Key points about: paying your credit card bill early
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Paying your credit card early could improve your credit score, help with budgeting, and lower potential daily interest charges.
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Making early credit card payments can help lower your credit utilization rate.
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Having enough cash to cover an early payment and still meet other financial obligations is a factor in whether to pay early.
If you’ve just made a purchase with your credit card and have cash in the bank to cover the payment, you may wonder if you should pay it off now or wait until your credit card bill is due.
There are perks to using a credit card for spending, like a credit card that offerscash back rewards. And managing your expenses with credit can help you cover certain costs until payday. But the decision about when to pay your credit card comes down to your unique circ*mstances. While there are benefits to paying your credit card early, there may be situations when paying on time is the best choice.
The benefits of paying your credit card early
When paying your credit card balance, staying on top of payments helps you build credit history and responsibly manage your spending. And while making your monthly payment on time is crucial, you may want to consider the benefits of paying early (before your due date).
Increase available credit
Since making a payment early reduces what you owe, it also improves your credit utilization ratio. Credit utilization ratio is the amount of your total available credit that you’re using. It’s calculated by dividing your total revolving credit debt by your total revolving credit limits. Multiply this number by 100 to see the credit utilization rate in a percentage.
According to the Office of Financial Readiness, your credit utilization rate greatly impacts your credit score. If your credit card company offers online banking, you can use online bill pay to submit a payment before the payment due date and even make additional payments later. Some online banking apps allow you to set up recurring payments for different amounts, like the minimum amount due or the outstanding balance.
Credit bureaus don’t see the daily purchases you make with your credit card; your credit card issuer only reports your account balance at the close of your billing cycle. So, if you make payments to your credit card company before your due date, you’ll have a lower balance due (and higher available credit) at the close of your billing cycle. That means less credit card debt gets reported to the credit bureau (or bureaus), which could help your credit score.
According to the Consumer Financial Protection Bureau, it’s best to keep your utilization ratio as low as possible,preferably no more than 30% of your total credit limit.
Avoid late payments
According to Experian, payment history (a record of on-time payments and late payments) is themost critical factor weighing your credit score. Paying your credit card bill early can help your credit score by ensuring you don’t miss a payment. Setting up an automatic payment can take the guesswork out of paying on time, so you never miss a payment date, especially if you have multiple credit cards.
Bring awareness to spending and budgeting
When you make an early payment to your credit card by logging in mid-month, you may notice areas where you can curb excessive spending. Regularly checking your credit card balance could help you stick to a monthly budget.
Lower daily interest on a carried balance
If you carry a balance past your due date, you’ll lose yourgrace period, which means you’ll pay interest on your balance plus new purchases as you make them. Making credit card payments ahead of the next due date can reduce the balance that accrues interest every day. This is especially helpful if you have a high interest rate.
You can break it down like this: For regular purchases, you get charged interest based on your credit card’s purchase APR (annual percentage rate). Your APR determines the total interest you pay yearly on any credit card balance you carry from one month to the next. But most credit card issuers apply an interest charge daily (using a daily rate based on your APR), which compounds (interest charged on unpaid interest) over time. That means you can save on daily interest charges by paying early, no matter the amount.
Are there downsides to paying your credit card early?
As beneficial as paying your credit card bill early can be, there are some reasons you may want to stick to your scheduled payment date. For instance, you might need to keep cash in your bank account to pay for necessities or other bills. If this is the case, paying on the due date can help you meet your other financial responsibilities.
Did you know?
If you have a balance transfer card with a 0% introductory APR, you may not want to make early credit card payments since the outstanding balance won’t accumulate interest fees during the introductory period.
Is it best to pay your credit card early or on time?
While there’s no single answer to whether it’s best to pay your credit card early vs. on time, it’s safe to say you should avoid paying late. Aside from potentially incurring a late fee, making a late payment or missing a credit card payment can negatively impact your payment history and credit score.
Managing your debt takes careful planning and discipline. Understanding how paying your credit card bill early impacts your credit and cash flow can help you make more informed decisions.
