How and When to Pay Your Credit Card Bill

Many people think that you need to carry a balance on your credit card from month to month to build your credit score. But the opposite is more true: Paying your card’s full statement balance each month can have a positive impact on your credit score. This is because it lowers your credit utilization rate. A low credit utilization rate demonstrates to lenders that you borrow money responsibly and pay it back reliably.¹

Another myth is that if you make the minimum payment each month, you won’t incur extra charges. On the contrary, if you do not pay your card’s minimum payment for a given month, you can be charged a late fee. Late payments could also cause your annual percentage rate (APR) to rise. And, your creditor might report the missed payment to the major credit bureaus, which could affect your credit rating.

If you only make the minimum payment, you will also likely incur interest charges that you could otherwise avoid by paying your statement balance in full. For example, imagine you have a credit card with a $2,300 balance, a $46 minimum payment, and a 20% APR. If you only pay the monthly minimum and never make another purchase, it could take nine years to pay off that balance and it could cost over $4,500, due to compounding interest over all those years. Ultimately, paying your credit card bill in full could be to your advantage.

A good practice when paying your credit card bill each month is to pay your full outstanding balance on or before the due date. Busy jobs, families, social lives, and all kinds of day-to-day distractions can make it easy to lose track of due dates or forget to pay a credit card bill. This is especially true if you have multiple credit cards. Here are three tips to help you make sure this doesn’t happen to you:

• Set up text or email alerts. If you prefer to review statements before you pay your credit card bill alerts can act as helpful reminders about upcoming due dates. Some credit card companies have mobile apps you can use to set notifications that give you a weekly snapshot of spending, payment reminders, statement-ready reminders, bill-due reminders, and more.
• Request the same payment date for all cards. If you have more than one credit card, one uniform payment date could make your life easier. Then, you only have to keep track of a single monthly payment date. You can usually arrange this by either calling your card issuer or making the request online. Of course, there’s no guarantee you will receive the exact date you request.
• Use autopay for your credit card bills. Setting up automatic payments can help take the worry out of missing a payment. Just make sure you have enough funds in the bank to cover your payments. 

Let’s talk a little more about autopay and how you can use it to pay your credit card bill.

Most major credit card companies offer automatic payment options, which allow your credit card company to debit your bank account on a set date and for a set amount each month. This can minimize your risk of late payments or late fees. There are generally three ways to use autopay to pay your credit card bill:
 

• Pay the minimum due. This is a basic safety measure that will ensure you never miss a payment due date. It’s especially useful if you want to review your bills manually each month before paying them, but don’t want to overlook a deadline.
• Pay the full balance on your card. If you maintain a large enough balance in your bank account to cover your monthly credit card balance, this approach could help you save money on interest charges and avoid late fees.
• Pay a fixed amount. This can be a useful strategy if you’ve stopped using a credit card and want to pay down the balance by making regular payments that are greater than the minimum amount due each month. It could also be a useful strategy if you usually spend the same amount on your credit card every month.