When Should I Pay My Credit Card Bill?

Before proceeding any further, there is actually one simple answer that’s true for all credit card users, no matter the circumstance: Pay your bill on time and in full every month. Contrary to an enduring myth, carrying credit card debt past the end of the billing period is not good for credit scores—in fact, it’s usually the opposite. Paying what you owe and being consistent about it are two of the most important factors on a favorable credit report.

Carrying a balance from month to month is often a costly and inefficient way to borrow money, especially when interest rates have climbed above 20%. As such, the first step in timing payments should be simply ensuring that bills stay small enough to be paid reliably.

Ensuring bills remain reasonable is easier said than done and the numbers prove it— the average U.S. adult with a credit card carries an ongoing balance of over $5,500. Even for responsible people, it’s easy to default to simply meeting a mandatory minimum to avoid penalty fees. Luckily, any credit card user, no matter their credit score or level of debt, can still adjust the timing of payments to help a financial situation.

Many Americans do pay off bills in full and many keep monthly spending well below the recommended credit utilization threshold of 30%. People who do these two things reliably are more likely to have a favorable credit score. These routinely-responsible cardholders don’t benefit much from rushing to pay off monthly bills.

Instead, waiting until your monthly bill is due allows you to hold onto your money until the last possible moment. Of course, the statement balance won’t change, but waiting can give you a little extra leverage to prioritize other financial goals.

For cardholders unburdened by debt or a waning credit score, waiting to pay until close to the end of a billing cycle can allow you to earn a little more interest in your bank account or give you more time to manage your money in the best way possible.

Your credit utilization rate, or the percentage of your available credit that you’re using at a given time, is an influential factor in your credit score. While some experts may suggest keeping your utilization rate below 30%, there is no hard-and-fast rule—the lower it is, the better.

Credit card companies report your balance to the credit bureaus every month, typically at the end of each billing cycle. If you make your payment shortly before your statement date, it could help reduce your credit utilization, which can help you increase your credit score or maintain good credit.

That said, if the card issuer reports a zero balance every month, that could negatively impact your credit score. As such, it may be a good idea to avoid paying the full balance or to make your payment a few days before your statement date, so a few new purchases make their way onto the card in the meantime.

You may also consider making multiple payments throughout the month to keep your balance low. For example, if your balance is nearing the 30% recommended threshold, you can pay it off to avoid going too high. You may also opt to make a payment each time you get paid. In fact, many credit card issuers allow you to adjust your monthly due date, which you can align with your payday.

Credit card users who always pay in full don’t need to worry about paying interest because of your credit card’s grace period. However, when you carry a balance from one month to the next—no matter how small—you’ll be charged interest for the previous month.

What’s more, you’ll also lose your grace period on new purchases until you pay your balance in full. In other words, new purchases will start accruing interest from the date of each transaction. So, while it may be convenient to wait until your due date to make a payment, that convenience can cost you.

What Happens if You Don’t Pay Your Credit Card Bill

To give you an idea of how credit card interest is calculated, let’s say you had a $1,000 balance on a credit card with a 21% APR and you paid off $500 of the debt on your due date. To calculate your interest, the card issuer will divide your interest rate by 365, giving you a daily interest rate of 0.0575%.

Then, the card issuer will calculate your average daily balance from the previous month by adding up the ending balance for each day and dividing the sum by the number of days in the month. Let’s say your average daily balance was $575.

The card issuer will then multiply the average daily balance by the daily interest rate, then multiply that amount by the number of days in the month to give you your interest charge. For example:

$575 x 0.000575 = 0.330625

0.330625 x 30 = $9.92

That might not seem like a lot, but remember that new purchases are also accruing interest, and that interest compounds each day, becoming costlier every day. So, if you have credit card debt, making payments more regularly can be a great way to save money on interest.

Credit cards can offer a wealth of value through rewards and benefits. But if you aren’t careful, they could cause significant damage to your financial health. Here are some tips to help you better manage your credit card bills:

• Make it a goal to pay your balance in full every month.
• Create a budget and avoid spending more than you can afford to pay off.
• Think twice about financing large purchases over time unless you have a 0% APR promotion.
• Check your online account to keep an eye on your balance and watch out for unauthorized transactions.
• Monitor your credit score to better understand how your actions impact your credit.
• If you’re carrying a balance, consider different credit card payoff strategies to determine the right approach for you.
• If you’re drowning in credit card debt, consider reaching out to a credit counselor.

Ideally, you’ll be able to work toward paying your bill on time and in full every month (if you aren’t already). Depending on your situation, though, you may want to be strategic about when you make your payments. As you evaluate your situation and goals, consider these rules and tips to determine the right time to pay your credit card bill each month and, if necessary, the best approach for handling existing credit card debt.