What's up you guys, sasha here now paying off your credit card sounds like a really simple thing: you just go once a month go and pay your credit card in full and that's about it. That's about all you need to know, but if you're wanting to optimize the growth of your credit profile, if you're wanting to do the best possible strategy for improving your credit, when should you go and repay your credit card and exactly how much should you repay i'm Going to cover that in very very fine detail in this video i'll tell you exactly when the optimal time to repair your credit card is, and at the end, i'll give you two tips that i think will be really really useful for those who are just getting Started with credit cards or want to use credit cards to go and improve their credit as fast as possible, so make sure you stick around for that. Just in case you're wondering who i am, i have worked in financial services and specifically in credit cards for the vast majority of my career and over the last six years, i've actually been advising and consulting some of the biggest credit card companies in the uk and Abroad and in the uk, i've worked with more than half of all the credit card providers, so i understand how these guys work. I understand how they make their decisions and i understand how the industry works.

So hopefully, some of this advice will be a little bit more useful and insightful and some of the other stuff you might have heard on youtube from people who maybe don't always provide the most accurate advice. Based on what i have seen in research for this video. Now, first off before we dive into the rest of the video, i've got to make two points really really quickly number one is, i am not a financial advisor and i can't advise you on what you should do with your finances, because i don't know your circumstances. If you do need financial advice, please go and seek it from a qualified professional somewhere else now.

The second thing i want to tell you is before i go into the depths of exactly what the optimal strategy is. If you go and make sure that you pay your credit card off in full every single month without fail, you can't go too far wrong. Just doing that alone is already a really good starting point, and that will ensure that your credit will remain healthy and you're. Not gon na do yourself too much disservice, but just ensuring that you never ever miss a payment.

Now, let's go into some of the details. Now let me get you the answer as quickly as possible so that you don't have to go and wait around. If you just want to know it really really quickly and the answer is you want to make the payment for your credit card, as laid as is possible within your billing cycle? Now, what i mean by that here is how the credit card cycle works. You have a month which is set by the credit card when you first start, and you can actually go and change if you really want to, although i don't think it really matters for most people, you have this one month, which is called a statement cycle.

So, every single month you have a statement produced on a particular day in the month, which covers all the spending that you have done in the preceding month, since the last statement was generated after that particular statement is generated. You then have a printout which tells you all your transactions, the total balance that you have and the amount that you have to pay as a minimum plus the date by which they have to receive the payment. Now the date will typically be 25 days after the date of the statement, so you have 25 days to go and make that payment in order to pay the balance in full and not have to pay any interest now, really really simply for people who, maybe don't Understand this very well: if you don't repay your credit card in full every month, you will have to go and begin paying interest. If you do repay your credit card and fall every single month, you will never have to pay any interest unless you go and take out cash from your credit card, which is a topic for a whole other video that i will reference in the description below that.

I'm about to put together as well, where i'll cover a lot of those other topics now make sure you go and check your credit, card's terms and conditions or the summary box or the summary statement or any other document where you will find it to go and Check exactly how long you have, because some credit cards have a lower amount of time. In order for you to make that payment. It depends on the scheme you use so the type of visa or mastercard agreement that the credit card has with visa mastercard and a bunch of other factors. It's not always 25 days.

The easiest thing is just to go and look in your statement and you'll know exactly what that date is make sure that you have made the payment by that date. Two really important things to note that relates to this point that i've just made. The first point is: if you go and wait until that very last day on which to make the payment, if you have a particularly low credit limit, it may well mean that you can't actually go and use that credit card for the majority of the following month. So, for example, if you have a credit card that has a 250 pound credit limit and you're gon na spend 220 pounds in one month, then because you then have to wait 25 of say the 30 or the 31 days over the following month.

I mean before your payment actually comes out. You only have a 30 pound buffer and if you don't want to push it too close, you may not want or be able to go and spend on a credit card for that period of time. Just something to note something to be aware of other really important thing to note is, although the optimal time is to pay it right at the end of that period over which you are able to make repayments, it is crucial. It is critically important not to pay a slightly too late.

It is better to pay it a few days earlier, rather than miss it by one day now. The really important thing here is, if you make a payment on, say the website of the credit card provider or via some other means, like some old school method of filling in a gyroslip or some other method like that, it may take a day in some cases. Even longer, if you're doing it at the weekend, it might take several days because you'll have to wait for the first business day or maybe even the second business day for the transaction to actually go through and if you're leaving it right to the last moment. It may mean that your payment is actually processed after the deadline, which will mean that you will have a missed payment on your account.

