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.
How long should you wait before you pay your credit card bill? ›
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 15 3 rule? ›
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. That information is reported to the credit bureaus.
When should I repay my credit card bill? ›
After Credit Card bill generation date, there is an interval within which the card holder must pay their dues. Companies typically offer a 10-15 day repayment period for Credit Card bills. The day when your grace period is exhausted is called the payment due date.
Is it better to pay credit card before statement or due date? ›
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.
Is it smart to pay credit card early? ›
Paying your credit card early could help your credit score
And lower credit utilization can boost your credit scores. In fact, FICO® is pretty specific about what it views as the most important credit factors. And about 30% is based on this ratio.
What happens if you pay your credit card too soon? ›
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.
What is the 30 percent credit rule? ›
This means you should take care not to spend more than 30% of your available credit at any given time. For instance, let's say you had a $5,000 monthly credit limit on your credit card. According to the 30% rule, you'd want to be sure you didn't spend more than $1,500 per month, or 30%.
What is the credit rule 35 30 15 10 10? ›
This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). Your FICO Scores consider both positive and negative information in your credit report.
When should I pay my credit card bill to avoid interest? ›
Paying early also cuts interest
Not only does that help ensure that you're spending within your means, but it also saves you on interest. If you always pay your full statement balance by the due date, you will maintain a credit card grace period and you will never be charged interest.
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 your credit card bill early help? ›
Paying your credit card early reduces the interest you're charged. If you don't pay a credit card in full, the next month you're charged interest each day, based on your daily balance. That means if you pay part (or all) of your bill early, you'll have a smaller average daily balance and lower interest payments.
Should I pay my credit card right away or wait for statement? ›
If your goal is to keep your credit utilization as low as possible, make it a goal to pay your credit card balance before your monthly statement date, which is when your card issuer will report your balance to the credit reporting agencies.
When should I make my credit card payment? ›
You may have heard about something called the “15/3 rule” online and how it can help your credit. 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.
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.
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.
How long do you have to pay a bill before it goes on your credit? ›
A bill only affects credit scores if its payment information—whether it was paid in full and within 30 days of its due date—is reported to the national credit bureaus.
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.
