With a credit card, you can earn rewards, pay for travel, and enjoy other benefits. Having a credit card, however, can be pricey if you fail to make your payments on time or in full.
Are there any additional benefits if you opt to pay off your bill before the due date? Let’s delve into whether it’s worth making credit card payments early.
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Understanding the billing cycle
To determine when you should pay your credit card bill, you’ll want to know some key terms first.
- Billing cycle. The time between the close of your last statement and the current statement. Typically, this is a period of 28 to 31 days when transactions are posted to your account.
- Statement balance. During the billing cycle, any transactions that are posted to your account, leftover balances, and interest charges are included in the statement balance. The statement balance is what you owe.
- Due date. This is the due date for your credit card bill. To avoid paying a late fee, you must make at least the minimum payment.
When is the best time to pay your credit card bill?
Generally, it’s best to pay off your credit card bill in full and on time (aka on the due date) every month. Doing so will prevent carrying a balance and incurring hefty interest charges. You must at least make the minimum payment if you can’t pay off your entire statement balance, or you’ll be on the hook for a late fee.
However, for some, there are advantages to paying off your credit card bill early. If you want to boost your credit score or reduce the interest you pay on your balance, making payments before the due date can help you do both.
Does paying off your credit card bill early affect your credit score?
While making on-time payments is the most important factor in your credit score, accounting for 35% of your FICO score, your credit utilization ratio is another important component.
The credit utilization ratio is the ratio of credit you use to the amount of credit you’re extended. For example, if you spend $2,000 of your $10,000 credit limit, your utilization ratio would be 20%. Experts generally recommend keeping your utilization ratio below 30% as a low ratio indicates that you’re not close to maxing out your credit line.
So how exactly does paying off your bill before the due date impact your credit utilization ratio?
Card issuers typically report your credit history to the three credit bureaus—Equifax, Experian, and TransUnion—every billing cycle. For example, if you paid off part of your balance before the issuer reports your information to the credit bureaus, a lower credit utilization ratio will be reported.
The card issuer usually won’t disclose when they report to the bureaus, but you can call and ask your issuer when they report if you want to make payments before the due date.
Does paying off your credit card bill early impact your interest?
You’ll be charged interest for balances you don’t pay in full and carry over to the next billing cycle. The rate of interest you’ll pay is determined by the card’s annual percentage rate (APR).
Some issuers calculate interest daily based on your average balance. If you plan to carry a balance, making an extra payment or paying off a portion before the due date can help you save some money because you’ll accrue less interest over the month.
The takeaway
Some people will benefit from paying off their credit card bills early, especially those who want to improve their credit scores or reduce the amount of interest they owe.
However, the most important thing is to make your payment on time. If you need help remembering when your bill is due, call the card issuer to ask about adjusting your due date. Most providers also allow you to set up autopay from a verified checking account, ensuring you never miss a payment.
FAQs
You should pay your credit card bill in full before the due date to avoid racking up expensive interest charges that compound when you carry a balance from month to month.
When should you pay a credit card bill? ›
To ensure that your payment is on time, it is always a good idea to pay a few days in advance of your billing due date. This is especially true if you are mailing in a credit card payment. If you are unable to pay your credit card in full, you will be carrying a balance over from one billing cycle to another.
When should I pay my credit card to maximize my 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 on credit cards? ›
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.
Should I pay my statement balance or current balance? ›
In order to have your account reported as current to the credit bureaus (Experian, Equifax and TransUnion) and avoid late fees, you'll need to make at least the minimum payment on your account. But in order to avoid interest charges, you'll need to pay your statement balance in full.
When should I pay my credit card to avoid interest? ›
Pay your credit card bill in full every month
If you pay off every bill completely, you won't carry a balance into the next month, meaning you won't owe any credit card interest at all.
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.
Does paying too early affect credit score? ›
Paying your credit card early does not affect your credit score in and of itself, but how it impacts your other finances does. If you pay your bill early and lower your credit utilization from 70% to 30%, that can have a positive impact on your credit score.
Is it good or bad to pay 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.
What is the best way to pay credit card to increase credit score? ›
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.
The date at the end of the billing cycle is your payment due date. By making a credit card payment 15 days before your payment due date—and again three days before—you're able to reduce your balances and show a lower credit utilization ratio before your billing cycle ends.
What is the double payment trick on credit cards? ›
The 15/3 credit hack gets its name from the practice of making your monthly payment in two installments: the first half 15 days before your due date and the second half three days before your due date. This hack, popular on various social media platforms, claims to be a shortcut to good credit.
What is the 2 90 rule for credit cards? ›
1-in-5 rule: This states that you can only apply for one American Express card every five days. 2-in-90 rule: You can only be approved for up to two American Express cards within a 90 day period.
What happens if I pay credit card before statement? ›
By making an early payment before your billing cycle ends, you can reduce the balance amount the card issuer reports to the credit bureaus. And that means your credit utilization will be lower as well, which can boost your credit scores.
What happens if you pay your credit card bill early? ›
By making a payment before your statement closing date, you reduce the total balance the card issuer reports to the credit bureaus. That in turn lowers the credit utilization percentage used when calculating your credit score that month.
What happens if I only pay the statement balance? ›
Statement balance: If you pay the statement balance (or more) by the due date, you maintain your credit card's grace period and won't accrue interest on new purchases. Pay at least this amount each month, and you won't pay interest on your credit card purchases.
Is it better to pay credit card on or before 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 better to pay your credit card early or on time? ›
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 better to pay credit card early or on due date? ›
By making an early payment before your billing cycle ends, you can reduce the balance amount the card issuer reports to the credit bureaus. And that means your credit utilization will be lower as well, which can boost your credit scores.
Is it better to pay your credit card on the due date or before the due date? ›
Generally, it's best to pay off your credit card bill in full and on time (aka on the due date) every month. Doing so will prevent carrying a balance and incurring hefty interest charges.
