Seven reasons to pay your credit card bill before the due date
You may already know that making responsible credit card purchases and monthly on-time payments before the due date can improve your credit score. But did you know that how and when you pay your credit card bill may also help you build or rebuild your credit?
Most people pay their card bill after the billing cycle closes and just before the due date. However, this isn’t the only strategy. Credit card companies usually let you make a payment on your bill any time you have a balance. This means that rather than making one payment a month, you can make more frequent payments. For example, some credit card users regularly make a payment on a particular day of the week. Others use the pay-as-you-go method. This means that they pay their total balance as soon as a charge appears on their account.
Today, we’ll explore some advantages of making early credit card bill payments. We’ve identified seven possible benefits of paying early to help you determine if changing your payment strategy could help you reach your financial goals faster.
7 Reasons Why You Should Pay Your Credit Card Bill Before its Due Date
1. You will reduce your credit utilization, which may improve your credit score.
Credit bureaus evaluate your credit utilization when calculating your credit score. Your credit utilization is the ratio of your total debt to your total available credit. Because credit card companies only report your balance at the close of the billing cycle, paying before the due date helps reduce your utilization. Your debt-to-credit ratio is the second most important factor in determining your credit score. Therefore, it’s important to keep it as low as possible.
2. You’ll have a higher available line of credit to use in case of emergency.
Sometimes life happens. Your car breaks down. Your refrigerator goes out. There are medical bills that you don’t expect. Routinely making early payments means you’ll have more available credit if you need to use your credit cards right away.
3. You will save money on interest if you’re carrying a balance.
Credit card companies calculate monthly interest rates based on your average daily balance. If you carry a $500 balance for a full 30-day billing cycle, you’ll owe twice as much interest as if you carried a $500 balance for the first 15 days and had a $0 balance for the last 15 days. Use a cash back card like Chase Freedom or Chase Freedom Unlimited? Making early credit card bill payments keeps you from wasting the value of your rewards with interest charges.
4. You can eliminate debt more quickly.
When you’re paying less interest, more of each payment goes toward paying down your balance. This can add up quickly if your balance is relatively small. If you have a large balance or are trying to pay off more than one card, you may need extra help. You might want to consider applying for the Chase Slate or another card with a 0% introductory APR. Cards like this are designed to help you eliminate debt.
5. You’ll be less likely to miss a payment.
The most common reason consumers miss a payment due date is that they simply forgot. You’re less likely to let your bill’s due date sneak up on you if you’re paying in advance. If you’re paying as you go, it’s likely that you will have already met your minimum payment for the month even if you forget to pay your full balance.
6. You’ll become more conscious of your spending.
Developing the habit of “paying as you go” means you’ll be made more aware of what’s on your bill. If you start making weekly payments instead of monthly payments, you’ll be monitoring your spending four times more often. This can be particularly useful for compulsive or emotional spenders. Coming to terms with the reality of how much you’re spending more often can help deter unnecessary purchases.
7. You’ll become less prone to spend more than you can afford.
Checking your balance more frequently means you watch as your spending builds over the course of the month. Using the pay-as-you-go method to pay off purchases as you make them helps you stick to your budget. Since you’ve paid early, you’ll never be tempted to skip making a payment because you need the money for something else.
Who benefits the most (and least) from paying a credit card bill early
When you’re considering adopting an early payment method, you’ll need to find which benefits apply to you. If you never carry a balance, you have the least to gain. You’re already avoiding interest charges and probably have a low credit utilization rate. Your major benefit might be in monitoring your spending more carefully.
If you are eliminating debt, early credit card bill payments are probably a good strategic move. You’ll save money on interest, which will help you pay down balances faster. You’ll also become more aware of what you are spending and continue to learn how to buy only what you can pay for. That makes this strategy ideal for impulse buyers, emotional spenders, and others who are learning to control their spending, as well.
Making early payments may be a bad idea if you regularly carry a balance. If you make a payment in the middle of a billing cycle, the credit card company is likely to apply it to that billing period. This may mean that you might have to make another payment when the billing cycle ends and your next bill comes due.
How to make a credit card bill payment before it’s due date
If you’re going to adopt either of these early payment methods, you’ll probably want to set up online payments. Virtually every credit card company lets you monitor your account activity on their website. Most have user-friendly smartphone apps. Paying early and keeping a close eye on your purchases will be much easier if you utilize these services.
If you don’t want to use your company’s app or website, give them a call. Credit card companies usually provide automated balance and credit card bill payment options. Use the customer service number on the back of your card.
Absolutely committed to writing a check after you receive a paper bill? It still may be possible to make early or multiple payments each month before the due date. Contact your card company to discuss your options.
How do you feel about paying a credit card bill before it’s due date? What’s your payment style? Are you a pay-as-you-go advocate, a weekly payment fan, or a one-payment-a-month traditionalist? Let us know in the comments.
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