When is the best time to pay your credit card bill?
At the very least, you should pay your credit card bill by its due date every month. If you're like most credit card users, as long as you do that, you're fine. But in some cases, you can do yourself a favor by paying your bill earlier. That's because the balance that gets reported to the credit bureaus can have a direct effect on your credit scores.
To understand the effects of paying early, it helps to know how the credit card billing cycle works.
A quick look at the billing cycle
Credit cards operate on a monthly billing cycle, and there are three dates to understand:
The statement date. Once a month, your card issuer compiles all the activity on your card account and generates your statement. The day this happens is your statement date, also called the closing date. Anything that happens after this date — including activity between the time your statement is created and the time it reaches you in the mail — will go on your next statement.
When your statement is produced, it will show a statement balance. This is calculated by taking the balance at the beginning of the billing cycle, adding all new charges made during the cycle, and subtracting any payments made during the cycle.
The due date. This is the date by which you must pay at least the minimum amount due. The due date is usually about three weeks after the statement date. Failure to pay at least the minimum by the due date will result in a late fee.
The reporting date. This the date on which the card issuer reports your balance to the credit bureaus. Unlike the closing date and due date, the reporting date does not appear on your bill. It could be any time during the month, but it's best to assume it will be around the time of your statement closing date.
Paying early could help your credit
One of the primary factors in your credit score is your credit utilization ratio. This is the amount you owe as a percentage of your credit limit. For example, if you have a $5,000 credit limit and your balance is $2,000, your utilization is 40%. Generally, the lower your utilization, the better, and utilization above 30% could be damaging to your credit scores. This is where changing up your credit card payment comes in.
🤓Nerdy Tip
Some people mistakenly believe that 30% utilization is a target — that you should aim to keep your credit card utilization around 30%. This is based on a misunderstanding. The 30% number should be viewed as a cap. It's best to assume that utilization above 30% will have a negative effect on your credit, but the lower, the better.
Credit scores are based on account information reported to the credit bureaus. That information includes your balance and your credit limit, from which the scoring formula determines your utilization ratio. But this information isn't continually updated in real time. It's reported only once a month, on the reporting date defined above.
In the example above, say your payment is due on the 20th of each month, but your issuer reports your balance on the 15th. If your issuer reported a $2,000 balance on the 15th, the credit bureaus would see a 40% utilization — even if you paid your bill in full just days later. Your credit score could end up getting dinged, even though your payment habits are solid.
So consider paying early whenever your credit utilization nears that 30% mark, regardless of when your bill is actually due. By monitoring your utilization and keeping it in check, you’ll be in good shape to get reported to the credit bureaus on any day of the month.
A final note on utilization: Credit utilization "has no memory," meaning that it doesn't have a lasting effect on credit scores. High utilization one month might knock points off, but if your ratio goes back down the next month, your scores should recover.
Paying early also cuts interest
When possible, it's best to pay your credit card balance in full each month. 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.
That said, if you won't be able to pay the full statement balance and you have to carry debt into the next month, paying early can reduce your interest costs. That's because the interest you're charged is based on your average daily balance.
Here's an example. Say you start a 30-day billing month with a $1,000 balance:
If you paid $400 on the last day of the month, your balance will have been $1,000 for 29 days and $600 for one day. Your average daily balance would be about $987. If your credit card had a 15% interest rate, your interest charge for the month would be about $12.33.
If you paid that same $400 halfway through the month, your balance will have been $1,000 for 15 days and $600 for 15 days. In that case, your average daily balance would be $800, and your interest charge would be $10. You cut your interest payment by nearly one-quarter just by moving up your payment date.
Why the due date is so important
Regardless of when you do it, make sure you pay the minimum amount due it by the due date. Otherwise:
Your issuer could charge you a late fee. As of 2022, late fees can run as much as $40, depending on the issuer's policy and whether it's the first time you've been late.
Your credit scores could suffer. Payments that are more than 30 days late will show up on your credit report, where they can do serious damage. Payment history is the single biggest factor in your credit scores. And a late payment can stay on your report for seven years.
Other tips for managing your bill
Aside from keeping an eye on your credit utilization and making a payment when it starts to get too high, here are a few other pointers for managing your credit card bill:
Keep a budget and track your spending. This way, you’ll keep from spending more than you can afford to pay off in one month.
