Is It Good To Pay Your Credit Card Bill Early? Everything You Need To Know

Paying your credit card bill early can have advantages, but also some potential drawbacks In this comprehensive guide, we’ll explain when you should pay your credit card early, the benefits of doing so, and if there are any downsides you need to be aware of

What Does It Mean To Pay Your Credit Card Early?

Paying your credit card early essentially means making a payment before the due date on your statement. There are two ways you can do this:

• Pay during the grace period The grace period is the time between when your statement is generated and when your payment is due. For most cards this is around 3 weeks. If you pay during the grace period but before the due date, this is considered paying early.

• Pay before the statement closing date: The closing date is typically 3 weeks before your due date, when the credit card company finalizes your charges for that billing period. If you pay before this closing date, you are paying early in the billing cycle.

Is It Good To Pay Your Credit Card Early?

Paying your credit card bill early can definitely be advantageous in many cases Here are some of the benefits to paying early

• Lower credit utilization: Your credit utilization ratio is how much of your total credit limit you are using. This factor makes up around 30% of your credit score calculation. When you pay early, you lower your balance, which lowers your credit utilization and can boost your credit score.

• Avoid interest charges: If you routinely carry a balance on your card, paying early can reduce the average daily balance used to calculate your interest charge for that billing period. This saves you money on interest.

• No risk of late fees: Paying early ensures your payment is on time, eliminating the risk of late fees, which typically range from $25-$40 per late payment.

• More available credit: When you pay early, you free up more available credit to use if needed, since you are lowering your balance.

• Helps you pay off debt faster: Making additional or early payments lets you pay down balances quicker and can help you get out of credit card debt faster.

So in most cases, paying your credit card bill early does have financial benefits and can be a smart money move for those who want to boost their credit score or pay off debt faster.

When Should You Pay Your Credit Card Early?

You have a couple options on when to pay your credit card bill early:

• Pay early in grace period: Paying after you receive your statement but before the due date is better than paying late or waiting until the due date. Paying a week or more early gives you a buffer.

• Pay before closing date: Paying 3 weeks before your due date ensures the lower balance gets reported to the credit bureaus, lowering your utilization. However, you still need to make a minimum payment by the next due date.

• Make an extra payment: You can make an additional payment any time to pay down your balance faster. This helps you pay off debt quicker.

Many experts suggest paying 5-7 days early as a good rule of thumb. This gives you plenty of buffer but still allows about 3 weeks of spending to accrue before the next statement cuts.

How Early Should You Pay Your Credit Card?

There are no set rules on exactly how early you need to pay your credit card bill to reap benefits. But here are some general guidelines:

• At least a few days before the due date is good, a week or more is better.

• 5-7 days early is ideal for most. Gives you buffer without cutting short the next billing cycle.

• Paying super early like a month ahead won’t necessarily help your credit or finances much more than paying a week early.

• Paying before the closing date is great to lower your utilization if you carry a balance.

• Paying every 2 weeks is an option. Allows you to pay down debt faster.

Overall, pay early enough to avoid late fees, pay down debt faster, and lower your utilization, but not so early it strains your current cash flow.

Disadvantages or Downsides to Paying Early

Paying early has many benefits, but there are a couple potential drawbacks to consider as well:

• Reduced available cash: Paying early means you have less cash readily available for daily spending needs.

• Possible prepayment penalties: A very small number of credit cards charge prepayment penalties if you pay early. Read the fine print.

• Shorter time for rewards to accrue: If you pay early, you have fewer days of spending with that card each billing cycle to rack up rewards points or cashback.

• 0% APR promotional offers: If you have a 0% APR card, paying early means you don’t get the full 0% interest benefit for as many days.

For most people, the many benefits of paying early outweigh the relatively minor drawbacks or risks. But it’s helpful to understand both sides.

Common Myths and Misconceptions

There are some common misconceptions when it comes to paying credit cards early. Let’s debunk some myths:

• “It will hurt my credit score” – False, paying early or extra can only help your credit, not hurt it.

• “I can pay less if I pay early” – Generally false, you still need to pay statement minimum or full balance owed. Early payments apply to current balance.

• “I just need to pay once a month” – If you pay early but still owe a balance, you’ll need to make another payment by the due date.

• “I should wait until after the closing date” – It’s actually better to pay before the closing date to lower your utilization amount.

• “I shouldn’t pay more than the minimum” – Paying more than minimum, early or extra helps pay off debt faster.

Tips for Paying Your Credit Card Early

If you want to get into the habit of paying your credit card bill early, here are some useful tips:

• Mark your closing date and due date on your calendar so you know when to pay.

• Set payment reminders through your card issuer’s app a week before due date.

• Sign up for autopay to have the minimum paid automatically on the due date.

• Schedule additional payments for a set day each month to pay extra.

• Pay weekly or bi-weekly to lower average daily balances.

• If carrying a balance, try to pay before closing date to lower utilization amount.

• When you get paid direct a portion immediately to credit card payments.

• Review statements when they come in and pay at least a portion right away.

The Bottom Line

Paying your credit card bill early has significant benefits for most cardholders and can be an easy way to start improving your finances and credit profile. Lower credit utilization, avoiding interest and late fees, paying debt off faster, and having more available credit are all good reasons to get into the habit of paying early.

Aim to pay at least a week before your due date, or earlier in the billing cycle if you carry balances. Just be aware payments before closing date don’t remove the need to also pay the next monthly minimum payment. Use the tips provided above to make paying early an easy routine.