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.
You know it’s important to pay your credit card bill by its due date to keep your card provider from charging you late fees or hitting you with a sky-high penalty interest rate. But when is the best day of the month to pay your credit card?
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 full payment, or at least the minimum, before your card’s closing date.
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, said Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report.
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 time to pay your credit card bills.
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 grace 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.
Paying your credit card bill early
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.
Issuers report your credit utilization at different times, and it won’t necessarily line up with your closing date. 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
Some cardholders believe that 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,” says Jason Hull, a certified financial planner and owner of Hull Financial Planning. “There are no ‘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, says Hull.
“Doing it this way keeps your limbic system from making bad decisions on the spur of the moment,” says Hull. “You might not buy that 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. 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, 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.
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, said Lauren Bringle Jackson, an accredited financial counselor at Self. Just log into your credit card account online, connect a bank account to your card and pick a date when you want your payment to be made.
You can usually set your payment so that it covers the minimum monthly dues, pays off your balance in full or pays a flat amount that you set each month. Keep in mind, however, 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 issuers 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. Then, compare that with 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 figure out which spending habits you can change.
Paying your credit card bill on time is essential to maintaining a good credit score. It can also help you avoid late fees and even a penalty rate for paying late.
Now that you know all of the options regarding when you can pay your bill, choose the time that’s right for you and your financial situation. Once you do that, your chances of missing a payment should be slim to none.