation IF you pay off the full balance and don’t use the cash for something else.
Our Ortho actually gave us a discount for paying cash. You might want to ask about that. If you get a discount, by all means pay cash.
If you’re trying to build up a credit history, then you need to show credit activity. As much as I have come to hate credit, I have to agree with chacoguy420, et al. So long as you aren’t going over your credit limit, charge it, then pay it off, as soon as you get the bill.
If you do have other financial reserves for emergencies, and you’re still within the 0% interest period, you might even consider paying half the first month - again, as soon as the bill arrives - and paying the second half as soon as you get the next bill.
However, there’s just one thing that you can’t really tell us without revealing an uncomfortable amount about your personal financial situation. The financial gurus on the radio and/or in print vary in their attitudes. Some are adamantly opposed to using credit at all. Dave Ramsey comes immediately to mind, of course. But it’s very hard to have an active financial life in the U.S. without using it, unless you’re either at the top or the bottom of the income spectrum.
One who takes a more moderate stance is Michelle Singletary, whose advice is probably more tailored to your circumstances and aspirations. If you check her site, you might find stories of others who are in similar positions that can be easily applied to your situation.
Where credit is concerned, it’s all mind games: you vs. the lenders. That’s the nature of our economy, sad to say.
One last thing that may not have registered with other posters, and only hit me in the eye when I went back one last time to review your question: you said the $1500 is “a good chunk of the cost”. IOW, you will have an outstanding bill with the dentist. Is (s)he giving you a payment plan? If so, what are the terms? If you don’t want to tell us, that’s fine, but you should think carefully through how you’re going to cover those, as well - if you haven’t already. You certainly don’t want to have the dentist bill show up on your credit reports.
In terms of your credit rating, one transaction probably doesn’t make much difference. However, making credit card purchases that you pay off on time do help to establish your general creditworthiness.
My advice to you would be to pretend that your credit card is a debit card. Don’t use it to buy anything new that you can’t pay off immediately, and be sure that you do pay it off immediately. Since you have the cash for the dentist payment saved up, you could charge it…but ONLY do this if you really will pay it off right away. And by “right away” I don’t mean “before December”. I mean you either get online and transfer the money to your credit card as soon as the transaction is posted, or you write a check for the full amount of the dentist’s charge as soon as you get your monthly Visa bill. Your goal should be to pay as quickly as you can, not to put it off as long as you can.
In terms of your ready cash this will work out the same as if you’d just written a check, and it won’t add anything to the current balance you’re carrying on your card. You’ll get the benefit of having a credit card transaction without any of the potential downsides. Since you’ll be paying it off immediately, you’ll still have most of your available credit (less whatever you owe on your computer) available in case of an emergency.
If you cannot commit to paying the charge off right away then save yourself the worry and write a check.
I’m with the crowd that says that “if you use the credit card, pay the 1500 pretty much immediately”. Do NOT attempt to hang onto the 1500 dollars until the end of the zero-percent period - it’s too easy for money to get gone when that happens. If you’ve already got a balance that you’re paying off, then that itself shows that you’ve got an established pattern of paying your bills on time. I don’t think an extra 1500 dollars, even paid off immediately, will have much of an effect. In addition, at least during that one month, a FICO score will see that you’ve got a larger percentage of your credit limit in use, which could lower the FICO a little.
Re single credit card and effect on credit rating: one factor is the longevity of the account. So just keep on keepin’ on with that credit card, and your credit rating should steadily improve.
I would say, unless you get some reward for using the card (points, cash back, or whatever), it’s not worth using the card (since you’ll be making payments during that time anyway). If you had the card paid off right now, I’d be more inclined to use it, just to have one more month of “buy and repay promptly” in the history.
And you want to use your credit card to build credit…for what? Are you planning to get a car loan or a mortgage in the next two years?
I don’t think credit rating is based on how many good transactions you do, it’s how well you stay out of trouble. I will defer to credit experts (and I mean real experts) on that one.
But look at this practically. You can either pay in cash and you’re done, or start playing games with your credit card and risk ending up on the wrong side of the bill again. You have worked hard to get where you are, don’t blow it.
A little history: When I turned 18 every department store I could think of handed me credit cards. In fact, Dayton-Hudson’s sent me a friggin birthday card with my credit card (I had been on my mom and dads card since I was 13… and they had their credit open since the 50’s). I got stupid. By the time I was 23 I had either willingly closed or had all accounts closed for me and lost a checking account too.
One debtor filed a judgment against me, which I did pay off, but due to paperwork errors and my not having a clue, it wasn’t removed until almost 5 years later.
Now I’m 39. Single. I “own” my home, in that I pay the mortgage and my name is on the tax file. My name is not on the mortgage (my mom is the owner). If I look at my credit report it’s pretty much blank.
When I moved into this house it was with the understanding that once I could get my financial situation under control they would sell it to me. Since Dad died my Mom removed that option - despite the fact I have never been late in paying ANY of my bills in the past 10 years. It is a control thing, she will even state that. In her opinion a single woman shouldn’t OWN a house. Since I don’t plan on ever getting married…
I learned. As noted, I’ve made very few purchases with the credit card. My mom told me the idea is to keep is active, but pay it off as soon as possible, never send in the minimum due. Purchasing the computer was huge, but will be paid off next month thanks to scrimping and saving.
(To be truthful, I really didn’t want to buy a new computer, but mine was dying a sad death. It needed to be put out of it’s misery and it was cheaper to buy this one rather than attempting to fix that one. I was hoping to wait until spring when I could just outright buy a new computer, but that was not possible)
Her braces are $3800. The minimum I need to put down is $950, but I’ve saved $1500 and would rather put a larger amount down and reduce my monthly payments (if I pay the $950, my monthly bill would be $125 at 0% interest for the duraction of her treatment - 20 months or so). If I charged it I would pay the $1500 immediately - well, $1700 if I include the remaining balance from the computer.
But it’s very hard to have an active financial life in the U.S. without using it, unless you’re either at the top or the bottom of the income spectrum.