Determining the best time to pay your credit card bill can be confusing. While it may seem responsible to pay as soon as possible, there are some strategic reasons to wait. We will examine when you should pay your credit card bill to maximize benefits like rewards, cashback, interest savings, and improved credit score.
Pay On Time To Avoid Penalties
The first rule of thumb is to always pay at least the minimum amount due by the payment due date. Credit card companies charge late fees penalty APRs and other consequences for late or missed payments that can negatively impact your finances and credit score. Setting payment reminders and automating payments can help avoid missed payments.
Paying on time is vital, but paying more than the minimum whenever possible is wise to avoid interest charges. Carrying a balance and only paying the minimum keeps debt growing through compounding interest.
Pay In Full To Avoid Interest
Ideally you should strive to pay your statement balance in full every month. This allows you to avoid paying interest on purchases while continuing to earn rewards. If you cannot pay in full, paying as much as possible above the minimum due will save on interest fees.
By paying in full each month, you maintain your grace period – the time between the end of a billing cycle and the payment due date during which no interest accrues on purchases if balance paid in full Failure to pay in full forfeits the grace period and leads to interest accumulating daily on purchases.
Pay Early To Reduce Utilization
An important factor in your credit score is credit utilization – the ratio of credit card balances versus total available credit limits. Lower utilization signals responsible credit management.
You can manipulate this ratio by making payments before your statement closing date when the balance is reported to credit bureaus. For example, if your limit is $1,000 and you’ve charged $500, your utilization is 50%. But paying $200 before the closing date leads to a reported utilization of just 30%. This small timing adjustment can boost your score.
Just be sure not to pay early too frequently where your reported balance is $0. Having some utilization reported proves you actively use credit.
Pay Before Large Purchases
For big purchases like vacations or large household items, consider making an extra payment before charging them to keep utilization low when the balance reports. This prevents your utilization ratio from spiking, along with subsequent score drop.
Additionally, minimizing your balance helps available credit for large purchases that need to be split across multiple cards. You want room on each card to maximize rewards with your spending split strategically based on bonus categories.
Pay After Billing Cycle To Maximize Rewards
Waiting until after the statement closing date means you have use of the funds until the due date to earn interest or returns elsewhere. This only applies if you reliably pay in full – carrying a balance negates any returns earned and racks up costly interest charges.
Delaying payment also allows additional transactions to accumulate rewards. As long as you avoid the aforementioned utilization issues, maximizing rewards dollars can give your finances a boost through statement credits, cash back, travel perks, and more.
Set Payment Date Strategically
Most credit card companies allow you to set a preferred payment due date based on your pay schedule. Aligning due dates with paydays ensures funds are available to pay on time and in full.
Setting a date soon after payday gives a buffer between when you receive income and the payment deadline. This prevents missed payments if pay is delayed. Likewise, due dates far from paydays ensure you don’t tap credit cards to bridge gaps.
With proper timing, you can strategically pay credit card bills to maximize rewards and savings while building your credit. Just remember – pay at least the minimum on time always, pay in full when possible to avoid interest, and time larger payments wisely to manipulate utilization. Master these basics and your credit card can improve your financial situation.
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You should always pay your credit card bill by the due date, but there are some situations where its better to pay sooner.
For instance, if you make a large purchase or find yourself carrying a balance from the previous month, you may want to consider paying your bill early. It seems like a small change, but it can have a significant effect on your overall finances and help protect your credit score.
CNBC Select explains when it makes sense to pay your credit card balance early and how the timing of your payment affects your credit score.
When to make multiple payments on your credit card bill
If your credit card bill is higher than usual because youve made a large purchase, such as new workout equipment or office furniture, your credit utilization rate, or the percentage of your total credit youre using, will go up. This is most noticeable when you have a lower credit limit.
The change in your balance can potentially lower your credit score since utilization is the second most important factor of your credit score. Its important to maintain a low credit utilization rate below 30%, and ideally 10% if you really want a good credit score.
In these situations — and any time you have a higher-than-normal balance — it can be a good idea to make multiple payments during your billing cycle or simply pay the entire balance before your due date. Paying your balance more than once per month makes it more likely that youll have a lower credit utilization rate when the bureaus receive your information. And paying multiple times can also help you keep track of your spending and cut back on any overspending before you fall into debt.
On the other hand, waiting until your billing cycle closes to make one large payment makes it more likely that the bureaus will see the high balance, since its reflected on your statement.
Lets say your billing cycle ends on the 10th of every month, and your card issuer reports to the credit bureaus on the 11th. If you typically spend $1,000 on a card with a $5,000 credit limit, your utilization is 20%. But if you make an additional $2,000 in charges for home renovations on the 1st, on top of the $1,000 you usually spend, your utilization would increase to 60%.
However, you can reduce your utilization by paying some of your balance before your billing cycle ends on the 10th. You could pay off the extra $2,000 in charges on the 2nd, and lower your utilization back to 20% by the time your billing cycle ends. The simple action of paying part of your balance early can reduce any potential negative impacts to your credit score.
BEST Day to Pay your Credit Card Bill (Increase Credit Score)
FAQ
What is the best time to pay credit card bill?
What is the 15 3 rule for credit cards?
When must I pay my credit card bill?
When should I pay my credit card bill to increase my credit score?
Should you pay your credit card bill early?
But if there’s a month that you have extra money left over after essential expenses, you should use it to pay your credit card bill early, rather than waiting until the due date. When you pay the bill early, you save yourself some interest, says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report.
Should I pay my credit card bill before the due date?
Paying your credit card bill before its due date provides benefits to help your credit and your pocketbook. When you pay your credit card bill before your billing cycle ends, the balance amount your card issuer reports to the credit bureaus may be lower than if you paid after your statement closing date.
When is the best time to pay your credit card bill?
The best time to pay your credit card bill to avoid interest is on or before the due date. That’s because you’ll pay more in interest if you miss a credit card payment since you’ll continue to accrue interest charges on your past due credit card balance.
Should you pay your credit card bill on time?
Paying your credit card bill on time is important for a number of reasons. First, you can avoid paying interest on your balance if you pay in full. Second, it can improve your credit score by keeping your credit utilization low.
Should you pay your credit card bill in 2 days?
The 15/3 rule, a trending credit card repayment method, suggests paying your credit card bill in two payments—both 15 days and 3 days before your payment due date. Proponents say it helps raise credit scores more quickly, but there’s no real proof. Building credit takes time and effort.
When is my credit card bill due?
Your credit card bill is due on the same date every month. If you’re not sure what your due date is, you can typically find it on your credit card bill. The date must be at least 25 days from when the billing cycle closes and 21 days after the company sends your monthly statement.