You might say the earlier youâre able to pay something off, the better it will be for you in the long run. But does this hold true for credit cards?.
The short answer is yes, there can be benefits to paying your credit card early. But thereâs more to understanding how making credit card payments could help you boost your credit scores.
It’s good to pay your credit card bill early because it can save you money, boost your credit score, and calm you down. Though, is it always a good idea to pay early? This guide will look at the pros and cons of paying your credit card bill early and give you advice on when you should (and shouldn’t) do it.
What Does It Mean To Pay Your Credit Card Early?
Paying your credit card bill early simply means making a payment before the due date on your monthly statement. Your due date is typically 3 weeks after the end of your billing cycle. So if you pay any time between when your billing cycle ends and your due date, you are paying early.
You can also make more than one payment during your billing cycle or pay off your balance in full before the end of your statement period. Both of these are also early payments. The important thing is to pay before the due date on your statement.
Pros Of Paying Your Credit Card Early
There are several advantages that can make paying your credit card bill early a smart financial move
1. Reduced Interest Charges
Paying your balance early helps minimize interest charges. Credit card companies charge interest every day, so every payment you make lowers the daily average balance that is used to figure out interest.
For example, if you owe $1,000 at a 20% APR and pay $500 on day 15 of your 30 day billing cycle, you’ve lowered your average daily balance from $1,000 to $750. That saves you interest charges on $250 for half the month.
2. Lower Credit Utilization
When you pay off your debts early, your credit utilization ratio goes down. This is the amount of your available credit that you’re actually using. As you may know, lower utilization raises your credit score. If you have high balances, paying them off early can help your credit.
Experts recommend keeping utilization below 30%. Paying early can reduce your reported utilization, helping you stay under that 30% threshold.
3. Free Up Available Credit
Making an extra payment frees up credit you may need for emergencies or large purchases before your next statement. This avoids maxing out your card and potentially having transactions declined.
4. Avoid Late Fees
Paying early ensures your payment arrives on time, avoiding late fees and credit score damage from missed payments. Set payment reminders to ensure you pay early each month.
5. Build Positive Payment History
Making on-time payments builds your credit history – the most important factor in your credit score. Paying early maintains stellar payment habits.
Cons Of Paying Your Credit Card Early
While beneficial in many ways, there are some potential downsides to paying your credit card early that are worth considering:
1. Requires Budgeting Discipline
Paying early requires budgeting discipline. You need available cash before your due date, which may require some financial planning. Review spending and bills to ensure you can pay early each month.
2. Could Disrupt Autopay
If you use autopay for your credit card bill, early payments may disrupt your autopay schedule and result in duplicate payments. You’ll need to monitor payments to avoid overdrafts.
3. Minimal Benefit If No Balance
If you pay your balance in full each month and avoid interest entirely, there is little benefit to paying early. Your utilization is already optimized and no interest accrues.
4. Less Cash Reserves Temporarily
While paying early frees up credit, it also reduces your cash reserves until your next paycheck. Make sure you have sufficient savings to account for everyday spending.
5. No Impact If No High Balances
Paying early helps lower credit utilization, but if you already have low balances it won’t improve your scores. Only pay early if you need to lower utilization.
When Should You Pay Your Credit Card Early?
Paying early has advantages but also some potential drawbacks. Given that, here are some recommendations on when it makes the most financial sense to pay your credit card bill early:
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You carry high balances and want to lower your credit utilization before your statement date. Pay early to reduce the balance reported to the credit bureaus.
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You need to free up credit for a large purchase before your next statement. Pay early to lower your balance and open up available credit.
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You want to minimize interest charges. Make payments as early as possible during your billing cycle.
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Your due date falls on a weekend or holiday. Pay several days early to avoid issues from delayed payments.
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You want to build positive payment history and improve your credit score. Pay early every month to instill responsible habits.
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You’ve budgeted properly and have the available funds. Don’t pay early at the expense of missing payments on other bills.
Tips For Paying Your Credit Card Early
If you decide paying your credit card bill early aligns with your financial goals, here are some tips to do it successfully:
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Review statements to identify your billing cycle end date and payment due date.
