I have a credit card through my local credit union. I am not sure if this is normal: Essentially, I am using my credit card like a debit card. If I anticipate any major purchases I will put money on the card prior to charging it. I try to keep a couple hundred dollars negative balance at all times. I have never charged amounts to my card where I have a balance due at the end of my billing cycle, so I have never paid any interest/always have the card paid in full.
I did not want to get a credit card but realized I needed to build my credit score somehow, so I got this one. I am used to paying everything in cash (which I still do for the most part). I found this method easiest for me because I do not need to keep track of my purchases or when payment is due.
- Am I building a credit score using my credit card this way?
- Is this helping/hindering my goal of establishing credit?
Edit: I mistakenly misused positive balance for negative balance. It appears I am using 0% utilization of my available credit.
Edit 3/2017: Coming back here to update for any future readers.
My original question was asked because of my reluctance to use a credit card, and ignorance of what 'good credit card usage' habit really is. I was confused to when you have to pay your balance, how much you have to pay, and what the interest rules were. I basically did not understand any of this and made a plan to pay the card in full before using it.
In hindsight, I agree with the sentiment from the responses below: this was wasted effort. I went the long way around using a credit card because I did not know how everything worked! Wasted effort borne from ignorance.
If you are using a credit card as a debit card, and are wondering what are the effects on your credit score, you are doing the following:
- Payment On Time - GOOD
- Credit Card Utilization 0% - BAD
- Credit History - GOOD
I have an approximate credit score of right under 770. I spent 4 years with 1 credit card and no other form of debt. I have paid in full every month and have paid $0.00 in interest for the history of my account. At this phase in my life, I now have multiple lines of credit (student, auto) and am considering getting a second credit card to diversify my credit history.