Most Strategic Time to Pay Your Credit Card Balance
You know that you need to pay your credit card bill on time, and that you should always pay enough to avoid having a balance. But if you’re having a hard time managing your money , you might be tempted to pay off your credit card immediately after every purchase. This payment strategy will essentially treat your credit card like a debit card: sure, you’ll avoid accumulating any debt, but you’ll also harm your credit health along the way. Here’s what you need to know about the most strategic moment to pay off a credit card.
Fundamentals of Credit Card Payments
To learn the best way to pay off a credit card, you must understand the basics of a credit card statement . At the end of the billing cycle (usually every 30 days) you receive a report with your current balance. This balance reflects all purchases made with your card during a billing cycle, as well as any unpaid balances or interest carried over from previous cycles.
Your statement will show the minimum required payment, which you must make by a certain date (usually a couple of weeks after receiving your statement). A minimum payment is required to avoid late fees, but you should always pay more to avoid accruing interest and accumulating debt.
You should always strive to pay off your statement balance in full and on time. But here’s why you shouldn’t be too eager to pay off your balance too often.
What happens when you pay off your credit card too often
If you choose to repay your credit card after every purchase, you will lower your credit utilization rate , which is 30% of your credit score. In most cases, lower usage means a higher credit score, with the exception of using 0% .
The reason for this is that the credit bureaus do not receive your account information until the end of the billing cycle. If you always pay off your balance before you can get your statement, it will look to the bureau as if you weren’t using the card at all. And without a credit history to scrutinize, you are damaging your credit health.
Best Credit Card Repayment Strategy
Unless you’re seriously worried about accumulating debt, it’s unwise to pay every credit card swipe right away. But if you want to improve your credit score , it’s worth waiting until your discharge date to pay off the balance. It is best to have a balance that is less than 30% of your total loan and always pay on time to avoid interest or late fees.
Ultimately, the best strategy for you is to make sure you don’t go into debt. Better to overpay than not be able to pay at all.