Can You Pay Your Credit Card Bill Early? The Ins and Outs of Making Early Payments

Paying your credit card bill early can have advantages, but also some potential downsides to consider. Understanding how early payments work and align with your financial goals is key to deciding if it’s the right move for you.

What Does It Mean to Pay Early?

When you pay your credit card bill early, it usually means one of two things:

• Making your regular monthly payment before the due date
• Paying an extra amount toward your balance during the billing cycle

So for example, if your payment is normally due on the 22nd of the month, you might pay your bill on the 15th instead. Or, you could make your regular payment on the 22nd as usual but also throw in an extra $100 payment on the 10th.

Both scenarios allow you to pay down your balance faster than just waiting for the due date,

How Do Credit Card Billing Cycles Work?

To fully understand the advantages of paying early, it’s helpful to know how credit card billing works. Here’s a quick overview:

• Billing cycles generally last anywhere from 28-31 days

• At the end of the billing cycle, the card issuer will calculate your interest and minimum payment due and generate your monthly statement.

• The statement closing date is typically around 21 days before your payment due date. This is when the card provider reports your balance to the credit bureaus.

• Then, between the date your statement ends and the date your payment is due, there is a grace period during which no interest is added. For as long as you pay your bill in full every month, you won’t have to pay interest on purchases.

Can Early Payments Help Your Credit?

One big advantage of early payments is the potential positive impact on your credit. Specifically, making an extra payment before your statement closing date can lower your credit utilization ratio.

Your utilization ratio compares your total balances to your total available credit. Experts recommend keeping this below 30%. The lower the better for your credit score.

By making an additional payment during the billing cycle, you reduce your balance that gets reported to the credit bureaus. This in turn lowers your utilization for that month, which can benefit your credit score over time.

Do Early Payments Save on Interest?

If you routinely carry a balance month-to-month, early payments can potentially reduce the interest fees you pay.

For card issuers that use the adjusted balance method for interest calculation, an early payment right before your statement closing date can lower the balance used to compute your interest charges for that billing period.

However, if your provider uses the average daily balance method, an early payment won’t have as much impact on interest. Still, every little bit toward your balance helps cut down what you owe in fees.

Can You Avoid Late Fees?

One clear advantage of early payments is avoiding late fees. Most credit cards charge around $30-40 for a late payment.

To sidestep these pesky penalties, you can set payment reminders for yourself or automate your payments through your bank. Getting a jumpstart by paying at least the minimum due earlier in the grace period guarantees you won’t miss the deadline.

Any Downsides to Paying Early?

While not necessarily detrimental, early payments can have some potential drawbacks:

• You have less cash readily available for other expenses when you pay ahead.

• On a new card with an intro 0% APR, you lose the interest-free grace period if you pay off the full balance early.

• You still need to make your regular payment by the due date if you don’t pay the full balance with the early payment.

• It takes diligence and organization to change your payment timing and make it a habit.

For balances you carry over, an early payment gets applied to the prior month’s charges first. So you still need to pay the minimum due on any new activity by the statement due date.

When Is the Best Time to Pay?

Ideally, you’ll pay your credit card bill in full every month by the due date to avoid interest. If carrying a balance, the billing cycle end date, or statement closing date, can be a strategic time to pay.

Paying extra before this date reduces your balance reported to the credit bureaus and helps keep your utilization low. Just be sure you still make at least the minimum payment by the due date.

For the most impact, make your early payment at least 5 days before the statement closing date. This gives the payment enough time to process and lower your reported balance.

Can You Schedule Automatic Early Payments?

Many card issuers let you automate payments through their website or mobile app. You can schedule recurring payments for a set date each month.

Just log in to your account, find the payment settings, and select a payment date at least a week before your due date. This builds the habit of consistently paying early without the hassle of remembering.

Some banks also allow you to automate credit card payments through their bill pay features. You connect your card, pick a pay date, and the bank sends payments on that date every month.

How Else Can You Get Organized?

If you want to begin paying your bill early each month, consider these tips to stay organized:

• Mark statement closing and payment due dates on your calendar so you know when to pay.

• Set up payment reminders through your card issuer’s app a few days before you plan to pay.

• If you have cards at different banks, use a personal finance app tosync all your account details in one place and get reminders.

• Schedule a recurring automatic transfer from your checking account to the card 5-7 days before your due date.

• Add an extra transfer to your automated sequence mid-month to mimic an additional payment.

The Bottom Line

Paying your credit card bill early has the biggest benefits if you routinely carry a balance. The early payment lowers your credit utilization for improved scores, saves on interest, and prevents late fees.

However, it locks up funds you could use for other expenses. For cards with an intro 0% APR, it may not be advantageous to pay early. Take some time to evaluate your situation before rushing to change your payment timing.

Developing the habit of consistently paying on time, keeping utilization low, and monitoring your credit should provide more long-term benefits than focusing solely on paying early.