Sign up for text or email alerts from your issuer to keep tabs on your balance and your billing due date.
Call your issuer to move your bill's due date if it doesn’t coincide with your pay schedule.
Review your statement carefully every month. This will help you spot and correct unauthorized charges if they arise.
FAQs
The best time to pay a credit card bill is a few days before the due date, which is listed on the monthly statement. Paying at least the minimum amount required by the due date keeps the account in good standing and is the key to building a good or excellent credit score.
How does the 15 3 rule work? ›
The 15/3 credit card payment rule is a strategy that involves making two payments each month to your credit card company. You make one payment 15 days before your statement is due and another payment three days before the due date.
Does paying credit card bill early hurt credit? ›
No. It's not bad to pay your credit card early, and there are many benefits to doing so. Unlike some types of loans and mortgages that come with prepayment penalties, credit cards welcome your money any time you want to send it.
Is it better to pay off credit card immediately or monthly? ›
It's Best to Pay Your Credit Card Balance in Full Each Month
Leaving a balance will not help your credit scores—it will just cost you money in the form of interest. Carrying a high balance on your credit cards has a negative impact on scores because it increases your credit utilization ratio.
Does paying credit card early matter? ›
Paying your credit card early reduces the interest you are charged. If you don't pay a credit card in full, the next month you are charged interest each day, based on your daily balance. That means if you pay part (or all) of your bill early, you will have a smaller average daily balance and lower interest payments.
Is it better to pay your credit card bill early? ›
If you are looking to increase your score as soon as possible, making an early payment could help. If you paid off the entire balance of your credit card, you would reduce your ratio to 40%. According to the Consumer Financial Protection Bureau, it's recommended to keep your debt-to-credit ratio at no more than 30%.
Does paying twice a month increase credit score? ›
When you make multiple payments in a month, you reduce the amount of credit you're using compared with your credit limits — a favorable factor in scores. Credit card information is usually reported to credit bureaus around your statement date.
How can I raise my credit score 40 points fast? ›
Here are six ways to quickly raise your credit score by 40 points:
- Check for errors on your credit report. ...
- Remove a late payment. ...
- Reduce your credit card debt. ...
- Become an authorized user on someone else's account. ...
- Pay twice a month. ...
- Build credit with a credit card.
To raise your credit score by 20 points, you can dispute errors on your credit report, pay your bills on time and lower your credit utilization. Credit scores rise and fall based on the contents of your credit report, so adding positive information to your report will offset negative entries and increase your score.
Is it better to pay off credit card all at once or little by little? ›
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.
Making your payment before the current billing cycle closes will show a lower balance on your credit report—assuming you don't make any additional purchases before that time. It can help boost your credit score by lowering the credit utilization used when calculating your score.
How many credit cards should you own? ›
If your goal is to get or maintain a good credit score, two to three credit card accounts, in addition to other types of credit, are generally recommended. This combination may help you improve your credit mix. Lenders and creditors like to see a wide variety of credit types on your credit report.
What is the trick to paying off credit cards? ›
The 3 most common credit card payoff strategies
- Paying only the minimum. The least aggressive debt payoff method is making only the minimum payments. ...
- Paying more than the minimum. Paying more than the monthly minimum helps accelerate your debt payoff and is a more active approach. ...
- Using a balance transfer credit card.
Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores. 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.
Is it better to pay off credit card before or after statement? ›
You're usually given multiple options to pay your credit card statement each month. While it may be tempting to pay just the minimum payment — which could be as low as $25 — you'll start to accrue interest, leading to years of debt. The best practice is to pay off your credit card bill as soon as you make a purchase.
What increases credit score? ›
Factors that contribute to a higher credit score include a history of on-time payments, low balances on your credit cards, a mix of different credit card and loan accounts, older credit accounts, and minimal inquiries for new credit.
Why did my credit score drop after I paid off my credit card? ›
Why credit scores can drop after paying off a loan. Credit scores are calculated using a specific formula and indicate how likely you are to pay back a loan on time. But while paying off debt is a good thing, it may lower your credit score if it changes your credit mix, credit utilization or average account age.
Can I pay my credit card the same day I use it? ›
Yes sure absolutely you can do that. If your goal is to avoid interest as long as you pay off your card before the payment due date then you're golden.
