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The Best Time to Make a Credit Card Payment

When do you pay off your credit card bill? Some people pay their full balances every month by the due date listed on their credit card statements. Others carry a balance from month to month but make the minimum required payment at some point before the deadline. So when’s the best time to make a credit card payment? Before we discuss that, let’s review why you should at least pay your bill by the deadline.

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Why It’s Important to Pay Bills On Time

Most lenders use the FICO® scoring model to assess credit scores. Under that scoring model, 35% of your credit score depends on your payment history. So if you have a record of making late credit card payments, that can ding your score.

There’s another reason why you should make paying off your credit cards a priority. A credit card is a type of revolving credit account. Unlike installment credit accounts – like mortgages and student loans – revolving credit accounts allow you to borrow money whenever you need it up to a certain threshold (your credit line). There’s no fixed monthly payment and you can carry a balance from month to month by not paying your bill in full.

When it comes to your FICO® credit score, revolving debt typically carries more weight than installment debt. So while making any kind of loan payment after its due date can hurt your credit score, late credit card payments can do more damage to your credit.

The amount of debt you owe accounts for 30% of your FICO® credit score. An important part of that variable is the credit utilization ratio (the amount of credit you’ve used compared to your credit line) associated with your revolving credit accounts. That means your credit score could take a serious dive if you miss your credit card payment deadlines and you’ve used a significant portion of your available credit line.

Related: Best Credit Cards to Transfer Balances 

The Case for Making Early Credit Card Payments

The Best Time to Make a Credit Card Payment

While it’s a good idea to pay your credit card bill when it’s due, making an early credit card payment can work in your favor. To understand why, you’ll need to know how your billing cycle works.

Credit card billing cycles often last for 29 to 31 days. The last day of your billing cycle is called your statement closing date. Whatever credit card balance you have on this day is usually the balance that your credit card issuer reports to the credit bureaus. Your closing date isn’t the same as your payment due date. After all, your credit card payment technically isn’t due until the end of a 21- to 25-day period known as the grace period.

Related Article: 3 Things to Know About Carrying a Credit Card Balance

By making a credit card payment before the closing date, you can make it seem as though you’ve racked up less credit card debt. For instance, let’s say you have a credit card with a $3,000 credit limit. If you spend $2,500 but pay off $1,700 before the closing date, the credit reporting bureaus will think you’ve only spent $800.

Why is that a good thing? Based on our example, the credit reporting bureaus would think that your credit utilization ratio is 26.7%. Lowering your credit utilization ratio can improve your credit score. If you want a better FICO® score, it’s best to keep this percentage below 30%.

When You Should Make a Credit Card Payment

The Best Time to Make a Credit Card Payment

You’ll be in good shape if you can pay off your credit card by the due date, especially if you pay your entire balance. Paying at least part of your bill before the closing date could be even better if you want a good credit score.

But the best time to make a credit card payment may be whenever your credit utilization ratio exceeds 30%. By tracking your credit utilization ratio and keeping it as low as possible, you can protect your credit score. And you won’t have to worry about remembering the date when your credit information will be reported.

To calculate the credit utilization ratio for an individual credit card, you can take your credit card balance and divide that number by your credit line. Then multiply that number by 100.

Credit reporting bureaus also consider your overall credit utilization ratio. If you have multiple credit accounts, that’s equal to the sum of all of your credit card balances divided by your total credit limit.

Related Article: How Your Credit Card Utilization Can Affect Your Score

Bottom Line

Trying to figure out the best time to pay off your credit card? To avoid paying interest and late fees, you’ll need to pay your bill by the due date. But if you want to improve your credit score, the best time to make a payment is probably before your statement closing date, whenever your debt-to-credit ratio begins to climb too high.

Update: If you want some help getting your budget in order, you might want to work with a financial advisor. So many people reached out to us looking for tax and long-term financial planning help, we started our own matching service to help you find a financial advisor. The SmartAdvisor matching toolcan help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and your goals. Then the program will narrow down your options to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

Photo credit: ©iStock.com/sturti, ©iStock.com/YinYang, ©iStock.com/sturti

Amanda Dixon Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.
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