You should always pay your credit card bill by the due date, but there are some situations where it's better to pay sooner.
For instance, if you make a large purchase or find yourself carrying a balance from the previous month, you may want to consider paying your bill early. It seems like a small change, but it can have a significant effect on your overall finances and help protect your credit score.
CNBC Selectexplains when it makes sense to pay your credit card balance early and how the timing of your payment affects your credit score.
When to pay your balance early
While you're required to make at least the minimum payment on your statement balance by the due date to keep your account current, you should always aim to pay it off in full each month.
However, that's not always possible, especially now due to coronavirus-related layoffs and record unemployment rates.
As a result, you may carry a balance month-to-month. Depending on the size of your balance, this can cause you to incurthousandsof dollars in interest charges if you only make the minimum payment. But if there's a month that you have extra money left over after essential expenses, you should use it to pay your credit card bill early, rather than waiting until the due date.
When you pay the bill early, you save yourself some interest, says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report. Card issuers charge daily compounded interest (which is interest charged on interest), and it grows pretty quickly. Even if you pay just a few days early, you can knock off some of those charges and save.
When to make multiple payments on your credit card bill
If your credit card bill is higher than usual because you've made a large purchase, such as new workout equipment or office furniture, yourcredit utilization rate, or the percentage of your total credit you're using, will go up. This is most noticeable when you have a lower credit limit.
The change in your balance can potentially lower your credit score since utilization is the second most important factor of your credit score. It's important tomaintain a low credit utilization rate below 30%, and ideally 10% if you really want a good credit score.
In these situations — and any time you have a higher-than-normal balance — it can be a good idea to make multiple payments during your billing cycle or simply pay the entire balance before your due date.Paying your balance more than once per month makes it more likely that you'll have a lower credit utilization rate when the bureaus receive your information. And paying multiple times can also help you keep track of your spending and cut back on any overspending before you fall into debt.
On the other hand, waiting until your billing cycle closes to make one large payment makes it more likely that the bureaus will see the high balance, since it's reflected on your statement.
Let's say your billing cycle ends on the 10th of every month, and your card issuer reports to the credit bureaus on the 11th. If you typically spend $1,000 on a card with a $5,000 credit limit, your utilization is 20%. But if you make an additional $2,000 in charges for home renovations on the 1st, on top of the $1,000 you usually spend, your utilization would increase to 60%.
However, you can reduce your utilization by paying some of your balance before your billing cycle ends on the 10th. You could pay off the extra $2,000 in charges on the 2nd, and lower your utilization back to 20% by the time your billing cycle ends. The simple action of paying part of your balance early can reduce any potential negative impacts to your credit score.
When card issuers report your balance to the bureaus
Your credit card balance is reported to the credit bureaus at varying times throughout your billing cycle, depending on each lender.If you're unsure when your balance will be reported to the bureaus, call your card issuer to ask the exact date, Harzog recommends.
"Very often, it's the day after the closing date on your statement, but not always," she says. "Find out when that is so you can strategically make your payments."
The dates will probably differ based on the billing cycle for each card. Most lenders calculate your utilization rate based on yourstatementbalance instead of the current balance.
When you should change your bill due date
If you struggle to have cash on hand when your due date rolls around, most card issuers allow you to change the day your payment is due. This allows you to select a day that works best for you (maybe adjust it closer to the days you get paid), which could help you make full payments every month.
On the other hand, if you can't pay in full because of overspending, consider cutting back on non-essential expenses, such as streaming subscriptions or gym memberships.
And if you're falling behind on payments because of a temporary layoff or cut-back on your working hours, you may want to consider using a 0% APR cardso you can pay off debt over time with more flexibility on when the entire balance is due.
Cards like the Wells Fargo Active Cash® Card can help you finance new purchases with 0% intro APR for 15 months from account opening on purchases and qualifying balance transfers (after, 20.24%, 25.24%, or 29.99% variable APR; balance transfer fee of 3% for 120 days from account opening, then up to 5%, min: $5 (see rates and fees). Keep in mind that this card requires good or excellent credit. And while it can help you temporarily avoid interest charges, you'll still need to make minimum payments during the no-interest period.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
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.
