I have no credit card debt, is this good or bad?

Question

My wife and I made a commitment to get out of debt. Our plan started in February and we have now cleared all credit card accounts. We still have a vehicle we are making payments, (more than the minimum) and student loans. For the credit cards I planned on just keeping the $0 balance and sending in $5 a month to each card, to produce a credit balance. Is this okay, should we still use the cards for say gas, just so it carries a balance each month? I dont want to close them as my wife has little to no credit history. I'd prefer out of sight of of mind and use our debit for purchases, but I want to improve my history and establish hers. Any adive would be greatly appreciated.

Answer 1

Keeping your accounts open is definitely good for your credit history, as long as you stay within 25% of your total credit. Since you guys have paid everything off, try using the credit card just once a month and paying the balance in full.

My husband and I have a good system - we set up one VERY special date per month (not necessarily expensive, just special) and we use the credit card for all date-related purchases. This usually runs about $50 to $100. Then we pay it off in full. We know we had a lot of fun using that credit, and then put the card literally in the freezer until the evening of the next month's date.

It's an easy way to establish credit responsibly and it's a lot more fun than spending on something boring like gas or groceries. :-)

Answer 2

Carrying a balance and paying on time raises your credit ratings. This is exactly what the credit card companies want you to do. Paying it off, then using some credit again, is also good. The top issue is paying the minimums on time. Do not EVER be late. However you must be careful not to use too much of your debt to income ratio, that is, there is a maximum amount of credit you can have for your income. If you get too close to that limit it will reduce your credit rating. Request a free credit report. You are entitled to one free report each year. And you can do it all on-line.

Answer 3

Do not create a credit sitution. If you pay off every month choose a card that will earn you cash back or points. The only way for your wife to establish a good credit history is for her to be the primary on the account. A Sears card is a good start.

If you wish to use a card that is in danger of closing , put a charge on it every six months, that will keep it active.

In a credit report, making purchases, but never carrying a balance (paying off in full with every statement) is excellent from a banks prospective...mortgage, yada yada yada. The credit card company might not like it, but they will keep you around incase you go insane one day, and make some gigantic purchase and start payting interest again.

Answer 4

Congrats! I did something similar a few years ago, kept a couple cards, and used them every few months. Unfortunately, I forgot that I used the card and wound up paying a late fee because I was out of the routine of paying monthly! But it didn't trigger anything on my credit report.

But another thing I learned: you still want to do your major purchases on a credit card and pay it off quickly. Here's why - you get some buyer's protection with Visa and MC that is very worthwhile. For example, if you purchase something from a company that goes out of business before delivering the purchase, you get your money back quickly. If something breaks on the way home, many cards will replace the item. And if you rent a car or check into a hotel with a bank card, your money will be frozen for a couple weeks.

I learned all of these lessons the hard way. (Furniture store went out of business, new dishes for eight destroyed on the drive home, and rented a car with my ATM Visa.) Learn from my mistakes!

Answer 5

Paying the way you are doing it is wonderful! Still, if you want to establish credit for your wife, remember to do it with credit cards that are reported. Many stores have private 'charging accounts', but, they do not report to anyone, except themselves. Private store charges will not give your wife a credit rating. The standard cards, such as Master Card, Visa, etc. are always reported, of course. Have you considered getting her a card that is only for a small amount to keep your debt in check?

Answer 6

Hang on to one card for convenience / emergencies. Don't build up a credit as the companies will usually just send you a check after about two months if there is a credit.

If you're going to use it for gas and such, pay it off each month to keep from paying interest.

Answer 7

You don't need credit if your goal is pay cash. You can get home loans by asking the bank to do a manual underwriting mortgage.

I suggest you read The Total Money Makeover by Ramsey about debt & budgets. He would LOVE your thinking about get out of debt. He will explain in his book why you don't need a credit card or credit history.

Great job on getting out of debt! You will have money for retirement if you keep going!

Answer 8

Use one card for small things - like gas for the cars, and pay it off each month. This way, it doesn't get out of control, and you're building credit history. AND you have one card set aside for an emergency.

Answer 9

Cash management can be characterized as the well-organized usage of cash through corresponding management of costs, collections and cash balances. The goals are to diminish expenses, advance control and improve returns. Cash administration engages adapted services offered by the bank's staff to the company's financial officer. Traditionally the transfers were usually opened by the company's financial officer via mails, telephone calls, faxes or appointments to the bank. With the development of high technology, cash administration services have been computerized to a large degree. Most of the banks let their clients to perform online transfer services (payment, collection and liquidity management) through PC or Internet. This system allows performing most of the cash management functions themselves without relying on a bank staff to act as the doer of their requirements. Read more about it at: http://www.credit-card-gallery.com/article/186,Credit_Cards,_Credit_Loan,_Cash_Advance,_Credit_Line,_Improve_Credit,_Poor_Credit

Answer 10

Just use your cards for everyday purchases like gas, groceries, clothes etc. being careful never to exceed 30% of your limit in any given month and then pay them off in full before the due date.

This will help your score and keep your cards active.