A transactor is a customer who pays off all the charges on their credit card by the due date every month. This means you don’t have a balance that carries over and would be subject to interest charges.
Here’s how being a transactor works, which benefits and disadvantages you experience as this type of credit user, and how it differs from being a revolver.
Definition and Examples of a Transactor
When you’re a transactor, you make purchases on your credit card knowing you’ll probably pay off your balance on the due date. Credit cards often come with a grace period where you can pay for the recent billing cycle’s purchases within around 21 days of the closing date and not accrue interest. So being a transactor can offer you the conveniences of using a credit card without paying interest on your purchases that month. It’s also a way to have less debt to keep track of since you’re not carrying over another balance.
As a transactor, you’ll need to pay in full on time so that you don’t incur late fees, and also note the grace period so you can avoid interest.
Let’s say you use your credit card to buy groceries and pay your utility bills throughout the month. You end up spending $500. Your billing cycle ends, and your credit card company sends you the bill. Since you’re a transactor, you pay the $500 balance on your due date. Therefore, you avoid interest and a late fee on your purchases for that billing cycle.
How a Transactor Works
If you’re a transactor, you’ll usually fit a specific financial profile with characteristics that make it possible to always pay your credit card bill off completely every month. A 2020 study from the Federal Reserve indicates that transactors have the following financial profile:
- Median income of $65,000
- Median credit score of 804
- Utilization rate of 8%
These numbers indicate that the typical transactor has a higher-than-average income and credit score, along with a lower-than-average utilization rate.
If you have the financial capacity to do so, being a transactor can save you a lot of fee-related headaches, improve your credit score, and subsequently help you get better financing for loans. You’ll end up paying your balances off each month and avoid late fees and interest charges.
Most credit card issuers allow you to set up automatic payments that will pay off your balance for you. When you set up autopay, choose the option that pays off your statement balance.
Being a transactor may not be possible for consumers who are living paycheck to paycheck. If that’s the case, making on-time minimum monthly payments on your credit card cards can help steady or increase your credit score, as your payment history accounts for 35% of your credit score.
Pros and Cons of a Transactor
Avoidance of interest and late fees
Positive effect on your credit score
Better debt management
Requires careful spending
Overspending can cut into your savings
- Avoidance of interest and late fees: As long as you pay within the grace period, you can avoid credit card interest charges and late fees.
- Positive effect on your credit score: Being a transactor builds your credit score by providing data on your credit activity, credit history, and credit utilization rate. You could have chosen to pay with a debit card but you chose to pay with a credit card. Paying the balance off on time every month keeps your credit utilization for the card low and maintains a good payment history. These three components make up 65% of your FICO score, so they have a positive impact on your overall credit score.
- Better debt management: Paying off your credit card balances generates extra money, which would otherwise be going toward finance and interest charges. You can use that saved money to pay down other debts you may have, such as a personal loan, mortgage, or student loan. Once your debts are paid, you’ll have more freedom to set and achieve other financial goals.
- Requires careful spending: Avoiding overspending can be challenging if you have an emergency where you need to make an unexpected large charge to your card. It also means you have to stay on top of changes in your income or budget to avoid financial issues. These can be difficult skills to learn if you’ve been a revolver and want to become a transactor.
- Overspending can cut into your savings: If you overspend but still want to pay off your balance, the money you use may have to come from your savings. This can put you in a tight spot if you have a major expense to charge and a reduced or empty savings account.
Transactor vs. Revolver
|Pays off credit card balances on time every month||Carries a balance on credit cards|
|Doesn’t accrue interest or late fees||Accrues interest and possibly late fees|
|Credit score may rise||Credit score may fall|
As the opposite of transactors who don’t carry a balance, revolvers carry a balance at least some of the time. If you’re a revolver, you might pay off your balance occasionally or you might always carry a balance. This approach to credit cards will likely cost interest payments.
Additionally, keeping a balance on your card can negatively affect your credit utilization as well as lead to more debt through interest charges and fees adding up.
If you decide to carry over a balance, consider paying extra each month when possible to reduce interest charges. You might also want to transfer a balance to a card with a 0% introductory offer for balance transfers.
- A transactor doesn’t keep a revolving balance on a credit card and instead pays in full every month.
- Being a transactor helps you avoid interest charges and late fees and positively affects your credit score.
- Creditors are at a disadvantage by not getting credit card interest or fees from transactors, so they target these borrowers for other financial products offered.
- Spending wisely and considering the cash you have available are required for avoiding financial issues as a transactor.
- Revolvers differ from transactors since they carry at least part of the balance over and accrue interest and potential late fees.
Consumer Financial Protection Bureau. "What Is a Grace Period for a Credit Card?" Accessed Oct. 11, 2021.
Federal Reserve. "The Effects of the COVID-19 Shutdown on the Consumer Credit Card Market: Revolvers Versus Transactors." Accessed Oct. 11, 2021.
myFICO. "What's in My FICO Scores?" Accessed Oct. 11, 2021.