To think most people don’t actually pay off their credit cards in full each month?

[PoliteCyanViewer]

I always hear advice about clearing your balance each month to avoid interest but how many people actually do it? With the cost of living, unexpected expenses, and temptations everywhere, is it realistic? Do you pay yours off in full or do you carry a balance?

Of course I pay it off every month, and I assume most people do. Everyone I know who uses a credit card does so for the perks they bring, not because they can’t afford what they’re buying

You're not understanding the benefits of credit cards. It's not always financially sensible to pay off the balance.

One of the perks is that by holding a balance on a 0% credit card for a large purchase, you can gain interest on savings instead.
Eg, say I need to pay £5k for a holiday. If I pay it with savings then that's fine... I'm not in debt, and the money is gone.

But if I put it on a credit card at 0% and keep that £5k in savings I can gain an extra £200 in interest over 12 months. At which point I pay off the credit card and have got an extra £200 in my pocket for free.
And at the same time I've also got the extra protection that a credit card purchase brings.

Obviously this means being organised and diligent. I never move a balance, either - I make sure every balance is paid off by the end of the interest free period, as I just find it easier to manage that way. But there is a false assumption that if people have large credit card balances then they're feckless or can't afford what they're buying. This really isn't the case.

I never used to, then got myself into stupid debt over it. Luckily enough I managed to get a consolidation loan to pay off my cards as the interest and balances were getting silly.
I still have a credit card but am very careful not to build up too much on it now and am fanatical about clearing the balance each month. I learned my lesson!

With all due respect how have you measured what I understand about credit cards from 2 sentences? You don’t know what my financial goals are and what I am trying to achieve with credit cards?

Yes we do. Every single bit of spending goes on the credit card to earn points, nothing on the debit card so that’s usually £2k+ each month. Always paid off in full without fail.

No idea what most people do, but I always pay it off automatically.

I don't know why you've been called unreasonable here.

Clearly most people carry a balance on their card- if everyone/ most people paid it off every month without incurring interest, the card issuers wouldn't make any money and the entire business model wouldn't exist.

In fact, those who pay it off every month are increasingly having their cards cancelled as unprofitable customers.

I don’t agree. I’ve had my credit card with a particular provider for almost 20 years. We put all our spending on it to earn points, so a significant amount every month and it’s always been paid off in full. No signs of them cancelling it.

I wouldn’t pay off a 0% one but an interest bearing one I would

It’s also not a good idea to use a debit card as your bank could be frozen because of fraud. Credit card is better as less bother if compromised

Why not? It still needs to be paid eventually. Unless you’re putting that money aside to earn interest and the money will be there waiting to pay it off when due.

I definitely do.
I have a "credit card savings" account and at least once a week I make sure my account matches the credit card.
I used it for credit rating purposes and also shopping protection.
I used the PayPal split four months if I need to order clothes in multiple sizes. And then if I for example order two things but two different sizes and I'm only likely to keep two of the items I put them in an account.
Sounds a bit long winded but isn't and works for me.

In fact, those who pay it off every month are increasingly having their cards cancelled as unprofitable customers

thats certainly not the case for us….they keep putting our limit up

Always pay it off in full here. Although, one time I used it to buy a car and then had an unexpected delay in getting a bonus from work, so ended up letting the balance roll over for a week or so.

I've paid it off every month for the last ten years. Usually I don't wait until the end of the month I just pay it off as soon as I can after the transaction.

When I was younger though I had a terrible credit history, not in terms of missing the minimum payment but in terms of allowing the balance to build until it was at the limit then only paying the minimum payment every month. Being in that much debt in relation to my income was horrible, there was no way of getting out of it (except the obvious, get a better paid job).

There are three types of credit card user. The one who pays it off every month because they don't want to be in debt (I am them), the one who would like to pay it off but can't afford to (I was them and hopefully never will be again), and the one who is so wealthy they don't give a toss about paying it off on time because whatever, they can afford the interest and have better things to spend their time on.

Have you got any evidence for that? Because I find that very unlikely. They don’t just make money via interest, they make it via transactions. I’ve used credit cards for decades, never paid a penny of interest and never had a card cancelled, my limit just gets bigger and bigger. They’re making money from me, and it’s not on interest.

Do you know something that the official figures don't? All the published data shows that more people clear their balance than dont

Maybe you don't know this but the card processors take a %age of every transaction from the retailer as well as interest from customers.

Yep.

That's a pretty cavalier use of the word 'clearly'.

If you have access to internal industry statistics, and you can show these, then fine. But I'm working off the following:

https://www.money.co.uk/credit-cards/credit-card-statistics

As of October 2021, there were approximately 52.97 million credit card accounts in the UK, with almost two-thirds of these (34.79 million) being active (those with balances outstanding at the end of the calendar month).

65.6% had balances outstanding (not paid off in full) then.

Also:

Transactors, which make up 8.5%, will pay their statement balance in full every month and generally have one of the better average scores on Experian’s aggregated bureau index.
Representing over 11% of users, revolvers do not pay their outstanding balance in full every month and will incur a resulting rate of interest on their credit card debt. As a result, their bureau index score is severely less, at 895. Hardcore revolvers are the most popular group. At 31.5%, these people only pay the minimum amount each month, which in turn produces the lowest average score of 803 (over 200 points less than transactors).

Transactors paid their balances in full very month. Revolvers do not, and hardcore revolvers only make minimum repayments.

Finally, a couple of articles that show credit card companies make greater profits and revenue from interest than they do from transaction fees:
https://www.federalreserve.gov/econres/notes/feds-notes/credit-card-profitability-20220909.html

https://www.fool.com/money/research/credit-card-company-earnings/

I admit, none of these sources are perfect, they are what I have access to in the middle of the day.

So, if you have evidence that the credit card industry is structured very differently in the UK to the USA (or the ROW given VISA and MasterCard are multinational), or that UK borrowing habits are much better now than they were in 2021 I'm happy to be shown to be wrong.

Yes I do

I always have a balance outstanding “at the end of the calendar month” - I still pay my cc statement off in full every time. I get my statement on eg the 20th of the month and I have until the 20th of the next month to pay it off before any interest is charged. You’ve misunderstood what that means - it’s just that the cards are being used rather than the holder never spending on that card.

I would interpret that differently in the context of the article, but I'll meet you on that.

The figures from Experian suggest just over half of all credit card users are using them for revolving credit and only 8.5% use them regularly and pay them off in full? How do you explain that?

Bringing this down for you @ScholesPanda, it's very long so also adding the screenshot to save you having to scroll way way down.

Its been 4 or 5 years since I worked in cards but about 30% of the book were full payers

That'll teach me to rush read and post! Ok, I admit I'm wrong in my assumptions.

I guess that means a lot of profit is made off people who are often carrying balances month after month- but that those people are in the minority? A bit like drinks companies make a lot of money from a minority who drink heavily?