Why Do You Need to Pay Your Credit Card Bills Before the Due Date?
While most people understand why they should avoid paying their credit card bills after the due date, only a handful knows that paying their credit card bills early can actually help them save money. Here are some reasons why this can be one of the wisest financial moves you can ever make.
It can help reduce your interest charges. By carrying a balance on your credit card account, you accumulate interest charges based on your daily balance each and every day. However, by making a payment before the due date, you can lower your average daily balance and reduce your interest charges considerably. You can save even more if you pay the full statement balance before payment is due since you wouldn’t have to pay any interest charges.
In addition, it can also help you avoid late payment charges. Under the Credit Card Act of 2009, late charges are capped at $25 but you can expect to be charged more if you exceed your spending limits.
And since you only earn a little interest by keeping your money in your savings or current account and pay significantly more for the interest charges in your credit card, paying your bills early really makes a lot of sense.
It can free up your line of credit. If you are planning to make a large purchase, consider paying your credit card bills earlier to ensure that you can get all of your other charges approved. Remember, making large purchases can quickly use up your credit limit. And since the typical statement period takes about 30 days and that the grace period can be anywhere from 21 to 25 days, this may leave you with less credit line available before your next payment is due. To avoid putting yourself in such situation, make sure your pay your credit card bills even before payment is due.
It can do wonders for your credit score. While missing payment for one or two months would not affect your credit score considerably, missing several payments for one or two months can be a cause for alarm. However, if you pay off your balance (or even a portion of your balance) before the statement cycle closes, you can reduce your debt-to-credit ratio and improve your credit score.
There are a lot of good reasons why you should consider paying your credit card bills before the due date. Maybe it’s about time you consider it.