The saying “timing is everything” definitely applies to your credit card payment. Late payments come with quite a few consequences you should avoid if possible. Not only will you incur late fees if you pay past your due date, but you also risk damaging your credit and having your interest rate increased to the highest penalty rate.
The timing of your credit card payment—even when you pay on time—can also impact the amount of interest you pay when you carry a balance. Paying earlier in the billing cycle can reduce the amount of interest you pay and boost your credit score in some cases. If you're trying to decide the best time to make your credit card payment, here are some guidelines.
1. Before the Due Date
Making at least the minimum payment before the cutoff time on the due date will keep your account in good standing and help you avoid late payment penalties. Missing your credit card payment, even by just a few minutes will result in at least a late fee.
You may also trigger the penalty rate if your account becomes 60 days past due. That is, if you miss two payments in a row. Late payments can also cause you to lose a promotional interest rate or forfeit any rewards you’ve earned.
If you’re trying to make a last-minute credit card payment, you can pay online or by phone as long as you make your payment by the cutoff time.
There may be a fee for making an expedited payment over the phone but it will typically be lower than the late fee and you’ll avoid other late payment penalties.
2. Before the Account Statement Closing Date
To ensure a lower credit card balance is reported to the credit bureaus in the current month, make your credit card payment before the account statement closing date. Having a high credit card balance updated on your credit report can raise your credit utilization and cost you credit score points. Having the best possible credit score is important if you’re planning to apply for a major loan, like a mortgage or car loan, before your next account statement closing date rolls around.
Otherwise, you can ensure a lower balance is reported to the credit bureaus by first paying off your credit card. Then, once you've lowered your balance, avoid making any new credit card purchases before your next statement closing date.
3. Early in the Billing Cycle
Your due date may fall later in the billing cycle, but paying your credit card early in the billing cycle can reduce the amount of your finance charge, especially if you don’t make any other purchases during the billing cycle. Here’s why: your credit card issuer likely uses either the daily balance or average daily balance method to calculate your finance charge. In both cases, having a lower balance for more days in the month will result in a lower finance charge.
You can find your account statement closing date and number of days in your credit card's billing cycle on your credit card statement.
4. When Your Direct Deposit Hits
Making your credit card payment right after you get paid ensures you can afford the payment and reduces the likelihood that you’ll have a returned payment—an infraction that can lead to a fee.
You can send your payment even if your payment isn't due for several days for peace of mind knowing your payment is covered. Before sending your payment, review your other bills to be sure you’re not trying to pay too much from one paycheck. If you’re paid weekly or bi-monthly, you may be able to postpone some credit card payments until your next paycheck.
5. Before Making a Large Purchase
Putting a big purchase on your credit card when you already have a balance can raise your credit utilization and hurt your credit score. Paying down your balance before making big purchases can keep your credit utilization from spiking and protect your credit score from a dip.
There are benefits to paying your credit card at earlier times in the billing cycle, but the most important thing of all is to make your credit card payment on time.