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When Is the Best Time to Pay My Credit Card Bill?

Sept. 25, 2014
Credit Card Basics, Credit Cards
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We adhere to strict standards of editorial integrity. Some of the products we feature are from our partners. Here’s how we make money.

Let’s face it: Paying bills is a boring and tedious task. Clicking between accounts and crunching numbers is such a yawn, you probably never considered the effect that switching up your strategy could have on your finances.

But it’s true – you should be deliberate about how and when you’re paying your credit card balance. Surprised? Take a look at the details below.

At the very least, you should pay by your due date

Hopefully, at the very least, you’re paying your credit card bill by its due date. If not, you could face some unpleasant consequences.

For one thing, most credit card issuers charge a fee when you’re late on making a payment. Although this is commonly only $25-$35, it can really add up if you’re not careful. To put this into perspective, let’s say you pay your credit card bill late only three times per year. At $35 a pop, you’ve paid out $105 in fees by year’s end. Keep this up for 5 years, and you’ll have paid out $525. That’s certainly not chump change!

But more seriously, paying your credit card bill late could do damage to your credit. Since 35% of your FICO score is determined by your history with paying bills on time, a few late payments could really pinch. This isn’t something to take lightly, since your credit score is checked when you apply for an apartment or mortgage, when you purchase insurance, even when you set up utilities.

All this goes to show that paying your credit card bill on time is important – make it a priority.

Looking for a credit card? Tell us what you would most want your new card to do.

But there might be a good reason to pay in advance of your due date

It’s important to keep in mind that your bill’s due date simply signifies that a billing cycle has ended and it’s time to pay up. It doesn’t necessarily mean that this is when your current balance is reported to the credit bureaus, which is why it might make sense to consider paying your outstanding balance well before it’s actually due.

To explain why, let’s take a step back and discuss how your credit utilization ratio impacts your credit score. Your credit utilization ratio is the amount you owe on your card in relation to how much credit you have available. So, if you have a card with a $10,000 limit and your outstanding balance is $5,000, your credit utilization ratio is 50%. This ratio heavily influences the 30% of your credit score that’s determined by amounts owed.

Generally, the lower your credit utilization ratio, the better. But using more than 30% of your available credit could trigger a loss of points to your credit score, so it’s very important to stay below this threshold.

This is where changing up when you pay your credit card balance comes in: Most credit card issuers report your balance to the credit bureaus on a certain day each month, not necessarily on your bill’s due date. So in the example above, if your issuer reported a $5,000 balance on the 15th day of the month, the credit bureaus would see a 50% utilization ratio – even if you were planning to pay it off in full the very next day. Your credit score could end up getting dinged, even though your payment habits are solid.

So a good rule of thumb is to make a payment on your card whenever your credit utilization ratio starts to creep up to that 30% mark, regardless of when your bill is actually due. By monitoring your credit 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.

Other tips and tricks for managing your credit card bill

Aside from keeping an eye on your credit utilization and making a payment when it starts to get too high, the Nerds have a few other tips 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.
  • If your bill’s due date doesn’t coincide with your pay schedule, call your issuer to see if you can have it moved.
  • Review your statement carefully every month. This will help you spot and correct unauthorized charges if they arise.

The takeaway: It’s essential to pay your credit card bill by its due date. But if you charge a lot to your card every month, it’s probably also a good idea to make a payment mid-cycle to keep your credit utilization ratio under control. And be sure to keep the Nerds’ other tips and tricks for managing your credit card bill in mind – happy swiping!

Paying credit card bill image via Shutterstock