When is the Best Time to Pay My Credit Card Bill?

At the very least, you should pay your credit card bill by its due date every month. But in some cases, you can do yourself a favour by paying it even earlier — whenever your credit utilization gets close to (or exceeds) 35%. Here’s why it’s worth paying your bill before it’s due.

Why pay your credit card early

Your credit card bill’s due date simply signifies that a billing cycle has ended and it’s time to pay up. The due date is not necessarily when your current balance will be reported to the credit bureaus. That’s why it might make sense to pay your bill well before it’s actually due.

To explain why, let’s take a step back and discuss how your credit utilization ratio impacts your credit score. Your credit utilization ratio is the amount you owe in relation to how much credit you have available. So, if you have a card with a $10,000 limit and your outstanding balance is $4,500, your credit utilization is 45%. Your utilization ratio heavily influences the 30% of your credit score that’s determined by amounts owed.

Generally, the lower your utilization ratio, the better. A ratio higher than 35% could knock points off your credit score, so it’s important to stay below this threshold. This is where changing your credit card payment date comes in.

Most credit card issuers report your balance to the credit bureaus on a certain day each month, and, as mentioned, that’s not necessarily your due date. In addition, not every issuer reports to both credit bureaus — some only report to one, if they report at all.

Let’s continue the example above, where you have a $4,500 balance on a credit card with a $10,000 limit. Say your payment is due on the 20th of each month, but your issuer reports your balance on the 15th. If your issuer reported a $4,500 balance on the 15th, the credit bureaus would see a 45% utilization ratio — even if you paid it off in full just days later. Your credit score could end up getting dinged, even though your payment habits are solid.

A good rule of thumb is to make a payment on your card whenever your credit utilization ratio starts to creep up to about the 30% mark, regardless of when your bill is actually due. By monitoring your utilization ratio and keeping it in check, you’ll be in good shape no matter when it gets reported to the credit bureaus. (Note that an overpaid credit card, one that has a negative balance, does not have a negative impact on your credit score.)

Paying early also saves on interest

In general, we recommend paying your credit card balance in full every month. When you pay off your card completely after each billing cycle, you never get charged interest. That said, if you do have to carry a balance from month to month, paying early can reduce your interest cost. That’s because the interest you’re charged is based on your average daily balance.

Say you start the month with a $1,000 balance on your card. If you paid $400 of that balance on the last day of the month, your average daily balance for the billing period would be about $987. If your credit card had a 15% interest rate, your interest charge for the month would be about $12.33.

Now say you paid that same $400 halfway through the month. In that case, your average daily balance would be $800 and your interest charge would be $10. You cut your interest payment by about 20% just by moving up your payment date.

» MORE: How is credit card interest calculated?

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Why the credit card due date is so important

Every month, you get a statement from your credit card issuer listing what you’ve charged during the billing cycle and how much you owe. The statement includes a minimum payment amount and a due date. You must pay at least the minimum by the due date. If you don’t, you could face some unpleasant consequences:

Your issuer could change your interest rate. You could see an increase in your interest rate if you don’t make a payment, or if you only pay the minimum. You could also lose any promotional rate offer you may have.
You could lose your interest-free grace period. If you typically pay off your balance in full each month, you are likely benefiting from a grace period. A grace period is a timeframe, typically 21-25 days, where you are not charged interest on new credit card purchases. If you pay late or only pay your minimum, you will be billed interest on those purchases in your next statement.
Your credit scores could suffer. Payments that are more than 30 days late will show up on your credit report, where they can do serious damage. Payment history is the single biggest factor in your credit score. And a late payment can stay on your report for six years, even after you pay the balance.
Your card could be cancelled. Your issuer can respond to late or missed payments by cancelling your credit card.

Are all late payments equal?

Late payments are not all weighted equally. Generally, three factors determine how a late payment will be considered: how recently the late payment occurred, how severe it was, and how frequently late payments happen. A recent late payment can be more damaging than several old late payments. Frequent late payments indicate a risk to lenders.

Creditors typically report late payments in a few categories: 30 days late, 60 days late, 90 days late, 120 days late, 150 days late, or a charge-off. A payment that is 90 days late is more severe than one that is 30 days late. The longer you wait before making your payment, the worse the late payment will look on your credit history.

Other tips for managing your credit card bill

Aside from keeping an eye on your credit utilization ratio and making a payment when it starts to get too high, here are a few other pointers for managing your credit card bill:

Keep a budget and track your spending. This way, you won’t spend more than you can afford to pay off in one month.
Use credit card autopay to schedule recurring credit card bill payments,
Sign up for text or email alerts from your issuer to keep tabs on your balance and your bill’s due date.
Call your issuer to move your credit card due date if it doesn’t coincide with your pay schedule.
Review your statement carefully every month. This will help you spot and correct unauthorized charges if they arise.
Ask for a payment holiday. If you’re having trouble keeping up with your payments, contact your issuer to see if you can get a payment holiday, which will let you skip a payment. Make sure to ask whether or not you will pay interest if you skip a payment.
Consider credit card balance insurance. This type of insurance provides coverage to help pay your outstanding balance if you lose your job; are involved in a legal strike; are hospitalized; become injured, disabled, or critically ill; or die. If you do not have enough savings to pay your balance each month, balance insurance might be a good option for you.

The takeaways

Pay your credit card bill by its due date, if not sooner. That should be an ironclad commitment you make when you sign up for a credit card. If you charge a lot to your card every month, consider making your payment early — or making multiple payments each month — to keep your credit utilization ratio under the 35% threshold.

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How to Read Your Credit Card Statement

Your credit card statement is a record of all your transactions during a billing period. It also includes important account information and details that can help you master credit card management and ensure you’re not the victim of fraud.

Sandra MacGregor