Home > Managing Debt > 4 Reasons to Pay Your Credit Card Bill Before It’s Due

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There are many good reasons to never pay your credit card bill late, but are there any good reasons to pay it early? It would seem to go against all common sense to send in a payment well before the due date, but the more you understand about how credit cards and credit reports work, it can be smart idea under some circumstances.

Here are four reasons why you might consider paying your credit card early.

1. Save Money on Interest Charges

When you carry a balance on your credit card account, you accumulate interest charges each day, based on your daily balance. So when you make a payment before the due date, you are lowering your average daily balance, which can reduce your interest charges significantly. Also, think of it this way: Since you earn very little interest from keeping money in a checking or savings account, but pay much more for that high-interest credit card debt, you stand to save money in the long run by making payments to your credit card as soon as possible. If you want to know how long it will take you to pay off that balance, this calculator can help you.

2. Improve Your Credit Score

When your statement period ends, and a statement is issued, that balance is reported to the major credit reporting agencies as debt, even if you ultimately avoid interest by paying your balance in full by the due date. That reported debt can lower your credit score if your balance is high during a particular month. By paying off all or some of your balance before the statement cycle even closes, you can reduce your debt-to-credit ratio and improve your credit score (you can see how this factor is affecting your credit scores by checking your free credit report data on Credit.com). This can be an especially important factor when you are applying for a home mortgage or another line of credit.

3. Pay Off Your Debt Sooner

By making an early payment, you are committing your funds to paying off your debt, rather than merely planning on doing so in the future. Without having those funds available for other discretionary expenditures, you are unable to change your mind and spend the money elsewhere.

4. Free Up Your Line of Credit

If you anticipate making a large purchase, you can quickly use up your line of credit before a payment is even due. This is especially true when you consider that the typical statement period is about 30 days long, and your grace period, the time between statement closing and the payment due date, can be 21 to 25 additional days. And if you are traveling and have holds placed on your account by hotels or rental car agencies, then you may have even less of your credit line available by the time the due date arrives. By making early payments, you can free up your line of credit and ensure that all of your charges are approved.

When Not to Pay Your Bill Early

While there may be some very good reasons for cardholders to pay their bills early, it won’t make sense for everyone. If you are always avoiding interest by paying your statement in full, and you aren’t using a large amount of your credit line, then waiting until just before your due date to make a payment can be ideal. In this situation, you aren’t saving any money on interest charges, and your funds will remain available to you in your bank account for as long as possible.

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  • bbt

    Keep in mind that by paying off your credit card statement early, you negate any benefit that your card may give you in terms of rewards or cash back. Rewards and cash back are normally calculated against the balance on your credit card statement, so if you pay it off early, you won’t earn any of the rewards on the amount that you paid early.

    • http://www.credit.com/ Credit.com Credit Experts

      Smart to check the terms of agreement. What you say may be true for some cards, but it is not true for all.

    • Cooley_ATL

      That is not correct. Dollar spent is dollar spent…cashback only on balance, now that’s just silly.

  • Dianne

    This advice can work against you. Last month I made a partial payment one week before the statement was issued and the rest before the due date, only to discover $100 worth of interest on the next statement. The reason? My early payment was applied to the previous month (whose balance was zero because I already paid in full) and since the second payment didn’t by itself cover the entire statement, I was charged interest on the difference. Yes, I was charged interest because I overpaid and my account was in credit. I may be the only person on the planet who’s dumb enough to pay before the billing period is done – apparently their computer systems can’t handle it.

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