What is the Best Way to Pay Your Credit Card Bill?

Typically, credit card payments are due on the same day every month, but it can still be easy to forget and miss a payment. Missing a credit card payment, or even paying late, can impact your credit score, and affect your overall financial health due to late fees and penalty interest rates.
 
Today, online tools from credit card issuers, including Discover, can help make payments easier and ensure card members don’t miss any payments on their credit cards. Knowing how credit cards work and the payment options you have available can help you determine how to pay a credit card bill and keep your finances in good health.

How to manage credit card payments

Consider these tips to help ensure you make monthly payments on time and keep your credit in good standing.

Take advantage of free alerts

With Discover, you can sign up for alerts for account activity, such as when a payment is posted, whenyour statement is available, and when your minimum payment is due. You can also set up alerts or reminders to help you track your spending, protect your account, and manage your rewards and offers.

Pay electronically

Paying your credit card bill online forgoes the stamp and envelope, allowing your payment to be received more quickly. Many card issuers offer automatic payments via your bank account each month, so you don’t have to worry you’ll forget a payment.

Pay on the same day every month

According to the Credit CARD Act of 2009 passed by the U.S. Congress, credit card bills must be due on the same date each month, so at least these dates will be predictable. It can also help to plan on paying your bill on the same day each month to avoid missing a payment. If you pay late, you may incur costly late fees, and your credit score could be impacted. But if you do accidentally pay late, you may be able to contact your card issuer and ask to have your first late charge waived as a courtesy.

Pay more than the minimum

One way to manage your credit card account is to avoid interest charges by paying each month’s statement balance in full and on time. If you get into this habit and pay on time every month, you shouldn’t have to worry about late fees.

If you have to carry a balance occasionally, how much you pay is very important. When you can’t pay your balance in full, paying as much as possible will minimize the interest charges applied to your account. At the very least, pay the “minimum amount due.” If you pay below that, you’ll still be responsible for late fees and might incur a penalty interest rate.

Paying your credit card balance in full

Credit cards allow members to spend money now and pay it off later. For some, this means carrying a balance from month to month and usually paying interest. But paying your card balance in full is ideal, especially in the following cases.

If the interest rate (APR) is high

Your credit card interest or APR (annual percentage rate) is set by your credit card company based on factors like your credit score. Most credit card issuers offer an interest-free grace period if you pay your statement balance in full by the due date every month and don’t take a cash advance or do a balance transfer. But if you take a cash advance, do a balance transfer, or don’t pay your statement balance in full each month, you’ll immediately carry a balance and lose your grace period. Once you lose your grace period, you’ll start accruing daily interest on the carried balance and any new transactions or fees. And if you have a high APR, daily interest charges can make it harder to pay down your debt.

That said, you may be able to transfer your balance to a credit card offering 0% intro APR on balance transfers and/or purchases for a limited time. Transferring a balance to a card that offers 0% intro APR gives you time to pay down debt without paying interest. However, you’ll lose your grace period and begin accruing daily interest if you don’t pay your transfer and purchase balances off before the introductory period ends.

If your promotional APR period is ending

If you’ve been using a credit card with a promotional APR that’s about to end, you may want to consider paying off the balance in full. It can be easy to spend on a promotional 0% APR card, forgetting that regular interest will apply once the promotion ends. You can avoid this problem by reminding yourself when the regular APR kicks in.

For example, when you receive the card, you could set a calendar reminder for a few weeks or more before the interest-free period ends. This can give your future self a heads-up to address the balance.

A loan application

When you apply for a large line of credit like a mortgage or car loan, lenders will check your credit as part of the approval process. One important number is your credit utilization ratio, which is calculated by dividing your credit in use by your total available credit across all your revolving credit accounts. This figure is meant to assess your ability to pay back any new debt. If your credit utilization ratio is high, meaning you use a lot of your available credit, a lender may view you as a less reliable borrower because you have so much outstanding debt.

While there’s no specific number for where your credit utilization ratio should be, it’s recommended to keep it low. If you’re in a situation where your ratio will be scrutinized, try to keep it as low as possible.

By applying these concepts and suggestions to your credit card accounts, you should be well on your way to using credit wisely.