How and When to Pay Your Credit Card Bill

It is an urban legend that you need to carry a balance on your card from month to month in order to build your credit score. So much so, in fact, that thousands of people search every month to answer the question, “Is paying off your credit cards in full bad?” The truth is the opposite: Paying your card’s full statement balance each month has a positive impact on your credit, since it lowers your credit utilization rate and demonstrates to lenders that you borrow money responsibly and pay it back reliably. ²

Another myth is that if you pay the minimum payment due each month you’re good to go and won’t incur extra charges. True, if you fail to pay your card’s minimum payment for a given month you will have defaulted on your agreement with the lender and will be charged a late fee—$36 on average, according to U.S. News & World Report.³ In addition, your annual percentage rate (APR) could rise and the credit card company will likely report the missed payment to the credit bureaus, which could damage your credit rating.

That doesn’t mean, however, that all is good if you pay the minimum.

There’s a cost to paying only the minimum. One friend of mine had a credit card statement balance of $5,250 for August 2019, with a minimum payment of $79. According to a credit card payment calculator, if he only ever paid the minimum, and never made another purchase, it would take more than 30 years to pay off that balance! Shockingly, it would cost him more than $24,000, in total, due to compounding interest over all those years.⁴

A good practice when paying your credit card bill each month is to pay your full outstanding balance on or before the due date. Busy jobs, families, social lives and all the day-to-day distractions that go with them make it easy to lose track of a due date or forget to make a payment. This is especially true for people with more than one credit card. Here are three tips to help you make sure this doesn’t happen to you⁵:

1. Use autopay for your credit card bills. Setting up automatic payments can help take the worry out of missing a payment. You just have to make sure you have enough in the bank to cover your payments.
2. Set up text or email alerts. If you are more hands-on and prefer to review your credit card bill before paying it, this is a good alternative. Some card companies have mobile apps in which you can set notifications that give you a weekly snapshot of spending as well as payment reminders, statement ready reminders, bill due reminders, and more.
3. Request the same payment date for all cards. If you have more than one credit card, this can make your life easier, since you won’t have to keep track of multiple payment dates. You can generally arrange this by either calling your card issuer or making the request online. Of course, there’s no guarantee you will receive the exact date you request.

Most major credit card companies offer automatic payment options, which allow the card company to debit your bank account on a set date and for a set amount each month. There are generally three ways to do this:⁶

1. Pay the minimum due. This is a basic safety measure that will ensure you never miss a payment. It’s especially useful if you want to review your bills each month before paying them manually, but worry that you might overlook a deadline.
2. Pay the full balance on your card. If you maintain a large enough balance in your bank account to cover your monthly expenses, this approach can help you save money on interest.
3. Pay a fixed amount. This can be a useful strategy if you’ve stopped using a credit card and want to pay down the balance by making regular payments that are greater than the minimum due each month.

In fact, some experts recommend paying off a portion or all of your balance early, before the monthly due date, as this helps lower your credit utilization rate. Some people even pay their credit card bill twice a month, in the middle and at the end of their monthly cycles, in order to keep that utilization rate as low as possible. If you plan on paying your monthly balance in full each month and are looking to improve your credit score, one of these approaches can be a good way to go.⁷