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Is It Good to Pay Your Credit Card Early?

Published November 30, 2022
4 min read

Key Points About: Paying Your Credit Card Bill Early

  1. Paying your credit card early has advantages, like possibly improving your credit score, helping with budgeting, and lowering potential daily interest charges.

  2. As long as you pay your balance on time and in full, you won’t pay interest on your purchases.

  3. Having enough cash to cover an early payment and still meet other financial obligations is a factor in whether to pay early.

If you’ve just made a purchase with your credit card and have cash in the bank to cover the payment, you may wonder if you should pay it off now or wait until your credit card bill is due.
There are perks to using a credit card for spending, like a credit card rewards system that offers cash back earnings. And managing your expenses with credit can help you cover certain costs until payday. But the decision about when to pay your credit card comes down to your unique circumstances. While there are benefits to paying your credit card early, there may be situations when paying on time is the best choice.

The benefits of paying your credit card early

When it comes to paying your credit card balance, staying on top of payments helps you build credit and responsibly manage your spending. And while making your monthly payment on time is crucial, you may want to consider the benefits of paying early (before your due date).

Increases your available credit

As paying your bill early reduces what you owe, it also improves your credit utilization ratio, which is the second most important factor that impacts your credit score. A credit utilization ratio is the amount of your used credit divided by your total available revolving credit (credit you can use again once you pay your debt), including credit cards and lines of credit. 

Here’s how it works: Credit bureaus don’t see the daily purchases you make with your credit card; your credit card issuer only reports your account balance at the close of your billing statement. So, if you make payments to your card before your due date, you’ll have a lower balance due (and higher available credit) at the close of your cycle. That means less credit card debt gets reported to the credit bureaus, which could help your credit score.

As a general rule, it’s best to keep your utilization ratio as low as possible, and preferably no more than 30% of your total credit limit

Helps you avoid late payments

Did you know

Payment history (record of late and on-time payments) is the most critical factor weighing your credit score. Paying your credit card bill early can help your score by ensuring you don’t miss a payment—especially beneficial if you struggle to track due dates or need to improve a bad credit score. Setting up an automatic payment for one or more monthly payments takes the guesswork out of paying on time.

Brings more awareness to your spending and budgeting

When you make an early payment to your credit card by logging in mid-month, you’re more likely to notice areas where you may want to curb excessive spending. And regularly checking your credit card balance can help you stick to a monthly budget.

Lowers daily interest on a carried balance

If you carry a balance past your due date, you’ll lose your grace period, which means you’ll pay interest on your balance plus new purchases as you make them. Making credit card payments ahead of the next due date can reduce the balance that accrues interest every day. 

You can break it down like this: For regular purchases, you get charged interest based on your credit card’s purchase APR (annual percentage rate). Your APR determines the total interest you pay yearly on any credit card balance you carry from one month to the next. But most credit card companies apply an interest charge daily (using a daily rate based on your APR), which compounds (interest charged on unpaid interest) over time. That means you can save on daily interest charges by paying early, no matter the amount. 

Are there downsides to paying your credit card early?

As beneficial as paying your credit card bill early can be, there are some reasons you may want to stick to your scheduled payments. For instance, you might not have the cash in your bank account to pay early. If this is the case, paying on the due date can help you meet your other financial needs, like covering necessities and paying your other bills on time.

Is it best to pay your credit card early or on time?

While there’s no single answer to whether it’s best to pay your credit card early vs. on time, it is safe to say you should avoid paying late. Aside from potentially incurring a late fee, making a late payment or missing a credit card payment can negatively impact your payment history and credit score.

Ultimately, managing your debt takes careful planning and discipline. Understanding how paying your credit card bill early impacts your credit and cash flow can help you make more informed decisions.

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