Many articles, and advisers have a single piece of advice, “Don’t pay late!” This, however, isn’t much help if you are trying to build your credit back up, or have a job that don’t allow you to pay the full balance on one paycheck. So when should you pay, or is there a real difference?
First of all, call your card issuer, and find out two dates, other than the date the bill is due. This will help you make a plan to make credit card payment history that looks the best for you. Then, take a look forward, and see if your score might need a slight, temporary bump.
Three dates to know
The first date you need to be aware of is easy to find: the day your credit card payment is due. This is the date that you need to make credit card payment (or the total of the payments you can do) with no late fees or penalties. This is normally printed on your statement, and is a consistent date (the 16th of every month, for example). Making your credit card payment on this date is expected, and will have no penalties, extra fees, or other expenses added to your payment. If money is tight because of an emergency, make credit card payment of the minimum balance, even if you know this is going to cause you to use your card more for a short period of time.
The next date you should know is when the billing cycle ends. Your due date may fall at any point in this cycle, so to make credit card payment too early may show that you aren’t using the credit you’re offered, or show that you have a high balance every month. Depending on your personal needs, you should be aware of what this is showing about your spending habits. A higher balance, paid off every month, may show that you are a better credit risk.
The third date you should know is when your bank reports credit usage. This is the date your bill is posted (which may require a call to find out). This date is the day that they officially record your credit usage, and the balance-which may be an average daily balance, or the highest balance on the card during the month. This date is important to know because you should keep your credit usage- especially when trying to establish credit – under 30% of your available credit. This shows that you are responsible, and not using your card for everyday expenses.
How these dates affect my credit score
This seems like a lot to keep track of, but once these numbers are figured in, you can plan to make credit card payment arrangements that will benefit you. Your spending habits can be shown in the best light, even with minor emergencies.
- Pay at least the minimum balance by the due date. There is little long-term benefit to paying early.
- Regardless of how many payments you need to make, plan to make credit card payment immediately after you are paid. This will avoid the financially-painful surprise of a missed payment.
- If possible, pay early in the billing cycle. The less time that you have charges on your card, the smaller the finance fee. This is a great tip if you’ve needed to use your card more than usual, and you get paid frequently.
- Remember, your score will be affected more by how often you use your credit, versus how often you pay. This seems odd, at first glance; but banks and other institutions have found it to be the best indicator.
Other things to think about
Knowing all of these things will allow you to plan when to make credit card payment, and make sure that you are presenting the best possible picture of yourself to the credit companies. You can show yourself to be a responsible person, as well as make plans for a larger purchase by having a low balance at the time of the purchase. This is very important: careful timing of the payments and reporting can show that you are a really good credit risk.
If your plans are something large, like a car, you can take advantage of paying before the due date to give yourself a slight, temporary bump in your credit utilization ratio. This figure is normally averaged over the last few months, so it will take some planning on your part to get any advantage. If your score is borderline, this may be a worthwhile opportunity.
[Read: The Best Cash Back Credit Cards]
Keep in mind, your credit is a history of your spending patterns. Following these rules, then using your card for everyday expenses will quickly show in your credit score. Make credit card payment on time, and keeping your use under 30% of your available credit is an exercise in self-discipline, but is worth it for your financial future.