Hey guys it's sasha now, spending on your credit card sounds like a really simple thing. You just go out there and you use a credit card whenever you pay for things and then you go and pay the bill every month. But if you really want to optimize your credit profile and you want to get the best possible credit score, when should you spend on your credit card and how much should you spend? Should you make one large transaction or many small ones? Should you spend it at the beginning, middle or end of the month? Well, i am going to answer all of these questions in this video i'll. Tell you exactly when you should spend in your credit card and how much you should spend on that credit card in order to improve your credit.

I'll also explain why, so that you understand a bit more about your credit card spending and how it helps you build credit at the end. I'll also give you two tips for those who are either getting just started with their credit cards or for those who want to use their credit card to improve their credit, so make sure you stick around for that. Just in case you're wondering who i am, i have worked in financial services and banks, specifically within credit cards, for the vast majority of my career and over the last seven years, i've been advising and consulting many of the biggest credit card companies in the uk, us And around the world in the uk i have worked with probably around two-thirds of all the credit card companies that exist, and i have worked with many across over in the united states, middle east and asia. I understand reasonably well how these credit card companies work, how they make their credit decisions and how the whole credit, history and application process really work.

So hopefully i can explain this a little better and perhaps a little bit more accurately than some of the other stuff that i have seen on youtube and you might have seen first before we get into all the details. Let me make a couple of really important announcements number one. I am not a financial advisor and i can't provide financial advice to you because i don't know your personal circumstances. If you do need financial advice, please make sure you go and seek the help of a suitably qualified, professional somewhere else, and the second thing that i wanted to say before i go into the nitty-gritty into all the details in this video is this: if you go And spend a lowest percentage of your credit limit every month, maybe around 30 and then pay the credit card off in full every month.

You can't go too far wrong and if you just keep doing it, every single month spend pay off the credit card. Repeat your credit will just be absolutely fine, you're going to be good. Now, let's get into the details. First, i'm going to give you the answer.

If you just want to know it, and then i'm going to go and explain some of the intricacies, and the answer, if that's all you want to know, is that you want to spend on your credit card as soon as possible. After your monthly payment comes out, and preferably put most of your monthly spending on that credit card at that point, so what does that mean? Well, the credit card cycle is a technical term used by credit card companies. The credit card cycle runs from one monthly statement to the next and that monthly statement is determined by when you've applied or some arbitrary means that the credit card company employs it's to do with when your statement date is so each time your statement is generated. A new credit cycle starts.

The statement will have all your monthly spend on that credit card up to the date on which the statement is generated. Since the last statement, some very recent transactions won't be on the statement because they take a few days process, but everything else will be on there. That statement will have your total balance, which will be the sum of all those transactions plus, if you didn't repay the previous month in full, that balance from the previous month will be added on as well and by the way. If you want to improve your credit, you should always repay that credit card in full or, if you have credit card debt, that you are trying to work at at the very least, try and reduce your total balance on your credit cards every month, so that you Pay more than you spend so on that statement.

You'll also see something called the due date. This is the date by which your payment has to be made to the credit card company. In order for you to continue to be able to use your card and be in good standing by far, the best thing you can do with any credit card is to set up an automatic payment in the uk, that's called a direct debit in the u.s. That's called autopay, but it's all the same thing.

They just have different names. That payment will be either taken right at the end on the last possible day, which is what all credit card companies used to do or more recently, if you started taking it a few days earlier, for example, american express the automatic payment means that you can't forget To make a payment or accidentally make it too late, so it's a great idea for anyone who wants to improve their credit because missing a payment is really bad for your credit. But you probably already know that i actually made a whole video about when you should pay your credit card and i'll link it in the description below and you'll, see it right at the end of the video as an option to watch as well, if you're interested So now that you do know when to pay for your credit card, the less obvious question is: when should you spend on your credit card, if you want to improve your credit, a lot of people ignore this question, although from the point of building credit, it really Is pretty much as important as making payments, because, even if you follow the best advice on credit utilization, you might actually not see your credit improve, and this is why now in the us, the fico score is the most critical element of credit assessments and all credit Card companies use the same score pretty much in the uk and many other countries. There isn't a fixed single score and every credit card company has their own score and they are all actually quite different.

But the principle i'm about to explain applies wherever you are in uk us or anywhere else, pretty much it works in the same way. The best thing for your credit for other people to assess you for credit in the future is to show those credit card companies loan companies, mortgage companies, whatever that you can responsibly borrow money and then pay it back at the end of the day. That is all they care about, so you want to show those credit card companies that you are a responsible borrower and you do that by keeping a reasonable utilization utilization is a credit card industry term. It just means the proportion that your balance forms of your total credit limit.

So if your credit limit is a thousand and you have a balance of 300, that means you have a 30 utilization and in the us the optimal utilization is around 30, because everybody uses that fico score. That's pretty much! Basically it, although there isn't a huge amount of variance if you are not that accurate on that figure in the uk and other countries, it's not quite as precise, but, generally speaking, you want to keep your utilization above zero, because zero just means that you're not really Using the credit card at all so to future people lending you money, it is not clear whether you do or don't understand how credit works, how credit cards, work and you're, not showing any actual signs that you know how to go and borrow money on your credit Card and then pay it back afterwards, and this is really important. You also don't want to get too close to 100, either generally. Try to keep utilization below 80 percent at all times, probably is a good rule of thumb and preferably a little bit lower than that.

