February 17, 2025
Late payments on credit cards can result in late penalties and a higher interest rate. If your payment is more than 30 days late, it may hurt your credit. But how about paying your credit card statement timely?
For the most part, paying your credit card account on time is a financially healthy practice, especially if you pay in whole every month to prevent interest penalties. However, if you want to go a step further, paying your payment early might provide financial benefits such as lower interest charges, fewer fees, and a better credit score.
When you pay your credit card bill before the end of your billing cycle, your card issuer may report a lesser balance to the credit bureaus than if you paid after the statement closing date. This is the date that your card issuer generates your bill and normally sends your credit card information to the credit bureaus. This is important since a lesser balance lowers your credit utilization ratio, which is the percentage of available revolving credit you use.
Paying your credit card statement in full each month allows you to avoid interest costs entirely, with no debt to roll over to the next month. If that is not an option, it is still advisable to pay your payment as soon as possible to avoid interest costs, as credit card issuers normally charge credit card interest daily based on your annual percentage rate (APR).
If your credit card is nearing its limit, paying your account early may allow you to obtain additional credit. For example, you may require additional credit on your card to hold a hotel room reservation or cover an unforeseen charge. Ideally, you should have an emergency fund to cover such emergencies. If not, and you suddenly need to replace a broken refrigerator, having extra credit may keep your card from being refused owing to exceeding your credit limit.
By following these simple steps, one can make the credit card payment on time and save hard-earned money.
