Paying credit card bills any day before the payment due date is always the best. You’ll avoid late fees and penalties. However, making payments even earlier can have even more benefits.
A lot of people struggle to pay their credit card bills on time, i.e before the due date. However, if you’re on top of things, and you can afford to, you can improve your credit score (and even lower your interest rate) by making payments earlier in your billing cycle.
If you carry a balance month on month, then paying it early could also help improve your credit utilization, one of the key factors determining your credit score.
One of the most important factors to consider when it comes to paying off your credit card bill is the timing. Late payments can have a variety of consequences. Not only will they damage your credit score, you’ll have to pay penalty fees.
When you carry a balance every month, the timing of your credit card payments can affect the amount of interest that you pay. The sooner you can pay off more of your carried balance, the less you’ll pay in interest charges.
1. Making payments before the due date
Having a good on-time payment history will keep your credit card account in good standing. Credit bureaus reward payments made before the due date with a boost to your score. Remember, the minimum payment should be made before the due date to avoid late fees and interest charges.
2. Making payments before the statement closing date
If you want to show your creditworthiness to credit bureaus, make your payments before the closing date. (You’ll find your closing date on your card statement.) When you make a payment and lower your balance before the closing date, credit bureaus view that as responsible behavior, and you’ll likely see a boost in your score.
3. Making early payments in the billing cycle
Paying your credit card early can help lower your finance charges. When you carry a balance from one month to the next, credit card companies use either your average daily balance or the daily balance method to determine your finance charge. Having a lower balance for a longer period of time can help lower your finance charge.
4. Making payments when you get paid
Making a payment when you get your paycheck puts extra priority on paying your cards. With your card bill paid before or alongside other bills, you’ll help ensure funds are allocated.
5. Making payments before planning big purchases:
If you’re planning a big purchase, try making a payment before you go through with it. Lower your card’s balance before you start adding more to it. You’ll pay less in interest changes and see a lower minimum due.
A credit card billing cycle typically lasts from 28 to 31 days. During this period, any purchases or charges are counted toward your next bill. After the end of the billing cycle, you have time where you can pay off the bill without interest charges and late fees. The period between the end of the billing cycle and the payment due date is known as the grace period.
Your due date follows the end of your billing cycle. If you don’t pay the entire balance on your card by your due date, you’ll be charged interest. And, if you don’t pay at least the minimum payment, you’ll be charged a late fee.
1. Request for a change on your payment due date
If you’re having trouble making payments on time, it’s possible to request your credit card issuer to change your due date. This can help with budgeting, moving your due date to a pay period when fewer bills are paid. Most issuers are happy to oblige!
2. Set up automatic payments
If you’re finding it hard to track multiple due dates on multiple cards, setting up automatic payments can help you make payments on time. You can set it for the correct date and pay the full balance, a partial balance payment or the minimum due.
3. Mark your due dates on your phone
Most credit card companies offer to send alerts or reminders whenever a payment is due. It’s best to receive these reminders a few days before the due date to avoid missed payments.
Making payments any day before the due date avoids late fees and penalties. To improve your credit score, try making payments before the statement closing date, and to help out with tight budgets, move your due date and payment date to accommodate your cash flow.
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With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.