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6 reasons to pay your credit card bill early

You know the warnings and concerns about paying your credit card bill late. But what’s the benefit to paying off your credit card bill early?

The more you understand about how credit cards and your credit score work, you might find ways to send in that payment a little earlier.

Here are 6 reasons why making your credit payment early is a good idea:

1. Paying your credit card early frees up your line of credit

Try to keep the total of all your card balances at 50 percent or less of your total limits. This helps increase what is known as your capacity. A healthy capacity reflects positively on your credit score. The ideal point for card balances is about 30 percent of the spending limit, but that is a long-term goal, and it may take some time to get there.

If you make a big purchase, don’t wait until it shows up on your bill. You can start paying down that spending right away, freeing up your line of credit on your card.

2. Paying your credit card early can improve your credit score

A house. A car. Even a job. The fact is, your credit score is used for many parts of your daily life. Paying bills on time is 35 percent of your credit score. Why put that at risk by waiting until the due date to make the payment?

3. Paying your credit card early will help you track spending

Credit cards can offer some great benefits. But when you start to carry large balances, you can get in trouble. If you get paid every two weeks, or if you have a spouse with an alternating pay day, you can coordinate credit card payments to match.

By paying off credit card charges when they come in, you're more aware of how much you are spending. It's all about keeping your budget balanced. (And if you haven't started tracking your spending yet, no worries. Today could be your day to create a budget.)

4. Paying your credit card early reduces the interest you're charged

If you don’t pay a credit card in full, the next month you're charged interest each day, based on your daily balance. That means if you pay part (or all) of your bill early, you'll have a smaller average daily balance and lower interest payments.

Check your credit card rates. Credit unions are known for excellent rates, meaning more of your money stays in your pocket. Make sure you compare your current credit card to Numerica’s credit cards. If you carry a balance, you could save a bundle at a local credit union.

5. Paying your credit card early means paying off your debt faster

This is helpful in a couple of ways. First, there's the matter of interest we just pointed out. Limiting what you have to pay in interest increases what you can use to pay off the balance of your debt. Additionally, think about where your cash is going. The same dollar you used to pay down your bills could have been used to add to them. Smart choice! 

6. Paying your credit card early means you're less likely to forget about it

Unless you pay for a bill immediately when you get it, you're tempting fate. Why take a chance at losing it in the shuffle? Waiting until the last minute is that much closer to accidentally being late.

Consider enrolling in Bill Pay. It's a great solution to make sure your minimum balance is paid on time. You can always make additional payments throughout the month. You can set recurring payments, choose the date to pay, and pay the minimum balance or more.

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July 13, 2024