Micropayments help debt management, credit scores

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
My boyfriend made multiple payments to his credit card last month. Once he made four payments, they told him he had reached his limit and could not make another payment.

Personally, I have never made more than two payments a month. I know that financed items, such as car payments sometimes work this way, but I have never heard of not being able to pay on a credit card however and whenever you wanted. Especially, since the transactions are all electronic. Is this a common practice? – Kim


Dear Kim,
Making more than one payment per month is a great idea, for several possible reasons. I make at least two payments a month to each of my credit card accounts. The first one is a small automatic payment – my insurance against ever being late. The second payment is the remainder of my balance. I’ve never worried about it being a problem if I made more payments.

In fact, making more payments can be a good idea if you are trying to raise your credit score. If you spend a substantial amount of money on your card, you can have a high balance at any time during the month. You never know unless you ask when the bank will report to the credit bureaus, so if they report right after you buy airline tickets, for example, it can look like you carry a much higher debt burden than you actually do. You can say that you pay your balance off every month, but the credit bureaus are unimpressed. If you’re especially worried about your credit score, for example if you are planning to apply for a mortgage, you’ll want to keep your balances down throughout the month as much as possible.

People also make multiple payments if they get paid weekly, if they receive an unusual lump sum and want to use it before it gets away, or if they want to minimize the amount of interest expense they pay. (When you’re paying 18 percent or more on a high balance, every day sooner you can make a payment saves you money!)

Banks in the past have limited the number of payments you could make per day or in a short period of time. Some banks will not let you make two payments of the same amount in the same day, to avoid accidental duplicate payments. I’ve heard of banks not allowing you to make payments within three days of each other, possibly for the same reason.

Back in the day that payments involved paper checks and manual entry of information, I can see that banks would have a strong reason to discourage micropayments throughout the month. If you sent a dollar a day by check, the cost to have people open envelopes and enter data could outweigh the value of the payments. The postage involved would be a strong deterrent from your perspective! With current technology and online payments, however, as long as a person is reasonable it shouldn’t be a problem.

It seems strange that your boyfriend’s bank would tell him he could not make more than four payments, however. Four payments in a month does not seem excessive, especially if your boyfriend is trying to keep his balance down. Perhaps he reached some kind of limit his bank has set for his particular card. Either way, he should call back and ask what the rule is and why it’s in place.

Limiting payments to four per month is not a common practice, and the major banks do not have such a limit. A smaller bank or different type of card could have its own rules, as outdated as they may be, in my opinion.

I’m sure most credit card companies wish their chief concern could be getting too many payments per month. As long as your boyfriend makes at least one minimum payment per month and stays within his available credit limit, he should be considered a prize customer.

See related: Small balance shows you use credit, helping your score

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Updated: 11-24-2017