How to Handle Credit Card Payments Like a Boss

If you make your credit card payments on time and handle all your loans responsibly, you’ll build great credit and enjoy low interest rates. If you don’t, late fees and penalty interest rates may come your way — and your credit score will plummet.

How much you pay matters, too.

With stakes this high, it helps to know everything you can about how credit cards work. Here’s a complete guide to acing your monthly payment.

1. Take Advantage of Free Alerts

The first step to good credit is making sure you never miss payment. 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, protect your account and around rewards and offers.

2. Pay Electronically

Hands down, the best way to pay your credit card bill is via electronic payments through your card provider or bank — they’re fast, reliable and don’t require hunting for your last Forever Stamp. Most card issuers will even offer a way to automatically debit your bank account each month.

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3. Schedule Payments a Day Early

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.1 The only problem with this system is that your payment due date is sometimes going to fall on a weekend or a holiday, and your bank may not be able to schedule an electronic payment on that day. So you should always schedule payments no later than the last business day before the due date.

If you pay late, you may be incurring costly late fees and may even have a higher, penalty interest rate imposed on your balance. And of course, your credit will suffer tremendously if you get into the habit of making 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. At Discover, paying late won’t raise your APR and there is also no late fee on your first late payment.

4. Pay More than the Minimum Payment

The best way to manage your credit card accounts is to avoid interest charges by paying each month’s statement balance in full and on time. If you get in this habit, you’ll never have to worry about late fees or interest rates.

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, try to pay as much as possible because it will minimize the interest charges applied to your account. At the very least, pay out 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.

Here are some quick terms to help you understand payments:

  • APR (Annual Percentage Rate): Also known as your interest rate, this interest rate determines the finance charges you pay on your account if you carry a balance.
  • Billing Cycle: The length of time (typically 28 – 32 days) between your statements
  • Late Payment Fee: A fee charged when a payment has not been received by the specified due date. At Discover, there is no late fee for your first late payment.
  • Minimum Amount Due: The smallest payment a customer can make each statement period to keep the account in good standing. If you only pay the minimum payment, you will incur interest on the unpaid balance.
  • Penalty APR: A higher APR the credit card company charges on new transactions, after the customer has made late payments, exceeded their credit line, or otherwise did not abide by the Cardmember Agreement. If you become more than sixty days late, some credit card companies may apply the penalty APR to your existing balance. Discover it cards do not charge a penalty APR.

Sources:

http://www.consumerfinance.gov/credit-cards/credit-card-act/feb2011-factsheet/

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 

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