How can I raise my credit score by 100 points in 30 days? ›
- Lower your credit utilization rate. The fastest way to get a credit score boost is to lower the amount of revolving debt (which is generally credit cards) you're carrying. ...
- Ask for late payment forgiveness. ...
- Dispute inaccurate information on your credit reports. ...
- Add utility and phone payments to your credit report.
Once the incorrect information is changed, a 100-point jump in a month might happen. Large errors are uncommon, and only about one in 20 consumers have one in their file that could impact the interest on a loan or credit line. Still, it's important to monitor your score.
How To Raise Your Credit Score by 100 Points Overnight
- Get Your Free Credit Report. ...
- Know How Your Credit Score Is Calculated. ...
- Improve Your Debt-to-Income Ratio. ...
- Keep Your Credit Information Up to Date. ...
- Don't Close Old Credit Accounts. ...
- Make Payments on Time. ...
- Monitor Your Credit Report. ...
- Keep Your Credit Balances Low.
Tips to Perfect Your Credit Score
- Pay your credit card bills often. ...
- Keep a solid payment history. ...
- Consider your credit mix. ...
- Increase your credit limit. ...
- Don't close old accounts. ...
- Regularly monitor your credit report. ...
- Only apply for credit when you really need it.
How to Get an 800 Credit Score
- Pay Your Bills on Time, Every Time. Perhaps the best way to show lenders you're a responsible borrower is to pay your bills on time. ...
- Keep Your Credit Card Balances Low. ...
- Be Mindful of Your Credit History. ...
- Improve Your Credit Mix. ...
- Review Your Credit Reports.
Here are some strategies to quickly improve your credit:
- Pay credit card balances strategically.
- Ask for higher credit limits.
- Become an authorized user.
- Pay bills on time.
- Dispute credit report errors.
- Deal with collections accounts.
- Use a secured credit card.
- Get credit for rent and utility payments.
A credit ghost is someone who has never opened a line of credit, meaning they don't have a credit score. A credit ghost is also someone who has an inactive credit history. Another term similar to credit ghost is credit invisible.
Why has my credit score gone down when I haven t missed any payments? ›
This is because your credit history is shortened, and roughly 10% of your score is based on how old your accounts are. If you've paid off a loan in the past few months, you may just now be seeing your score go down. Your score could be negatively impacted by a closed credit card, too.
What is the average credit score? ›
Credit scores help lenders decide whether to grant you credit. The average credit score in the United States is 698, based on VantageScore® data from February 2021. It's a myth that you only have one credit score. In fact, you have many credit scores.
What time of day is best to apply for a credit card? ›
Bottom line. There isn't any particular date, time, or day of the week that's most likely to get you approved.
Should you pay your credit card the day before or same day? ›
Making your credit card payment online gives you the ability to pay as close to the due date as you'd like. You can even pay on the due date if you want to while you do have the flexibility to hold off paying your credit card until the last minute. It's often better to pay your credit card before the due date.
Is it better to pay your credit card all at once or gradually? ›
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.
It's generally recommended that you have two to three credit card accounts at a time, in addition to other types of credit. Remember that your total available credit and your debt to credit ratio can impact your credit scores. If you have more than three credit cards, it may be hard to keep track of monthly payments.
What is a good credit score? ›
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
What happens if I pay my credit card one day before 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. This can mean a boost to your credit scores.
Will paying credit card 1 day late affect credit? ›
Even a single late or missed payment may impact credit reports and credit scores. But the short answer is: late payments generally won't end up on your credit reports for at least 30 days after the date you miss the payment, although you may still incur late fees.
How to pay your credit card bill to boost your credit score? ›
Just pay off your credit card bill in full and on time each month, and the card issuer will report your payments to the credit bureaus. By paying in full, you also won't have to pay interest. Your payment history makes up 35% of your FICO credit score, so this is one of the best things you can do to build your credit.
Is it good to pay your credit card multiple times a month? ›
Reducing the interest you pay
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.
Do credit card companies like when you pay in full? ›
Yes, credit card companies do like it when you pay in full each month. In fact, they consider it a sign of creditworthiness and active use of your credit card. Carrying a balance month-to-month increases your debt through interest charges and can hurt your credit score if your balance is over 30% of your credit limit.
