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Is it better to pay off your credit card balance RIGHT when it is posted online? or wait for the bill?

• I just got a credit card not too long ago. I've made several purchases with it, but have paid the balance off within a day or two after it posted online. To increase my credit score, should I wait for the actual bill to get to me, then pay it off? or pay it off right when it is posted? I have heard conflicting views. Pay it off right away to avoid debt. But also, to play around with it to show you can HANDLE debt, not just avoid it. I haven't had the card long enough to have received a bill in the mail. Online it says "Please check back after Jan 19, 2012 when your statement period closes." What should I do? pay it off now? or wait till the bill comes in and pay that off? I want a good credit score, that was the whole point of getting a credit card.

• Answer:

  To improve your credit score you have to make certain that the bank reports a balance that is 30% of your credit line or less. Most people don't understand how to do this properly. Paying 70% of the balance may not work. The bank reports your balance to the credit bureaus at the end of its billing cycle when statements are produced, and BEFORE payment is due. If you have a credit limit of $1,000 you want the balance reported to be $300 or less to maintain your ratio at 30% or under. If you charged $1,000 in month 1, and paid $700 when the balance was due the bank would report a $1,000 balance. Your utilization ratio would by 100% which is bad. If you charged another $380 in month two, and paid another $700 your balance to the bureau would still be $1,000 after interest was inputed to your account. A better approach is to keep your spending below the 30% credit limit, and pay the balance in full each month. This keeps your ratio at the right level, shows consistent usage and payment, and avoids interest charges. You can pay the bill a few days before it is due to avoid any late fees.