Ask Liz Weston

Get smart with your money

Credit Cards

Q&A: Why you need to pay attention to your credit utilization

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Dear Liz: Our credit scores are in the low 800s. We always pay all credit card balances off before the next billing period. We are presently charging a cruise for us and our daughter and her husband. We’re worried about using too much of our available credit and thus reducing our credit scores. We’re using one credit card and paying half the balance this billing period and the rest on the next billing period. I’ve never been able to calculate the “credit utilization,” but I’m sure we will exceed it for the next two months even though we will pay the amount charged in full. With this large charge, can you suggest anything else we can do?

Answer: Your credit utilization is simply the amount of available credit that you’re using. If your card has a $10,000 limit and you make $5,000 in charges, your credit utilization ratio is 50%. (If you’re not sure what your credit limit is, you can check your account online or call the number on the back of your card and ask.)

In general, the less of your available credit you use the better.

The balance that matters for credit scoring purposes is the balance that’s reported to the credit bureaus — and that’s typically what you owe as of your statement closing date.

Making a payment right before the statement closes can help reduce your credit utilization. Some people make payments every week, or even more often, to keep their utilization in the single digits.

If you don’t plan to apply for a new credit card or loan, however, you probably don’t need to worry about a temporary ding to your credit scores because they’re already so high. Your scores will probably still be quite good and will rebound once you pay off the balance.

Q&A: How to improve credit card security

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Dear Liz: Can you please explain why a personal identification number is not required when one uses a credit card? I know people who’ve had their card stolen and used quickly and for large amounts. That would immediately protect the credit card company from paying millions to cover losses.

Answer: “Chip and PIN” cards — which combine a microchip with a personal identification number — are the norm in most of the rest of the world. In the U.S., however, credit card issuers are reluctant to require their customers to use PINs.

The issuers are worried people would find the PINs to be a hassle and would opt to use a competitor’s card that didn’t require remembering and entering a number. The massive amount of fraud that results is considered a cost of doing business.

Consumers aren’t on the hook to pay for these bogus transactions as long as the fraud is reported within 60 days of the charges appearing on a statement. But compromised cards are still a hassle.

One of the best ways to protect your credit cards from fraud is to use mobile payment systems such as Apple Pay or Google Pay. These systems don’t expose your credit card number to the merchants and allow you to pay for purchases quickly and securely.

Q&A: Credit use and your scores

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Dear Liz: When my credit utilization decreased to 24%, my credit score rose from 675 to 690. My utilization has since decreased to 17% but my score remains 690. Approximately what does my credit utilization have to be to see a credit score over 700?

Answer: Keep in mind that you have many credit scores, not just one, and the formulas used to create these scores can vary considerably. But in general, the less you use your available credit, the better. People with the highest credit scores tend to use less than 10% of their credit limits.

Q&A: Authorized credit card users

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Dear Liz: Following your advice on building credit, we recently added our son as an authorized user on one of my credit cards. My question is, what happens when I pass away? Does the card remain with him as the only user? Do I need to address this in my will?

Answer: Your executor, the person you named in your will to handle your estate, will be responsible for closing the account when you die. If there are any balances owing, the debt will be paid from your estate. There’s no need to make special provisions for the account in your will. By that time, your son, one would hope, would have cards of his own, so the closure shouldn’t affect his credit scores much if at all.

Q&A: Multiple payments may help credit scores

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Dear Liz: You recently wrote that using more than a small percentage of your credit cards’ available limit can hurt your credit scores, even if you pay your balances in full. I pay my credit cards in full each month and I also make several payments (via my bank’s online payment service) during the month. Do these multiple payments hurt or help my credit score?

Answer: They probably help. The balance that matters for credit scoring purposes is the balance that’s reported to the credit bureaus, and that’s typically what you owe on your statement closing date. Making multiple payments before the statement closing date should lower that balance. Just remember to make a payment between the statement closing date and before the due date to avoid late fees.

Q&A: Mom has dementia and credit cards. How does her family cancel the accounts?

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Dear Liz: My mother has two credit cards that have had no activity for a year and a half due to being in an assisted living facility. She is living with dementia and no longer able to make any decisions (personal or financial) on her own. Should I or am I even able to cancel these cards or do I have to wait until she passes and send in a death certificate to the bank?

Answer: Theoretically you could close the accounts for her if you have a legal document known as a financial power of attorney. These documents are designed to help you take over the finances of someone who is incapacitated. Unfortunately, banks and credit card issuers sometimes refuse to honor powers of attorney despite legal requirements that they do so. You might need to hire an attorney to force them to accept your authority. You can get referrals to experienced attorneys from the National Academy of Elder Law Attorneys and the American Bar Assn.

If you don’t have this document and your mother is no longer of sound mind, you probably would have to go to court to become her conservator to make financial decisions for her. That can be an expensive process.

But there might be a simple solution. Some credit cards have an “off” switch that prevents anyone from making charges on the account. If the card has this feature and you can access the account online, you may be able to effectively disable the account even if you can’t formally close it.