If your credit cards are maxed out, if your utilization is really high, it looks like you are financially stressed. It looks like you have potentially debt problems and that you need more credit, because you are in a desperate financial position. Even if you're, not that's how it looks when people look at the data, so here's where the important bit comes in there is a lot of really bad information out there and a lot of people. Don't really understand their spending bit very well or don't explain it particularly well.

Credit card companies submit a huge amount of data to credit reference agencies every month. It's not just one or two pieces of information or something it is vast. There are many hundreds of pieces of data submitted and the balance data is not just one variable. It's submitted in various different forms and whether you're talking about the fico score or other scoring systems in other countries, more than one variable, is taken into account directly or indirectly, when these credit assessments are made.

So you have your balance at the end of the calendar month. You have your balance on your cycle date, which is the day 20 statements generated. You have things like your average balance throughout the course of the month and other variables, which are all similar, but not the same. So it's not about the date on which your file is submitted by the credit card company to the credit reference agency, which is what some people say and that's just not really true.

It doesn't really matter - and it's also pretty much impossible to game, because these balance metrics are happening on different dates. It's very very difficult to cheat to the system, even if you know how - and even if you try so by far, the easiest and best thing to do is just to keep things consistent. Keep your balance at roughly 30 to 40 of your credit limit. At all times, if your credit limit is high, you do not have to go and build a high balance.

If your credit limit is say 20 thousand, you do not need to spend six thousand per month just to have good credit. I don't spend money that you aren't going to be spending anyway. You can spend far less and you're going to be just fine, but then at the end of your cycle, sometimes 25 days after the last statement, sometimes 19 or 20 days. It varies depending on the country and the provider.

The automatic payment will come out of your bank account and, if you're paying your credit card in full as you should, that means that your balance will go from whatever it was just before. The payment comes out down to zero and you only have a few days after that payments come out until the next cycle happens, and at that point the cycle balance is recorded and if the end of the month falls in that same time period and that's another Data point: the balance at the end of the month is going to be recorded as well, and if you don't spend on the card in those few days, then those variables will show up as zero in the data being submitted. Now sure there is other data like the average balance or the total spend in the month. That will show in principle that you are using the card.

That is, you know, you are borrowing and you're repaying sure, but in almost every single scorecard out there in credit policies, balance is the most important variable. So it's good if you're going to optimize something to try to optimize for balance your credit card balance when you're thinking about when to spend on your credit card. So the absolute best thing you can really do is go and spend on the card the day that your automatic payment is made and if a criminal credit limit is low, spend the whole 30 in one go. There's absolutely no real downside to doing that.

If your credit limit is, let's say just 200 250 pounds dollars whatever you can go and do your weekly shop or maybe fill up the car and you're done for the month. You've got your 30 and then you can just wait a whole month. Do absolutely nothing and then do the same thing again that way, your credit card balance is pretty much always going to be exactly the same, always in that optimal zone, regardless of which variable the credit card company uses or exactly when the different dates fall. It's always just going to be that same figure, because you spend you wait a month.

The payment is made. You then bring it back up to exactly the same level, and it just continues. If timing, that is hard - or you know you have life and things to do, you can always go and do the spending a day or two before the payment comes out. Your balance will be temporarily higher, but then the moment the payment drops it will go back down as the payment clears.

Now i mentioned that i'd share a couple of really important tips and now is the time to share them here. They are first, whether you live in the us or not keeping your utilization at below 50 at all times, no matter. What is a really good trick, and here is why it's really good and really important. If you only ever spend less than half of your credit limit per month, then it doesn't really matter exactly when your spending and your payment on that card happens and how long each of those takes to clear.

For example, if there's bank holidays or there's weekends that are happening on awkward dates during the month, you don't have to figure out exactly which day you need to go and spend money on or which day your payment's going to come out on and when that might Clear et cetera, if you happen to spend before your payment clears you'll, have two lots of less than fifty percent of your credit limit, which will add up to still less than one hundred percent. So you will never ever go over your credit limit and you don't have to check your balance every day to make sure and staying within your credit limit is incredibly important, because going over will hurt your credit and you'll also have to pay penalty fees, and here Is the second important tip if you really want to just use the credit card to build credit and nothing else, you don't care about the perks or the benefits or whatever you might just find it easier to stick a regular monthly payment of some kind on to The credit card that comes out automatically on the right day, preferably maybe you, go and buy something on amazon every month. If you have a subscription of some kind, or maybe you get your shopping delivered to your home, if you have it set up, you can leave your cars out of your wallet in a drawer and not ever have to think about how much you're spending when you're Spending it if you've just set it up, so that the spending automatically comes out, as do the payments both come out on the right date automatically. You don't have to do anything, but just be careful.

Continuous payments on credit cards work differently to how they work on debit cards. So i'm not going to get into the depths in this video, so i'd recommend you only redo this option with large reputable companies with customer management, where it's very easy to cancel that repeating payment. If and when you need to, i hope you found this video useful and the information here helps. If you did, i would really really appreciate it if you could just smash the like button for the youtube algorithm.

Thank you so much for doing it. If you want more useful information about managing your finances and making more of the money that you do have feel free to subscribe to my channel, that is exactly what i talk about pretty much every single day. Thank you. So much for watching and i'll see you guys later you.