It will mean that you are going to get into all kinds of issues with getting a late payment fee with getting in trouble with the credit reference agencies getting the data that you missed the payment that month now. Let me explain really briefly why paying as late as possible is the best possible way of paying your credit card for your credit profile when credit reference agencies receive data from credit providers, they receive a huge block of data, there's typically something like a thousand fields about Your behavior on the credit card that gets submitted to the credit card reference agency every single month, i'm simplifying slightly because some of those fields are actually generated by the credit reference agency based on the data that is supplied but anyway, for simplicity's sake, there's roughly a Thousand pieces of data available about you at any one point on your credit file and, as a result, there's a lot of different fields that all relate to the balance that you carry on your credit cards and, if you're wanting to improve your credit profile, you want To do two things you want to show to potential lenders in the future that you have borrowed money before, even if you're paying it in full every single month by your credit card, you still want to know that you have actually used the credit, and then you Went and repaid it as a sign that you are a responsible borrower as a sign that you know exactly what you're doing with credit, and it's a sign that you are highly likely to go and repay your credit in the future. So, in order to do that, you need to make sure that the balances that are being reported by the credit card provider to the bureau has a balance on there. What you don't want to happen is for that balance to be really really high versus the credit limit that you're assigned.

So if you have a credit limit, you don't want to go and spend right up to that credit limit, because that may signal to lenders that you are in some form of distress that you are potentially really in need of credit that you have financial troubles that You are unable to sustain your livelihood because you needed to borrow that much money, so spending too much in terms of what the proportion is to your credit limit is also a bad idea now in the us. This is a much more formalized thing because in the us all credit card, companies use something called a fico score and that has a very prescribed way of calculating the score where uh proportion about 30 of it is based on things to do specifically with balance and A further 30 are based on factors that are not balance based, but somewhat related to balance, i'm not going to go into too much detail, but in the us the optimal utilization is somewhere about 30 or less, but in the uk the situation is not quite the Same credit card companies have a much greater variety of ways in which they go and assess eligibility, and it is based on different factors for every single company, so the variables that they use from that 1000 variables for their credit policy and for their scorecard will actually Be different in every single case. This is why making sure that every single variable that they could use out of that 1000 needs to be the best possible value that you can make it. This is the thing that a lot of people don't really understand, and that is when the credit card company supplies data to the bureau.

There are several different types of balance that is provided they provide the month end balance for the calendar month. They provide them statement balance, which is the balance that you had on your statement. They also provide the balance that you had at the point at which the data is submitted, which is an arbitrary date in the month, which you won't ever really know. They'll also provide the averages, so they'll provide the average balance held on your statement.

They'll provide the average calendar month and so on and so on, and so on. There's several different types of balance, so you can't go and game it by ensuring that you can repay on day 17 or on day whatever, and if you want that balance to represent most accurately the balance that you've actually held on your account. You want to hold it there as long as possible so that, whenever those arbitrary dates, when the data submitted happen, you have the highest likelihood of a balance being reported for that date. Here is why it's really critically important some credit card companies will go and use the statement balance in their models.

Other credit card companies might use the calendar month, balance or the average balance over the submission period or something else and the truth of the matter is they will use different ones depending on how they build a scorecard, how they decided what's important. What's not important and you won't know exactly which one which credit card company use most credit card companies themselves get confused as to which ones they use. Maybe two or three people in the credit risk team. No, nobody else does so.

That is why it is really important to go and pay as late as possible so that whenever the various date points happen in calendar months in arbitrary statement periods and arbitrary submission periods, you have a balance to show on there. That is the right level of balance. To improve your credit profile now by far the easiest way to achieve it is to set up direct debit or autopay in the us. So whatever the name of the thing is, this will allow you to automatically have the exact correct amount of money taken out of your bank account and with both direct debits and auto, pays those come out on the last possible day.

So that means that you don't have to worry about whether it will reach them in time. You don't have to worry about whether there's going to be processing time or any issues like that. The money that is due will automatically come out of your account and will pay for your credit card. But there's two things that you need to be aware of number one.

You need to make sure that you set up the direct debit or the order pay for the full amount. Don't set up for the minimum amount for any other option on there, because the moment you're not paying in full you're doing yourself a disservice and you're actually going to be worsening credit profile because you'll actually be carrying debt and also you begin paying interest on it. So you're actually going to be in a financially disadvantageous position as well. If you're in the uk and you're wondering how much you should spend on your credit card before that automatic full payment comes out, there isn't a hard and fast rule.

But i would say that you don't want to be sitting below, say five or ten percent, because that might show that you don't really use the credit and it might show to potential lenders in the future that you don't really know exactly how credit cards or borrowing Works and the likelihood of them saying that you are good for the money is slightly lower, but you also don't want to be above somewhere the in the 80 territory, because people might think that you are stressed financially. If you are very highly utilized being utilized means the amount of your credit limit that you are using, as balance so make sure you're staying somewhere in the middle. If it was me, i would try to keep it somewhere around the sort of 30 to 50 territory. That's probably going to be good enough for most purposes.

If your credit limit is particularly high. Let's say you got a fifteen thousand pound credit limit, don't feel like you have to go and spend five thousand pounds every single month. You can have it lower. It won't have any downside now to answer two questions that are commonly asked about this number one.