FAQs
If you make payments to your card before the payment due date, you can lower your overall credit utilization rate, which is a positive sign for credit lenders. Credit utilization is a factor in determining an overall credit score, so continuing to keep a low credit utilization ratio could improve your score.
Is it good to pay credit card off early? ›
So, if you make payments to your credit card company before your due date, you'll have a lower balance due (and higher available credit) at the close of your billing cycle. That means less credit card debt gets reported to the credit bureau (or bureaus), which could help your credit score.
What is the 15 3 rule on credit cards? ›
By making a credit card payment 15 days before your payment due date—and again three days before—you're able to reduce your balances and show a lower credit utilization ratio before your billing cycle ends. That information is reported to the credit bureaus.
Is it better to pay off credit card immediately or wait for statement? ›
Credit card companies report your balance to the credit bureaus every month, typically at the end of each billing cycle. If you make your payment shortly before your statement date, it could help reduce your credit utilization, which can help you increase your credit score or maintain good credit.
Is it better to pay credit card before statement or due date? ›
To avoid paying interest and late fees, you'll need to pay your bill by the due date. But if you want to improve your credit score, the best time to make a payment is probably before your statement closing date, whenever your debt-to-credit ratio begins to climb too high.
Is it OK to pay off credit card every week? ›
As long as you're making at least your monthly payment, the frequency is up to you. Paying weekly could be a good idea if your credit utilization has been hurting your credit score, or if you want to better stay on top of your spending.
When should I pay my credit card to increase my score? ›
Consistently paying off your credit card on time every month is one step toward improving your credit scores. However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.
Does paying twice a month increase credit score? ›
When you make multiple payments in a month, you reduce the amount of credit you're using compared with your credit limits — a favorable factor in scores. Credit card information is usually reported to credit bureaus around your statement date.
What is the credit card payment trick? ›
You make one payment 15 days before your statement is due and another payment three days before the due date. By doing this, you can lower your overall credit utilization ratio, which can raise your credit score. Keeping a good credit score is important if you want to apply for new credit cards.
Does paying your credit card twice a month help? ›
As 30% or lower is the ideal credit utilization ratio, a single credit card payment is not your best option. Paying half your bill twice a month—such as with the 15/3 rule—would keep your credit utilization ratio at 22.5% or less throughout the month.
Yes, you can pay the credit card bill immediately after purchase. But, this has both benefits and disadvantages. You Don't Have To Remember The Due Date: By paying off the credit card bill immediately after making the purchase, you do not have to remember the credit card due date.
Will my credit score go up if I pay off my credit card in full? ›
While paying off your debts often helps improve your credit scores, this isn't always the case. It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. However, that doesn't mean you should ignore what you owe.
Will paying off your entire credit card balance in full every month hurt your score? ›
If you regularly use your credit card to make purchases but repay it in full, your credit score will most likely be better than if you carry the balance month to month. Your credit utilization ratio is another important factor that affects your credit score.
How many credit cards are too many? ›
Owning more than two or three credit cards can become unmanageable for many people. However, your credit needs and financial situation are unique, so there's no hard and fast rule about how many credit cards are too many. The important thing is to make sure that you use your credit cards responsibly.
Should I pay my credit card in full or statement? ›
The bottom line
You should always strive to pay off your statement balance in full each month by the due date to avoid costly interest charges.
What is a good credit score? ›
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
Will I be charged interest if I pay off my credit card in full? ›
Even though you paid off your account, there could have been residual interest from previous balances. Residual interest will accrue to an account after the statement date if you have a balance transfer, cash advance balance, or have been carrying a balance from month to month.
When should I pay my credit card to avoid interest? ›
Pay your credit card bill in full every month
If you pay off every bill completely, you won't carry a balance into the next month, meaning you won't owe any credit card interest at all.
What happens if you only pay half of your credit card bill? ›
Unless you've reached a prior agreement with the credit card company, partial payments will not satisfy your account's minimum payment requirements. Even if you pay a little money, your account will become delinquent, and the credit card company will report the late payments to the credit bureaus.
