The best time to pay your credit card bill is by the due date to avoid late fees and dings to your credit, but there may be situations when making a payment before the billing cycle ends can provide additional benefits.
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Paying your credit card bill on time eliminates the negative consequences of late payments, such as fees and dings to your credit. But sometimes, making a payment early instead of waiting for the due date could be a better option. Heres what you need to know about timing your payments to receive the maximum benefit.
Paying interest on your credit card balances can be an expensive burden. According to NerdWallet, the average credit card interest rate is around 16% – 20%. At these rates, interest charges can quickly snowball out of control if you don’t pay off your balances in full each month So when is the best time to pay your credit card bill to avoid paying interest?
How Credit Card Interest Works
Most credit cards have a grace period, which is the time between when your billing cycle closes and your payment due date. As long as you pay your statement balance in full by the due date, you won’t be charged interest on your purchases.
However, if you carry a balance from month to month, interest starts accruing immediately after the end of your billing cycle. Here are some key things to understand about how credit card interest works:
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Interest accrues daily – Your credit card issuer calculates interest daily based on your average daily balance and annual percentage rate (APR)
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Interest compounds daily – The interest charged one day gets added to your balance, so the next day’s interest is calculated on a higher balance amount.
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No grace period when carrying a balance – If you don’t pay your statement balance in full, you lose the grace period and get charged interest immediately.
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Minimum payments still accrue interest – Paying just the minimum due doesn’t help you avoid interest charges.
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High APRs mean larger interest charges – Cards with APRs of 20% or more can rack up interest charges quickly.
When Do Credit Cards Start Charging Interest?
Most credit cards provide an interest-free grace period from the closing date of your billing cycle until your payment due date, which is typically around 21 days. As long as your account is paid in full every month, you can avoid paying interest on purchases during this grace period.
However, interest starts accruing as soon as you carry a balance past your payment due date. Here are some common scenarios in which your credit card will start charging you interest:
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You don’t pay your full statement balance by the due date. Any remaining balance will be charged interest starting the day after your payment due date.
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You pay the minimum payment only. Minimum payments help keep your account in good standing but don’t allow you to avoid interest charges.
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Your 0% introductory APR expires. When intro 0% APR periods end, unpaid balances begin accruing interest retroactively.
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You take a cash advance. Cash advances begin accruing interest immediately and do not have an interest-free grace period.
The takeaway is that as long as you pay your full statement balance on time each month, you can continue charging purchases to your credit card without paying interest. But if you carry a balance, interest charges kick in quickly.
How Often Do Credit Cards Charge Interest?
Credit card interest is typically compounded daily starting the day after your billing cycle closes or the day after your payment due date if you carry a balance. While interest accrues daily, it’s actually billed or charged on a monthly basis.
Here’s a simplified example of how daily compounding interest works on credit cards:
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You have a $1,000 balance at 20% APR
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Your daily periodic rate is 0.0547% (20% APR / 365 days)
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On day 1, 0.0547% of $1,000 is $0.55 interest charged
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On day 2, 0.0547% of $1,000.55 is $0.56 interest charged
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On day 3, 0.0547% of $1,001.11 is $0.57 interest charged
This continues until your billing cycle closes and the total interest charged that month is added to your next statement balance. As you can see, interest builds up rapidly when compounded daily!
How to Avoid Paying Credit Card Interest
Here are some tips to avoid paying interest on your credit card purchases:
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Pay statement balances in full each month – As long as you pay off your full statement balance by the due date, you can avoid interest charges.
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Pay early – Don’t wait until the due date, since interest accrues during the grace period. Pay your bill as soon as you receive it.
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Pay more than the minimum – Paying the minimum keeps your account active but doesn’t reduce your balance enough to avoid interest.
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Pay multiple times per month – Making payments more than once monthly reduces the average daily balance that interest is charged on.
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Look for 0% intro APR offers – Cards with 0% intro APR periods allow you to pay no interest for 6-21 months typically.
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Transfer balances to a 0% APR card – Balance transfer cards let you move debt from a high APR card to one with a 0% promotional rate.
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Pay down highest APR cards first – If you have multiple credit cards, focusing on paying down the card with the highest interest rate saves money.
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Ask your issuer for a lower rate – You may be able to get your interest rate reduced by contacting your card issuer and negotiating.
The single most effective strategy is to simply pay your credit card bills in full and on time every month. By avoiding carried balances, you can use your cards freely without getting charged expensive interest fees.
Should I Just Pay the Minimum Due?
Many people think that as long as they pay the minimum payment due on their credit card statement each month, they’re managing their accounts responsibly. While paying the minimum does keep your account current and avoids late fees, it will not save you from accruing interest charges.
Even if you pay just the minimum payment, interest is still being charged daily on your remaining balance until it is paid off completely. Minimum payments are also typically quite low, around 2% of your total balance. Paying such a small fraction of what you owe does little to reduce your overall balance, so interest continues growing.
For example, let’s say you owe $5,000 on a credit card with 18% APR. The minimum payment may only be $100. If you paid just the minimum due each month, it would take over 7 years to pay off the balance, all while incurring over $5,000 in interest charges.
