When to pay your Credit Card Bill and how it Affects Your Credit Score.
When to pay your Credit Card Bill: Your credit card statement has a due date, just like every other bill. But you can pay your bill early, so unlike most payments, paying your credit card bill before the due date has advantages beyond the peace of mind that come with not having to deal with it for another month.
Asides from the peace of mind you get from paying your credit card bills early, you might love to know if it is safe to pay early or if it has an effect on your credit score. We will discuss that in this article.
Will Paying My Credit Card Bill Early Affect My Credit?
Some people think carrying a credit card balance from month to month can help you improve your credit score. That’s simply not true. Paying your balance in full will not harm your credit score, and carrying a balance typically means you pay interest charges, so it’s best to pay off your balance each month if you can afford to do so.
Furthermore, carrying a balance that exceeds about 30% of a card’s borrowing limit (also known as 30% utilization), can actually pull your credit score down, which you should avoid whenever possible.
Benefits of Paying Your Credit Card Bill Early?
1. Paying early means less interest
First things first: If you pay your credit card balance in full every month, you won’t have to worry about interest. That’s because issuers give paid-in-full accounts an interest-free grace period, which usually lasts until the next due date.
2. Early payments can improve credit
Taking care of a credit card bill early reduces the percentage of your available credit that you’re using. That’s good for your credit score.
3. Paying ahead clears room for other needs
Paying ahead of time also frees up your available credit for holds or purchases. To make big purchases on your card, you’ll need room to spare in your available credit. It’s possible for a card to be declined when you use most of the available credit or get close to a card’s limit.
4. Eliminate the chance of late charges
It sounds obvious, but paying your credit card early means you won’t forget to pay it. You can eliminate the chance of late fees or having late payments reported to the credit bureaus.
Be mindful of your due date, though. If you make a payment before your statement arrives but you’re still carrying a balance, you’re responsible for the minimum payment on the new bill. Payments made prior to the statement date count toward the prior month.
Reasons you might not want to pay your credit card bill early
The decision to pay your credit card bill early isn’t for everyone. It can be tempting to see that zero balance on your credit card, but if it will leave you short of cash for necessities, it might be better to leave your money in the bank.
Similarly, if you’re currently in your card’s introductory zero percent interest period and your money is in a savings account collecting interest, even at a rate of just 1 or 2 percent, it might not make sense to pay off your credit card immediately.
When Is the Best Time to Pay My Credit Card Bill?
The only bad time to pay your credit card bill is after your payment is due—a mistake that can have significant negative repercussions for your credit score. But paying your bill in full before your statement closing date, or making an extra payment if you’ll be carrying a balance into the next month, can help you cultivate a higher credit score by reducing the utilization recorded on your credit report—and save you some finance charges to boot.
Getting Out of Credit Card Debt
If you’ve found yourself in debt or paying the minimum every month, consider the avalanche method for paying off your debts, which involves tackling the debt with the highest interest rate first. You may also want to look into balance transfers to help speed up the debt repayment process. Transferring debt to a card with a lower interest rate can help you get out of debt sooner by reducing the cost of interest as you pay it off. Balance transfer offers make a good complement to the avalanche method, and they can be used together effectively.
The Bottom Line
Paying your credit card early can save money, free up your available credit for other purchases, and provide peace-of-mind that your bill is paid well before your due date. If you can afford to do it, paying your credit card bills early helps establish good financial habits and can even improve your credit score.