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Make payments as soon as possible after your statement cuts to maximize interest savings.
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Mark payment due dates on your calendar and set payment reminders.
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Automate early payments, but monitor your account to avoid duplicate payments.
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Budget properly each month to ensure you have the funds to pay early without disrupting other payments.
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Monitor your credit reports to check your utilization and make sure it’s decreasing with early payments.
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Don’t pay early if you’re also trying to pay off a credit card balance promotion – prioritize the promotional balance first.
The Bottom Line
Paying your credit card bill early can provide many benefits that save money, improve your credit, and give you greater control over your finances. It builds positive habits and frees up credit you can access in an emergency.
But it also requires budgeting properly and monitoring your account to avoid overdraft fees or duplicate payments. Overall, paying early is a smart idea if you carry balances, want to minimize interest, or need to reduce your credit utilization. Just be sure you have the available funds and aren’t sacrificing payments on other bills. With proper planning, paying early can maximize your credit card benefits.
Paying your credit card early could help you avoid late fees
Making your minimum payment during the grace period means you wonât risk getting hit with a late payment fee.
To help with this, you can schedule credit card payments in advance, set up automatic payments or set a reminder on your phone. Your credit card company may also offer mobile solutions to help you pay on time or even early.
If you still owe money from the previous month, remember that any payment you make before the due date of your statement will go toward that balance. This means that if you still owe on any previous charges, youâll also need to make at least the minimum payment on your new bill.
Potential downsides to paying your credit card early
While paying your credit card bill early wonât hurt your credit scores, it might reduce the amount of cash you have on hand for everyday purchases or emergencies.
And if youâre using a credit card with a 0% promotional APR, keep in mind that you wonât be charged interest on your credit card balance until the promotional period ends. But itâs still recommended to make the minimum payment by the due date.
BEST Day to Pay your Credit Card Bill (Increase Credit Score)
FAQ
Is it better to pay your credit card early or on time?
Your overall credit utilization rate will go down if you pay off your card balance before the due date. This is good news for credit lenders. One of the things that affects your credit score is how much credit you use, so keeping your credit utilization ratio low could help your score.
What is the 15 3 rule on credit cards?
What is the 15/3 rule? It’s a popular way to pay off credit card debt that says you should make two payments, one 15 days before the due date and the other 3 days before. Proponents say it helps raise credit scores more quickly, but there’s no real proof. Building credit takes time and effort.
Does paying your credit card bill early help?
Is there a disadvantage to paying credit card early?
Should you pay your credit card early?
Paying your credit card early can help you keep your credit usage down and avoid any extra fees. One of the most noticeable benefits of paying your credit card bill early is that you can lower your overall credit utilization rate, also known as your debt-to-credit ratio.
What happens if you pay your bill early?
You lower your credit utilization when you pay your bill early, which can help your credit score. Similarly, paying your bill early can mean you’re not taking full advantage of certain situations. If you carry no balance on your card, a credit utilization score of 0% is less influential than one in the single digits.
When should I pay my credit card bill?
The best time to pay your credit card bill is before your due date to avoid late fees and negative entries on your credit reports. And if you can swing it, pay your entire balance before the due date to avoid interest charges altogether. If you can’t pay in full, you can still benefit by paying your bill before the statement closing date.
Does paying your credit card early affect your credit score?
Paying your credit card early does not directly affect your credit score, but can still positively influence it. You lower your credit utilization when you pay your bill early, which can help your credit score. Similarly, paying your bill early can mean you’re not taking full advantage of certain situations.
Can you save money if you pay your credit card early?
Even if you only pay a portion of the card, or enough to cover your existing balance, you’ll still save on interest charges. Use a credit card payoff calculator to figure out how much you could save by paying your bill early. Does paying your credit card early help your credit score?
Should you take care of a credit card bill early?
Taking care of a credit card bill early reduces the percentage of your available credit that you’re using. That’s good for your credit score. The credit utilization ratio measures what you owe on your credit cards as a percentage of your available credit.
