Your credit score won’t take a hit as long as you pay the minimum amount before your due date. But these strategies can help you avoid accruing interest and keep credit utilization low.
There is no single right answer. Some financial experts recommend checking your credit cards online each day and making a payment whenever you have a balance. Others say that it’s best to make your payment one or two days before your card’s closing date.
Still others recommend a simpler approach:
“Making at least the minimum payment before that due date passes is what you have to do,” said Beverly Harzog, Atlanta-based credit card expert and consumer finance analyst for U.S. News & World Report. “That’s the basic thing you must do.”
But making the minimum monthly payment only – even by the due date – isn’t ideal. Depending on how much credit card debt you have, it can take you years, and thousands of dollars in interest, to pay it off taking that approach, Harzog said.
The better move is to pay off your entire credit card balance in full before every due date. That way, you won’t have to pay interest on your credit card debt.
But to understand when it makes the most sense for you to pay your credit card bill, you must first understand how credit card billing cycles work and consider your own financial habits: Do you routinely charge more than you can afford? Have you already run up the debt on your cards? Do you routinely forget to make payments by your due date?
All of this will help you determine the best way to pay your credit card bills.
When should you pay your credit card bill?
How long do you have to pay off a credit card?
A credit card billing cycle usually spans 28 to 31 days. Any transactions made during this time period are counted toward a monthly bill. After a billing cycle’s closing date, you’ll have a time period – usually around 25 days – where you can pay your bill without incurring interest charges or late fees.
At the end of this period, your card will have a due date. If you don’t pay your balance in full by this date, your remaining balance will incur interest. And if you don’t pay at least the minimum due, you will also have a late fee tacked on to your balance.
See related: How does credit card interest work?
Paying your credit card bill early
Forrest McCall, the Louisville, Kentucky-based owner of personal finance site DontWorkAnotherDay.com, says he usually pays his credit card bill one or two days before its closing date to keep his credit utilization ratio low.
Credit utilization measures how much of your available credit you are using at any one time, and it is an important factor in determining your credit score, accounting for 30% of your score. The lower the ratio, the better your score will be.
“When I pay my balance in full before the closing date, it shows on my credit reports that I have zero dollars in revolving credit for that card. It shows that my credit utilization rate is low. I am using credit cards quite a bit, but the credit bureaus don’t see that,” says McCall.
When issuers report credit utilization varies, and it might not line up with your closing date like it does for McCall. You can call your issuer to find out when it reports. Paying before that date will keep your utilization low – close to zero if you pay your balance in full.
Checking your balance every day
Jason Hull, a certified financial planner and owner of Dallas’ Hull Financial Planning, takes a different approach. He says the best time to pay your credit card is every time you make a purchase – or every time a new purchase clears.
Taking this strategy, you won’t run up any debt and you won’t have to worry about keeping your credit utilization ratio low. You’ll be keeping it low automatically by paying off individual purchases before they add up to higher piles of debt.
“This way, your debt doesn’t accumulate,” Hull said. “There are no ‘Oh, crap! Look what I’ve spent!’ moments.”
This strategy does require you to have enough money in your account daily to pay off what you’ve charged. If you don’t, you likely won’t have enough money to make other payments that are due soon.
But if you have the money saved, taking this approach will prevent you from ever paying interest on your credit card debt, Hull said.
“Doing it this way keeps your limbic system from making bad decisions on the spur of the moment,” Hull said. “You might not buy that 136-inch flat-screen TV you don’t really need if you know you’re going to have to pay $500 the next day on your credit card.”
Why it’s important to pay your credit card bill by its due date
Regardless of which strategy you take, the worst day to pay your credit card is any day that falls after your payment due date, because it will trigger a late fee. This will vary by issuer, but you can expect to pay as much as $40.
Depending on when you pay, you could face more consequences than a late fee. At 30 days past your due date, your late payment will be reported to credit bureaus.
“Failure to consistently make on-time payments can tank a consumer’s credit score,” said Jasmine Young, founder and CEO of Atlanta-based Southern Tax Preparation & Services.
Your payment history accounts for 35% of your credit score: the single biggest factor. A single late credit card payment can cause your score to drop by 100 points or more. And it will remain on your report for seven years.
At 60 days, it might trigger a penalty interest rate. These rates can be high, with some providers boosting your interest rate to 29.99%. If you regularly carry balances on your credit card, this could be financially devastating.
Young, like Hull, recommends that consumers pay their credit card bill several times a month. This will guarantee that you won’t pay your credit card bill late.
Tips to help you pay your bill on time
If you want to make sure you always pay your credit card bill on time, here are some tips to make that as convenient as possible:
Change your payment due date
If you’re having trouble making payments on your current due date, ask your issuer to move it to a day that works better, says Harzog. If you get paid on the 20th of every month and your due date is the 15th, you could ask your credit card provider to move it from the 15th of the month to the 21st.
Set up automated payments
If you frequently forget your due dates, set up automatic payments, says Lauren Bringle Jackson, an accredited financial counselor at Self, an Austin, Texas, financial tech company. Set up these payments by logging onto your credit card account online, connecting a bank account to your card and picking a date on which you want your payment to be made.
You can usually set your payment so that it covers the minimum monthly payment, pays off your balance in full or pays an amount that you set each month. Jackson warns, though, that you must have enough money in your account each month to cover the payment. If you don’t, you might end up with returned payments and fees from both the card issuer and your bank.
Set up reminders
Sign up for automatic payment reminders from your credit card provider. Card providers can send you alerts whenever and however they work best for you, whether that’s five days or one day before your due date.
Create a household budget
If you’re missing due dates because you don’t have enough money in your bank account, create a budget listing your monthly fixed expenses and spending. Compare that to how much money you make each month.
If you’re coming up short, check your credit card statements to determine where you might be spending too much and what spending habits you can change to get your spending down.