It is a really bad idea, despite what some people will tell you, despite what some of these youtube channels tell you, it's a really bad idea to go and repay the balance of whatever you spent really quickly and before the statement date. It will mean that you don't have any balance on your statement. It will mean that some of the data sent to the bureau about your usage of the account will show that you had no balance at all on the account on statement date and potentially some of the other dates that i mentioned as well. So you don't want to be doing that, and the second thing is some people ask: should i go and pay it as one payment, or should i split into several different payments? Uh say if you're being paid every two weeks or, if you're being paid in some other, weird and wonderful way, should i go and pay when i get paid because it's easier for me now the truth is as long as you are not paying it right down.

Every single time and you're not falling into that issue of having a zero pound balance on your card very frequently and on the statement because of that activity, it doesn't really matter how many payments it is that you take to go and clear your balance. The number of payments made on your credit card is not a variable that is really of any importance to anybody. People go and look at the total amount that you have paid every single month and that's the really critical factor. Now.

Let me get to the two tips that i mentioned right beginning in the video that i think are really useful for people. My top tip number one is if your credit limit is particularly low. Let's say you got one of these started credit cards and your limit is just 250 pounds. It might seem tempting to go and spend on a credit card, then go and repay it quickly then go and spend again, especially if a credit card offers some kind of rewards.

That is going to be not the best way of using a credit card for improving your credit profile. Now, if you don't care too much about getting the most optimal route for improving credit profile, it probably won't hurt you too much doing that. But if your objective is to do the best possible thing for your credit profile, even if your credit limit is very low, i would go and still use a 30 to 50 percent amount of my credit limit. I would then go and wait for the statement to generate.

I would set up a direct debit to repay that amount in full and i'd make sure that in the period of time after that, payment has come out and before the next statement is generated, i've gone and spent that amount of money again. So, whether that's in the shop when i'm buying food or filling up with the petrol station or whatever it is because the limit is so low uh, you were able to do it in one or two transactions, often i'll just go, and make sure that i do That, if i need to go and spend more money than the amount that i'm able to spend on that credit card, i would use any other card. Even my current account debit card or anything else, because the objective remember is to go and improve your credit profile. Not to go and put everything through your credit card, because it gets protection and other perks and benefits.

That's what we're talking about in this video. The reason that this is the case is because, when that data comes through when people build models, they don't assume that the average person will go and spend a lot more money on their credit card than the credit limit that they have. Because for people who have regular credit cards, where the credit limit is say three, four, five thousand or even fifteen or twenty five thousand pounds that usually doesn't happen and as a result, you might hit some unintended consequences of the way that their models are designed. Where you'll just fall through the cracks, because they have some policy rules and some exemptions which say that people who go and spend you know above 100 of their credit limit, will not qualify, they might not have designed the credit policy to specifically exclude you.

For that reason, but you might accidentally trigger some combination of rules which essentially go and do that, and because that activity is not very common or very frequent, you might. The critical company might not even know that this is happening in the background. Just don't give them a reason to accidentally decline, you go and do something that is as simple as possible in terms of the data that is then sent to the credit bureau, go and spend that utilization go and wait until your statements generated set up your direct Debit make sure the right debit comes out, then go and spend again and repeat until your credit score improves now the other really important tip, especially for people who are new to credit cards. Who might have one of these credit cards that only has a 250 or a 300 pound credit limit? Because that's what happens if you're, just starting out the first time you might get into that potential problem position where you spent on your credit card, the statements generated.

You have to wait until 25 days after that statement in order for the direct debit to come out, and you can't really go and spend on that card again. Now, there's two ways to solve that. One is to time your next spend so that you can go and spend in the five days between when the due date happens and when the next statement is generated so that that expenditure appears on that statement. Now that's kind of difficult.

You have to go and be right on top of your statements and all the various dates every single month, and i would probably advise most people not to do it. Not providing financial advice here. Remember just just kind of friendly tips from somebody who just likes talking about personal finance on youtube, so what i would recommend that people do instead is go and spend say 30 of their credit limit in one month and then don't use that credit card after that. So on 250 pound limit - i don't spend, say 75 pounds or thereabouts make sure that the statement is then generated that 75 pounds has been recorded in the statement and then at any point from that day i can then go and spend another 75 pounds and then My total balance will still be 150, which will still be below my credit limit.

So i don't ever have to worry about going over the limit. I'm still doing the best possible thing for my credit profile. I'll then wait for the direct debit to come out. Wait for the next statement to be generated, which will again have the same 75 pounds on it.

Let's say: you've gone to the supermarket or you've filled up your car or something like that and then after the next statement is generated, i will go and do exactly the same thing again now. I hope you guys found this useful. I hope you found some information in this useful. If you have, please make sure you go and smash that like button for youtube algorithm, i really really appreciate that is how my channel was able to grow and reach more people with useful advice.

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