Decisions, Decisions

On Wednesday, I got an email from CC2 issuer stating I had a document available to be read online. I go ahead, login to my account and notice immediately that my available credit is way higher than it’s supposed to be. It dawns on me while I retrieve the document- they increased my credit limit.

I have a love/hate relationship with automatic credit limit increases. I hate them because they are what got me into trouble with money when I was younger. But, at the same time, especially now that I’m becoming a more financially responsible adult, it’s nice to have some extra space on my credit card should catastrophe strike.

All that extra space got me to thinking “hmmm, I could pay off my cosmetic loan with it and save on interest….”

BUT….

I’ve never really discussed this before, but I’m obsessed with my credit score. I check creditkarma.com everyday to see what I my score is; it rarely changes, but one of these days it will be really awesome. If you’ve never heard of or tried creditkarma.com, I fully endorse it. Free service, let’s you know changes to your credit score and what it is that’s affecting the score, so by extension you’ll learn changes to your credit report as well. One determinant of your credit score is credit utilization, or the percentage that you’re using your available credit (total credit debt divided by total credit limits equals credit utilization percent). Thanks to this limit increase, my credit score should go up a few points.

If I were to pay off my cosmetic using my credit card, it would send my credit utilization percentage back up, thus bringing my score back down. Granted, it isn’t a big change, but the thought kills me! And it also makes me a little uncomfortable to take up so much room on the credit card.

What would you do? Pay off the cosmetic loan and save money in the long run? Or keep proceeding as normal?

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3 thoughts on “Decisions, Decisions

  1. I only put on the credit card what I plan to pay that month.

    How much would you save by putting the loan on the credit card? And, what happens if you have unexpected bills, or loss of income, and your increased balance on your credit card doesn’t get paid? I think it comes down to benefit and risk of each decision. I like having the best credit rating as well ! You need to factor that into your decision regardless of the potential savings.

    • Those are all definitely things tumbling around in my brain, and right now the benefit is outweighing the risk in my head. I wouldn’t gain more than 6 points on my score, and I would only lose those 6 points if I were to use the credit card to pay off the cosmetic loan. Immediate benefit is the interest savings- CC2 is in its introductory 0% APR until April so I would save a few hundred dollars in interest. And if I’m aggressive with my pay down as is the plan, it should all be paid off before then. I would still have CC1 to use for emergencies.

      Per your point though, if I were to suddenly have an unexpected loss of income, it would be no bueno. *Knock on wood* I have an extremely stable job though, I work in the medical field, so barring some physical ailment taking me out, I should be safe. It still gives me pause, but at the same rate, those debts will still be there no matter which account they’re in!

  2. +1 for creditkarma.com

    Another website I like is billshrink.com which helps you save money in different areas like your cell phone bill/credit card/gas/television. All you have to do is plug in some info.

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