If you make your credit card payments on time every month and handle all your loans responsibly, youâ€™ll likely build solid credit and could enjoy low interest rates. If you donâ€™t make on-time payments, late fees and penalty interest rates may come your way â€” and your credit score could take a hit.
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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 solidÂ 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 even to be reminded about 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 â€” they’re fast, reliable and don’t require hunting for your last Forever Stamp. Most card issuers offer a way to automatically debit your bank account each month.
3. 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. 1 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 will suffer 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.
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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 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 canâ€™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 the â€śminimum amount dueâ€ť. If you pay below that, youâ€™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.
- Billing Cycle: The length of time (typically 28 â€“ 32 days) between your statements
- Late Payment Fee: A fee charged when a payment has not been received by the specified due date.
- 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 charges on the unpaid balance.
- Penalty APR: A higher APR the credit card company charges on new transactions, after the customer has made late payments, 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.