When to pay your credit card? Some people pay their credit card when payments are due. While others make their credit card payments on a monthly basis. Whichever options you choose, however, it’s crucial to pay your credit card bill by the due date. Before we go into details as to when is the best time to pay off your credit card bill, it’s important to know why.
In the meantime, you can get a free credit report here through Credit Sesame to see your total credit card debt.
When is the best time to pay your credit card bill?
- Pay your credit card bill early
Paying your credit card before the due date can help lower your credit card utilization rate. It can also cut your interest. It can also improve your credit score.
- Pay your credit card bill in full each month
Doing so will help you avoid interests and also lower your utilization rate.
- Make the minimum payments when they are due.
While you will be charged interests on your purchases when making minimum payments, you will avoid late fees and late payments. (see more details below)
Why it’s important to pay credit card bills when they are due?
A missed credit card payment can negatively affect your credit score, because late payments account for 35% of your total credit score. And the lower your credit score, the riskier you appear to lenders when it comes time apply for a loan.
And if you do not pay your bills on time or miss several credit card payments, your chance of buying a house with a mortgage is very slim.
Another reason to pay your bills on time is to avoid interest. Credit cards carry some of the highest interest rates, which can be anywhere from 17% to 23%. Monthly interests means more money to your credit card providers and less money in your pocket.
A third reason why you should pay your credit card bill when payments are due is that you will get to control your credit card utilization. Credit card utilization is how much of your credit limit you’re using versus your balance. Credit card utilization accounts for 30% of your total credit score. So keeping it low is ideal.
According to experts, keeping your credit card balance under 30% is the way to go. For example, let’s suppose your credit card has a credit limit of $5000. You have used $2500 of that credit. Then your credit utilization is 50%. To keep it below 30%, you should only use $1500 of that credit.
Also, when lenders are assessing whether to give you a mortgage loan, they barely consider how much you pay monthly on your card. Rather, they consider your credit limit and how much of it you have used, aka, your existing debt repayments.
The higher your credit card balance, the weaker your borrowing power will be. That is because they see these debts as something you will pay in the future.
Try as much as possible to make your credit card payments by the deadline. Ding so will let you hit two birds in one stone: (1) it will raise your credit score; (2) it will help you avoid monthly interests and late fees.
When to pay your credit card?
When it comes to make your credit payment on time, you have a few options really. One is to pay everything by the deadline and the other option is to make the minimum payment by the deadline.
The best time to pay your credit card, however, is when you are able to keep your credit card utilization below 30%. Whichever option you choose depends on your circumstances. But if you really want to increase or maintain a good credit score, you might want to go with the third option.
Paying your credit card bill in full by the due date
This is one of the best times to pay your credit card bill on time. Making your payment in full, not only will it help you avoid interest on your purchases and late fees, it will also increase your credit score. Paying some of your bill before the closing date is also a good time.
Paying the minimum amount by the deadline
Your credit card statement always lists the minimum amount to pay. It also lists by what date to pay your credit card bill. Sometimes, the minimum repayment is what we can only afford to make.
However, while paying the minimum payment every month while carrying a balance is a good move, it’s not advisable to do so when you’re trying to improve your credit score or wanting to get out of debt fast.
While you will avoid a late fee if you make your credit card payment by the due date, you’ll be charged a month’s worth of interest on your balance. So only paying the minimum amount each month means that it will take you a long time to pay off your credit card debt.
The importance of making early credit card payments.
Paying your credit card early is the way to go. As you can see above, only making the minimum payment on your credit card statement every month has its disadvantages. So to avoid interest fees to pay off your credit card faster, pay everything early before the deadline.
Why? Well it goes back again to keeping a low credit card utilization rate. When you pay your credit card bill, it tends to lower your utilization rate before the closing date. A low utilization ratio can improve your credit score.
Best way to pay your credit card bill
The best way to pay your credit card bill on time is to set up an automatic payment plan. Doing so will help you avoid any late payment penalties. The payment is made automatically from your checking account. You can arrange it to pay the full closing balance, the minimum payment or some of the closing balance.
Bottom line ….
Deciding when to pay your credit card bill? A good option is to pay off your credit card balance in full each month. Doing so will allow you to avoid interest and late fees. Another option is to make the minimum payments as shown in the statement before the closing date. But the best time to pay off your credit card bill is when your utilization rate exceeds 30%.
Other tips to manage your debt
- Make a repayment budget – a budget will help you decide which debts to pay off first;
- Don’t overspend and don’t apply for other credit while trying to get out debt. Rather, stick to your budget when making credit card payments;
- Set an automatic payment plan so your bill is always paid on time;
- Regularly monitor your credit report and credit score for any errors or inaccuracies – if there are errors, dispute them immediately through Transunion or Equifax;
- If you have multiple credit cards, consider a credit card consolidation loan through Credible.
Work with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAsset’s free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.