Key points about: paying your credit card bill early
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Paying your credit card early could improve your credit score, help with budgeting, and lower potential daily interest charges.
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Making early credit card payments can help lower your credit utilization rate.
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Having enough cash to cover an early payment and still meet other financial obligations is a factor in whether to pay early.
If you’ve just made a purchase with your credit card and have cash in the bank to cover the payment, you may wonder if you should pay it off now or wait until your credit card bill is due.
There are perks to using a credit card for spending, like a credit card that offerscash back rewards. And managing your expenses with credit can help you cover certain costs until payday. But the decision about when to pay your credit card comes down to your unique circ*mstances. While there are benefits to paying your credit card early, there may be situations when paying on time is the best choice.
The benefits of paying your credit card early
When paying your credit card balance, staying on top of payments helps you build credit history and responsibly manage your spending. And while making your monthly payment on time is crucial, you may want to consider the benefits of paying early (before your due date).
Increase available credit
Since making a payment early reduces what you owe, it also improves your credit utilization ratio. Credit utilization ratio is the amount of your total available credit that you’re using. It’s calculated by dividing your total revolving credit debt by your total revolving credit limits. Multiply this number by 100 to see the credit utilization rate in a percentage.
According to the Office of Financial Readiness, your credit utilization rate greatly impacts your credit score. If your credit card company offers online banking, you can use online bill pay to submit a payment before the payment due date and even make additional payments later. Some online banking apps allow you to set up recurring payments for different amounts, like the minimum amount due or the outstanding balance.
Credit bureaus don’t see the daily purchases you make with your credit card; your credit card issuer only reports your account balance at the close of your billing cycle. So, if you make payments to your credit card company before your due date, you’ll have a lower balance due (and higher available credit) at the close of your billing cycle. That means less credit card debt gets reported to the credit bureau (or bureaus), which could help your credit score.
According to the Consumer Financial Protection Bureau, it’s best to keep your utilization ratio as low as possible,preferably no more than 30% of your total credit limit.
Avoid late payments
According to Experian, payment history (a record of on-time payments and late payments) is themost critical factor weighing your credit score. Paying your credit card bill early can help your credit score by ensuring you don’t miss a payment. Setting up an automatic payment can take the guesswork out of paying on time, so you never miss a payment date, especially if you have multiple credit cards.
Bring awareness to spending and budgeting
When you make an early payment to your credit card by logging in mid-month, you may notice areas where you can curb excessive spending. Regularly checking your credit card balance could help you stick to a monthly budget.
Lower daily interest on a carried balance
If you carry a balance past your due date, you’ll lose yourgrace period, which means you’ll pay interest on your balance plus new purchases as you make them. Making credit card payments ahead of the next due date can reduce the balance that accrues interest every day. This is especially helpful if you have a high interest rate.
You can break it down like this: For regular purchases, you get charged interest based on your credit card’s purchase APR (annual percentage rate). Your APR determines the total interest you pay yearly on any credit card balance you carry from one month to the next. But most credit card issuers apply an interest charge daily (using a daily rate based on your APR), which compounds (interest charged on unpaid interest) over time. That means you can save on daily interest charges by paying early, no matter the amount.
Are there downsides to paying your credit card early?
As beneficial as paying your credit card bill early can be, there are some reasons you may want to stick to your scheduled payment date. For instance, you might need to keep cash in your bank account to pay for necessities or other bills. If this is the case, paying on the due date can help you meet your other financial responsibilities.
Did you know?
If you have a balance transfer card with a 0% introductory APR, you may not want to make early credit card payments since the outstanding balance won’t accumulate interest fees during the introductory period.
Is it best to pay your credit card early or on time?
While there’s no single answer to whether it’s best to pay your credit card early vs. on time, it’s safe to say you should avoid paying late. Aside from potentially incurring a late fee, making a late payment or missing a credit card payment can negatively impact your payment history and credit score.
Managing your debt takes careful planning and discipline. Understanding how paying your credit card bill early impacts your credit and cash flow can help you make more informed decisions.
FAQs
So, if you make payments to your credit card company before your due date, you'll have a lower balance due (and higher available credit) at the close of your billing cycle. That means less credit card debt gets reported to the credit bureau (or bureaus), which could help your credit score.
Is paying a credit card bill early good? ›
Bottom line. Paying your credit card bill early is not intrinsically good or bad, but it can help you avoid negative habits such as high credit utilization and late payments. Paying your credit card early won't directly influence your credit score, but it can help in creating good financial habits down the line.
Is it bad to pay off a credit card before a statement? ›
The bottom line. Paying your credit card balance before your billing cycle ends can be beneficial in the short term and long term. It'll prevent you from missing a payment, help you avoid expensive interest charges, increase your credit limit and improve your credit score faster.
Is it better to pay off credit card immediately or wait? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
How many days earlier should I pay my credit card? ›
With the 15/3 rule, you make two payments each statement period. You pay half the credit card balance 15 days before the due date and the second half three days before the due date. This method ensures that your credit utilization ratio stays lower over the duration of the statement period.
Is there a downside to paying off credit card early? ›
While you might be penalized for paying off a loan early, there aren't many drawbacks to paying your credit card early. The pros far outweigh the cons. One potential downside would be if an early payment took money from your bank account that you needed for other things.
Do I get points if I pay my credit card early? ›
Do you still get points if you pay your credit card early? Yes. If you have a rewards card that earns points based on your spending, those points won't be lost if you pay your credit card bill early.
What is the 15 3 rule for credit cards? ›
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.
Does paying a credit card early help? ›
So, if you make payments to your credit card company before your due date, you'll have a lower balance due (and higher available credit) at the close of your billing cycle. That means less credit card debt gets reported to the credit bureau (or bureaus), which could help your credit score.
Is it bad to pay a credit card multiple times a month? ›
If you typically carry a balance on your credit card from one month to the next, then making multiple payments during each billing cycle can reduce your interest charges overall.
It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.
What happens if I use my credit card and pay it off right away? ›
Paying early could help your credit
This is the amount you owe as a percentage of your credit limit. For example, if you have a $5,000 credit limit and your balance is $2,000, your utilization is 40%. Generally, the lower your utilization, the better, and utilization above 30% could be damaging to your credit scores.
Is it bad to have a lot of credit cards with zero balance? ›
However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.
How early should I pay my credit card bill to increase credit score? ›
Credit card companies report your balance to the credit bureaus every month, typically at the end of each billing cycle. If you make your payment shortly before your statement date, it could help reduce your credit utilization, which can help you increase your credit score or maintain good credit.
Can I pay my credit card early and use it again? ›
Yes. Once your payment posts to your credit card, you are free to use that credit again. Just note that continually spending above your available credit each month can be of concern to your card issuer. It may signal the company to perform a financial review, even if you pay off your card frequently.
Can I pay my credit card bill immediately after purchase? ›
Yes, you can pay the bill immediately after a purchase, but the amount due will reflect in the next billing cycle. Paying promptly can help manage expenses efficiently.
When should I pay my credit card bill to avoid interest? ›
As long as you pay your statement balance in full every month before your grace period ends, you won't have to worry about paying interest on any of your purchases.
Will my credit score go up if I pay off my credit card in full? ›
Paying off your credit card balance every month is one of the factors that can help you improve your scores. Companies use several factors to calculate your credit scores. One factor they look at is how much credit you are using compared to how much you have available.
