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. While it may be beneficial to carry zero debt, there are also some reasons why you may not want to pay the entire balance off. If it’s helpful, you can always call or log on to your account online, and request to change the payment due date.

With stakes this high, it helps to know everything you can about how credit cards work, including the following:

  1. Handle Your Credit Card Payments
  2. Manage Your Credit Card Debt
  3. How to Build Credit
  4. Paying Everything Off

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, protect your account and even to be reminded about rewards and offers. 

Pay Electronically. Paying your credit card bill online forgoes the stamp and envelop, and posts the payment faster. Most 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 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. Manage Your Credit Card Debt

Many consumers don’t see debt as a good thing, as it means they have an obligation to pay someone out of their future earnings. Debt can also mean incurring costly interest charges. But credit card debt can be a positive thing from the standpoint of the broader economy.

Credit cards can help finance purchases that cardholders couldn’t otherwise afford. Because consumers are able to make these purchases, businesses generate revenue they might not have received otherwise, stimulating the economy.

The American Bankers Association reports 374 million open credit card accounts in the U.S. When you consider how these millions of credit card users are able to make purchases just because they have a credit card, it’s easy to see how credit card debt can indicate healthy levels of economic activity.

But cardholders incur too much debt, they have less spending ability, which can hurt the economy. Credit card users who carry a balance must also pay interest charges, which may also reduce their ability to make new purchases.

While economists can debate the effects of credit card debt on the U.S. economy, individual cardholders should always make the best choices for their own needs.

3. How to Build Credit

Credit cards can also help build a credit history — lenders want to know you’re a safe bet when it comes to paying off a loan or credit card, but that only happens when you build a history of handling credit well, like making payments on time.

First, consider a secured credit card, which allows you to draw upon money you’ve deposited into an account linked to the card, typically with that amount equaling your total credit limit. This initial deposit with the card issuer ensures that if you default, they can recoup the money. A secured credit card works the same way a credit card does, however, allowing you to make purchases up to your agreed-upon limit and charging an interest rate if you don’t pay your balance in full at the end of the month.

Second, don’t open too many credit card accounts at once. Yes you might have a greater overall credit line, but this could lead to overspending and accruing debt. Some cards charge an annual fee, which can add up. Lenders that see multiple cards with high credit lines under your name might be wary that you’ll max out those cards and be unable to make your loan payments. Learn to manage the credit cards you have before opening new accounts.

4. 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 Interest 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 is the only true way to avoid paying interest and save money.

That said, you could also transfer your balance to a 0 percent interest credit card. Transferring a balance to a card that offers a promotional interest-free period can temporarily delay the accrual of interest, but you’ll still have to pay up eventually. In addition, on many credit cards, you may lose your grace period on new purchases. 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.

 

Originally published August 31, 2015

Updated May 15, 2020

 

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