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

Credit card payments are due on the same day every month. Your credit score, as well as your overall budget health, can take a negative hit if you miss a payment, or pay late, as late fees and penalty interest rates may come your way.

Today, many online tools can help ensure cardholders don’t miss any payments in their Discover billing cycle (and other cards too). At the same time, cardholders may want to consider how much to pay beyond the minimum when submitting their monthly payment. It helps to know everything you can about how credit cards work, including the following:

1. Handle your credit card payments

Consider these tips for ensuring your monthly payments keep the good credit going.

Take Advantage of Free Alerts. With Discover, you can sign up for alerts such as payment posted, statement available and minimum payment due. You can also set up alerts or reminders to track your spending, help you to protect your account and even to be reminded about rewards and offers.

Pay Electronically. Paying your credit card bill online forgoes the stamp and envelope, and posts the payment faster. Many card issuers offer automatic payments via your bank account each month, so you don’t have to fear you will forget a payment.

Pay on the Same Day Every Month. According to the CARD Act of 2009, credit card bills must be due on the same date each month, so at least these dates will be predictable. Plan on paying your card on the same day each month to avoid possibly missing a payment. If you pay late, you may be incurring costly late fees. And of course, your credit score could be impacted by late payments. But if this does happen accidentally, you may be able to contact your card issuer and ask to have any late charges waived as a courtesy.

Pay More Than the Minimum. A good way to manage your credit card accounts is to avoid interest charges on purchases by paying each month’s statement balance in full and on time. If you get in this habit and pay on time every month, you should not have to worry about late fees. But if you have to carry a balance occasionally, how much you pay will be 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 still have to deal with a penalty interest rate. With these concepts and suggestions applied to your credit card payments, such as your Discover billing cycle and payment due dates, you should be well on your way to using credit wisely.

2. Paying everything off

Credit cards allow holders to spend money now and pay it off later. For some spenders, this means carrying a balance from month to month and usually paying interest. There are several instances, though, when you may want to consider paying off your card in full.

If the APR is High. Carrying a balance on a credit card almost always means accruing interest. Accrued interest is added to your balance — along with any other new expenses and fees — which, in turn, increases the amount of interest that’s added the following month. Paying off your balance in full and on time each month is the only true way to avoid paying interest on purchases and save money.

That said, you could also transfer your balance to a credit card offering 0% intro APR on balance transfers. Transferring a balance to a card that offers 0% intro APR for a certain period can temporarily delay the accrual of interest, but you’ll still have to pay up eventually. In addition, you may lose your grace period on new purchases. That means you’ll accrue interest on your purchases even if you attempt to pay off those purchases each month. The first option, paying off your balance in full, eliminates the balance on which interest accrues. No balance, no interest.

If Interest is Starting. 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’s easy to spend aimlessly on a promotional 0 percent APR card, forgetting that it will eventually start charging interest. Carelessness can convert to interest accrual. You can avoid this problem by reminding yourself when the card will start charging interest.

Setting a calendar reminder — right when you receive the card — for a few weeks before the interest-free period ends might give your future self a head’s up to address the balance.

A Mortgage or Loan Application. When applying 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 they focus on is your credit utilization ratio, which is calculated by dividing your credit in use by the amount of credit you have available. This figure is meant to assess your ability to pay new debt. If your credit utilization ratio is high, meaning you use a lot of your available credit, you may be viewed as a risky borrower by a lender because you have so much outstanding debt.

While there is no specific standard for where your credit utilization ratio should be, experts recommend keeping it low. If you’re in a situation where your ratio will be scrutinized, try to keep it as low as possible.