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? ›
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.
When should I pay my credit card bill to increase my 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.
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.
Is it better to pay credit card before statement or due date? ›
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.
Is it bad to pay credit card too 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? ›
Paying off your monthly statement balances in full each month is the path to avoiding credit card debt. As long as you pay off your statement balance in full, your grace period kicks in and you can make purchases on your credit card without paying interest until the next statement due date.
How can I raise my credit score 100 points in 30 days? ›
For most people, increasing a credit score by 100 points in a month isn't going to happen. But if you pay your bills on time, eliminate your consumer debt, don't run large balances on your cards and maintain a mix of both consumer and secured borrowing, an increase in your credit could happen within months.
Is a credit score of 650 good? ›
As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.
Why did my credit score go down when I paid off my credit card? ›
Similarly, if you pay off a credit card debt and close the account entirely, your scores could drop. This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio.
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 2 90 rule for credit cards? ›
Two Credit Cards Every 90 days
If you apply for two credit cards on the same day, data points suggest one of your applications will be put on hold as an automatic fraud prevention mechanism. There are conflicting reports on how charge cards are counted in this two-card limit.
What is the golden rule of credit cards? ›
Pay Off Your Balance
The golden rule of credit card usage is to do everything you can to pay off your entire balance each month. If you can do this, you won't be charged any interest.
Is it bad to pay off a credit card immediately? ›
By paying your debt shortly after it's charged, you can help prevent your credit utilization rate from rising above the preferred 30% mark and improve your chances of increasing your credit scores. Paying early can also help you avoid late fees and additional interest charges on any balance you would otherwise carry.
What is the best day to pay your 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.
Will my credit score go up if I pay off my credit card in full? ›
Paying off credit card debt is smart, whether you zero out your balance every month or are finally done paying down debt after months or years. And as you might expect, it will affect your credit score. Whether you are chipping away at a balance or eliminating it with one big payment, your score will likely go up.
What time is too late to pay credit card bill? ›
When is a credit card payment considered late? According to the Consumer Financial Protection Bureau (CFPB), a credit card payment is generally considered late if it's received after 5 p.m. on the day it's due, based on the time zone indicated on a billing statement.
Is it better to pay off credit card right away or wait? ›
Whenever possible, paying off your credit card in full will help you save money and protect your credit score. Paying your entire debt by the due date spares you from interest charges on your balance.
Should I pay my credit card immediately after purchase? ›
By paying your debt shortly after it's charged, you can help prevent your credit utilization rate from rising above the preferred 30% mark and improve your chances of increasing your credit scores. Paying early can also help you avoid late fees and additional interest charges on any balance you would otherwise carry.
