You might groan at the thought of paying money on your credit card before it’s due, but this move can improve your finances. Paying early can keep you from accumulating credit card debt and ensure you don’t have to deal with the consequences of missing a credit card payment.
Breaking up your credit card payments throughout the month can also help you keep an eye on your spending habits. Plus, if you make multiple payments throughout the month to keep your balance at or around $0, your credit utilization ratio -- a key factor in determining your credit score -- will benefit. Here’s why you might want to consider paying your credit card bill before its due date.
Is it bad to pay off your credit card bill early?
Your billing cycle is the period of time -- typically about one month -- during which your credit card transactions are recorded. At the end of the billing cycle, you’ll receive your credit card statement, which details all the purchases you’re now responsible for paying before the due date.
Treating your credit card like a debit card and making regular payments as you make purchases is one way to pay off your balance during your billing cycle. Another way is to make one or more larger lump sum payments before your billing cycle ends.
Posting credit card payments during your billing cycle can have several positive effects on your credit. Here are a few ways it can help boost your credit score:
Helps you avoid interest charges
When you pay your full credit card balance off early -- whether that’s before the billing cycle ends or before your statement’s due date -- you won’t be hit with interest charges on the purchases you make. Just remember that you have to pay the full statement balance to avoid interest each month.
This move can be incredibly helpful considering how high credit card interest rates have surged over the last period. The average credit card APR for July is above 20%. Not only can paying your statement balance each month help you avoid these exorbitant charges, but avoiding interest can also help limit your credit card debt.
Strengthens your on-time payment history
Credit card issuers report your card activity to the three major credit bureaus: Experian, Equifax and TransUnion. While they report a range of different data, the most important issue they report on that impacts your credit scores is your payment history. In fact, payment history is the biggest determinant of FICO credit scores, making up 35% of the calculation.
If you pay off your credit card balance before your statement ends or before the due date, that sends a positive signal to credit reporting agencies. Having a strong payment history will boost your credit, which will in turn help your likelihood of being approved for future loans or credit applications.
Lowers your credit utilization
Having a low debt-to-credit ratio, also known as credit utilization, is another factor that helps determine how good your credit score is. Experts generally recommend keeping your credit utilization below 30%. By paying your balance in full and early, you’ll be able to keep your credit utilization rate low. This can positively impact your credit score.
Credit card issuers typically report your credit utilization at the end of your monthly billing cycle, according to Experian. That means if you pay the bulk of your bill before your cycle ends, your credit utilization might go below 10%.
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Should you ever avoid paying your credit card bill early?
There’s generally no harm in making payments to your credit card bill during your billing cycle. And it’s always a good practice to pay your balance in full by your due date to avoid interest, late payment fees and dings to your credit. One way to limit overspending when using a credit card is to make weekly payments toward your balance, which can help promote healthy budgeting.
With these details in mind, you should feel comfortable paying your credit card bill early each month or even making multiple payments throughout the month as you like. You won’t hurt your credit if you do so, and this strategy can even boost your credit score and help you keep debt levels in check.
Should you set up automatic payments on your credit card?
Whether you opt to pay your credit card bill once or several times per month, using autopay can help avoid damaging your credit and other headaches caused by missing a credit card payment. It can even make keeping up with credit card bills easier when you’re busy.
Most card issuers offer the option to set up automatic payments -- either for the minimum or the full statement balance -- using a bank account paid automatically on your behalf.
While you might prefer to make payments manually, setting up automatic payments is a good backstop for the times you might get busy and forget. At the very least, it will make sure you never get hit with late fees or a penalty APR on your credit card account.
What about the 15/3 rule?
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.
This strategy is designed to boost your credit by increasing the number of on-time payments reported to the credit bureaus. However, credit reporting agencies report your payments to the credit bureaus only once per billing cycle, so this strategy is mostly a waste of time. The only real benefit you can get from following this rule is a lower credit utilization ratio throughout the month.
Common mistakes to avoid while making credit card payments
Paying off your credit card balance before the billing cycle ends is typically a good move since you can keep your debt and credit utilization under control. However, there are plenty of other mistakes you can make when accounting for credit card payments over the years:
- Making minimum payments: With the average credit card APR sitting well over 20%, making only the minimum payment on your credit card can quickly become costly. In fact, paying the $137.50 minimum payment on a $5,000 credit card debt at 21% APR could cost you $8,124.64 in interest. You would also have to make payments for 279 months -- over 23 years -- before you were debt-free.
- Paying late: Your payment history is the most important factor that makes up FICO scores and VantageScore credit scores, so your scores will take a huge hit if you pay your credit card bill late. And the longer you let payments lapse, the worse the results become.
- Ignoring your statement: If you miss a credit card payment and let your debt go into default, your debt could be sent to collections and you could be sued for the amount owed. Missed payments also remain on your credit reports for up to seven years, and it can drag your credit score down.
- Using too much credit: Another factor that impacts credit is how much debt you have, or your credit utilization ratio. Experts recommend keeping your utilization below 30% to have the best effect on your credit score.
The bottom line
Paying your credit card balance before your billing cycle ends can be beneficial in the short term and long term. It’ll prevent you from missing a payment, help you avoid expensive interest charges, increase your credit limit and improve your credit score faster.
If you can’t pay early, aim to pay your statement balance in full by the due date. And if you can’t afford to cover the entire statement balance, make sure to pay the required minimum to avoid late payment fees. Then you can work toward paying down the remaining balance before using your card again.
FAQs
There are no negative consequences that come with paying your credit card bill before the due date. In fact, this strategy can help you keep credit card balances low while avoiding debt.
Editors’ note: An earlier version of this article was assisted by an AI engine. This version has been substantially updated by a staff writer.
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