What is the best time to pay a credit card bill? ›
Essentially, this rule states you should make half of your credit card payment 15 days before your due date, then make the other half of your payment three days before your bill is due. This strategy is designed to boost your credit by increasing the number of on-time payments reported to the credit bureaus.
When should I pay my credit card to maximize my credit score? ›
To avoid paying interest and late fees, you'll need to pay your bill by the due date. But if you want to improve your credit score, the best time to make a payment is probably before your statement closing date, whenever your debt-to-credit ratio begins to climb too high.
What is the 15-3 rule? ›
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. Proponents say it helps raise credit scores more quickly, but there's no real proof. Building credit takes time and effort.
Is it good or bad to pay credit card early? ›
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.
When should I pay my credit card to avoid interest? ›
Pay your credit card bill in full each billing cycle
For example, if you get your credit card bill on the first of any given month, you will likely have until the 22nd of that month or longer to pay your credit card statement in full without incurring any interest charges.
What time is too late to pay credit card bill? ›
Credit card payments are due the same day and time every month, often 5 p.m. or later. A credit card payment can't be considered late if it was received by 5 p.m. on the day that it was due, according to the CARD Act. Some card issuers may set a later due date if you pay your bill online, giving you even more time pay.
How can I raise my credit score 200 points in 30 days? ›
How to Raise Your Credit Score by 200 Points
- Get More Credit Accounts.
- Pay Down High Credit Card Balances.
- Always Make On-Time Payments.
- Keep the Accounts that You Already Have.
- Dispute Incorrect Items on Your Credit Report.
Consistently paying off your credit card on time every month is one step toward improving your credit scores. However, credit scores are calculated at different times, so if your score is calculated on a day you have a high balance, this could affect your score even if you pay off the balance in full the next day.
How do I pay my credit card so my score goes up? ›
Aim for 30% Credit Utilization or Less
The simplest way to keep your credit utilization in check is to pay your credit card balances in full each month. If you can't always do that, then a good rule of thumb is to keep your total outstanding balance at 30% or less of your total credit limit.
That said, making two payments per month actually can help your score—but for a different reason. This strategy makes your credit utilization ratio appear lower, which can boost your credit score in the long run.
What is the credit card payment trick? ›
You make one payment 15 days before your statement is due and another payment three days before the due date. By doing this, you can lower your overall credit utilization ratio, which can raise your credit score. Keeping a good credit score is important if you want to apply for new credit cards.
What happens if I pay my credit card early? ›
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.
Will paying off your entire credit card balance in full every month hurt your score? ›
If you regularly use your credit card to make purchases but repay it in full, your credit score will most likely be better than if you carry the balance month to month. Your credit utilization ratio is another important factor that affects your credit score.
Can I pay my credit card the same day I use it? ›
Yes, you can pay the credit card bill immediately after purchase. But, this has both benefits and disadvantages. You Don't Have To Remember The Due Date: By paying off the credit card bill immediately after making the purchase, you do not have to remember the credit card due date.
What is a good credit score? ›
Generally speaking, a good credit score is 690 to 719 in the commonly used 300-850 credit score range. Scores 720 and above are considered excellent, while scores 630 to 689 are considered fair. Scores below 630 fall into the bad credit range.
Will my credit score go up if I pay off my credit card in full? ›
While paying off your debts often helps improve your credit scores, this isn't always the case. It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. However, that doesn't mean you should ignore what you owe.
Is it better to pay off your credit card slowly or all at once? ›
If you're under financial stress and can't afford to pay your credit card balance in full, it's best to pay as much as you can each month. Any amount will help to reduce the amount of compounded interest you'll end up paying.
Is it better to pay credit card daily? ›
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. That's because interest accrues based on your average daily balance during the billing period.
Should you pay your credit card every day? ›
The only rule about paying your credit card is to always make your payment by the due date. Ideally, you should pay the entire statement balance. If you do that, the card issuer won't charge you interest on your purchases. As long as you're making at least your monthly payment, the frequency is up to you.