The bottom line is if you want to avoid paying interest on credit card purchases, you should pay more than just the minimum amount due. Ideally, you should strive to pay off your statement balance in full by the due date.
Does Paying the Balance in Full Eliminate Interest?
Paying your credit card statement balance in full before the due date is the only way to completely avoid interest charges. As long as you pay off the full amount you owe each billing cycle, you maintain the interest-free grace period.
Even if you’ve accrued some interest charges the previous month by carrying a balance, paying off the current statement balance entirely zeros out the balance and resets the grace period. This allows you to continue using the card without interest until the next billing cycle ends, assuming you pay in full again.
The grace period is one of the most valuable benefits of credit cards. It essentially gives you an interest-free loan for a few weeks as long as you settle the balance each month. Maintaining this grace period by paying on time and in full should be the goal of every credit card holder who wants to avoid finance charges.
Does Making Multiple Payments Reduce Interest?
Paying your credit card bill multiple times during the billing cycle rather than just once at the due date can potentially help minimize interest charges. This strategy works because of the way credit card interest is calculated on your average daily balance.
Each day, interest accrues based on the unpaid balance that day. By making payments during the billing period, you lower the total balance that interest is being calculated on over those days until the cycle closes.
For example, say you have a $2,500 balance at 20% APR. If you wait until the due date to pay it off, you may accrue around $46 in interest charges. But if you make a $1,000 payment halfway through the cycle, you may only accrue $23 in interest by reducing your average daily balance.
So making multiple payments can reduce your interest costs compared to paying once monthly, although not as much as just paying the statement balance in full by the due date.
Should I Pay Off the Highest or Lowest Balance First?
If you have multiple credit cards with balances, a good strategy to save on interest and pay off debt faster is to target the card with the highest interest rate first. Paying as much as you can towards that debt while making minimum payments on the other cards results in more interest savings overall.
Paying off the card with the lowest balance first may seem more motivating by eliminating debts quicker. However, it ends up costing more total interest in the long run compared to focusing on highest APR balances first. The most financially optimal approach is to pay down your most expensive debt first.
Let’s say you have:
- Card A – $5,000 balance at 25% APR
- Card B – $2,000 balance at 15% APR
By putting an extra $100 per month towards
When Are Credit Card Payments Due?
Your credit card bill is due on the same date every month. If youre not sure what your due date is, you can typically find it on your credit card bill. The date must be at least 25 days from when the billing cycle closes and 21 days after the company sends your monthly statement. If the date the company assigns isnt ideal, it may allow you to change it to a more convenient date.
When the due date falls on a weekend or holiday, the issuer must receive your payment by the cutoff time on the following business day. If the company receives your payment after the cutoff time, its generally considered late.
Learn more >> How to Change Your Credit Card Due Date
When Should I Pay My Credit Card Bill?
The best time to pay your credit card bill is by the due date. Youll prevent late fees, the reporting of late payments to the three consumer credit bureaus (Experian, TransUnion and Equifax) and, if you pay in full, interest charges.
But you dont have to wait for the billing cycle to close to make a payment, and there may be times when not waiting can save you money or help you improve your credit scores.
WHEN and HOW MUCH to Pay on Your Credit Card to Avoid Interest!
FAQ
What date to pay credit card to avoid interest?
To avoid paying interest and late fees, you’ll need to pay your bill by the due date. However, if you want to raise your credit score, the best time to pay your bill is probably before the due date on your statement, when your debt-to-credit ratio starts to rise too high.
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.
Is it better to pay a credit card early or on due date?
Paying off a credit card early is usually better than paying it off late for a number of reasons. Interest savings: Credit cards usually charge high interest on balances that are still owed. Paying off your balance early can help you avoid accruing interest, saving you money.
Should you pay your credit card bill early?
There should be times when you have extra money after paying for the things you need, though. That time should be used to pay your credit card bill early, instead of waiting until it’s due. Credit card expert and consumer finance analyst for U.S. Credit Card says that if you pay your bill early, you save some interest. S. News & World Report.
How do I avoid paying interest on my credit card balance?
If you don’t have a credit card with an introductory rate, the only way to avoid interest on your balance is to pay your bill in full every month. In the event that your credit card comes with a 0% intro APR offer, you will not have to pay interest as long as you settle your balance before the offer ends.
When is the best time to pay your credit card bill?
When you pay your credit card bill on or before the due date, you can avoid early payment fees. That’s because if you miss a credit card payment, you’ll have to pay more in interest because interest will keep adding up on your past due balance.
Do you have to pay interest on a credit card?
People who always pay their credit card bill in full don’t have to worry about interest because of the grace period on their card. You will be charged interest for the previous month if you carry a balance from one month to the next, no matter how small. You’ll also lose your grace period on new purchases until you pay your balance in full.
When should I pay my credit card balance?
When possible, it’s best to pay your credit card balance in full each month. That not only helps you stay within your budget, but it also saves you money on interest. You will always have a credit card grace period and never be charged interest if you pay off your full balance by the due date.
When will interest be charged on my credit card purchases?
If you have a $0 balance on your credit card when you start shopping, interest is usually not charged on your purchases until the day after your bill is due, and only if there is still money on the card. If you pay your entire credit card bill each month, you will not be charged interest.
