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FAQ: When Should I Pay My Credit Card Bill?

Timing the payment of your credit card bill could potentially help you build your credit and save money on interest charges.

Chris Scott

Contributing Writer at Tally

February 8, 2022

If you’re fortunate enough to be able to pay your credit card bill in full, you may be wondering when the best time is to make the payment. The answer can be a bit tricky as it’s important to consider your personal financial situation and your monetary goals. 

If you’ve ever wondered when you should pay your credit card bill, you’re in luck. We’ll answer that question and more. By the end of this article, you should have a better understanding of the strategies involved in paying off your credit card balances. 

How do credit card bills work? 

When you open a new account with a credit card company, you will have a predefined billing cycle. This cycle typically lasts 30 days. You can make transactions and payments during this time without consequence. At the end of the billing cycle, you’ll receive a monthly statement. Your statement formalizes your outstanding balance from the last 30 days. 

For instance, let’s say that you make three purchases, charging $250 on your card for each. You pay off $150 during your billing cycle. At the end of your billing cycle, you have a $600 balance. 

In addition to the statement balance, your statement will list a payment due date and minimum payment required. You have until the due date to make a payment. The time between the end date of your billing cycle and your due date is known as a grace period. 

By your due date, one of three things will have occurred: 

  1. You will have paid the full statement balance and avoided all interest charges. 

  2. You will have made at least the minimum payment but still have an outstanding balance. You will be charged interest on this outstanding balance.

  3. You will have made less than the minimum payment, so you’ll likely be charged a penalty and late fees. You’ll also be charged interest on the outstanding balance. 

In these scenarios, the amount of interest you’d be charged depends on your credit card issuer and the terms of your agreement. Credit card interest rates are generally pretty high. The interest also compounds, which means that paying off the balance becomes more and more challenging every day. 

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When should I pay my credit card bill? 

Based on the information above, there is an obvious answer to the question “When should I pay my credit card bill?”: No later than the due date. If you don’t pay your balance in full by the due date, you’ll be charged interest. And, as mentioned, if you make a late payment, you’ll be assessed penalties. 

In summary, it’s wise to pay your entire balance in full no later than your payment due date. Doing so will help you avoid credit card debt. It will also establish a strong monthly payment history, which will eventually show up on your credit report and influence your credit score. 

If you struggle with money management, you may want to consider setting up automatic payments from your bank account. Many lenders now allow cardholders to set up autopay to ensure balances are paid in full and on time. However, you need to make sure that you have enough money in your checking account to cover your outstanding balances. 

Having said that, there can also be some strategy involved in paying off your balance, especially if you are looking to build credit. 

How can I build credit when paying off my credit card? 

If you are looking to build credit with a credit card, there are two things you’ll want to consider: 

  1. Your statement date

  2. Your credit utilization ratio

As we mentioned, your statement date is the date when your balance becomes “official” for the previous billing cycle. If you were to pay off your current balance before your statement closing date, then your statement would reflect a $0 balance when it’s issued. 

Your credit card company subsequently reports a $0 balance to the three major credit bureaus — Experian, Equifax and TransUnion. The credit bureaus would see this as you not using the credit card account even though you are. Thus, your credit report is not benefiting from you paying your credit card bill early. 

To sum it up, in order to get credit for making a payment, you need to wait until a statement is issued and it becomes an official balance. Paying off your credit card early — i.e., during a current billing cycle, before you receive your statement — demonstrates tremendous fiscal responsibility, but it doesn’t directly help you build good credit. 

The second thing you need to consider is your credit utilization ratio. This ratio indicates how much of your total credit limit you’re using. For instance, let's say that you have three credit cards with the following limits: 

  • $5,000

  • $3,000

  • $2,000

Your total available credit is $10,000. Now, let’s say that you put $2,000 worth of charges on one of your cards. Your credit utilization ratio would be 20%, since $2,000 is 20% of $10,000. 

Many financial experts recommend that you keep your utilization rate below 30% if you wish to build credit — and keeping it in the single digits could be even better, as long as it’s above 0%. Similar to the above scenario, a 0% credit utilization rate would lead the credit bureaus to believe that you’re not using your credit card. 

Remember that balances are not official before they hit your credit card statement. Let’s say, for instance, that you put $5,000 worth of charges on your cards during a billing cycle. If this information were to be reported to the credit card bureaus, your credit card utilization rate would be 50%, which might harm your credit report. 

You can time your credit card payments to create a lower credit utilization rate to try to maximize the growth of your credit score. Remember it’s a good idea to carry a balance at your statement closing date, but ideally, you want the total of all of your balances to be less than 10% of your total credit limit. 

In the example above, you could pay a portion of your outstanding balance — about $4,000 — before the end of your billing cycle in order to reduce your credit utilization rate to 10%. 

This may seem like a lot of work, but it’s a step that could potentially help you build your credit. A strategy like the 15/3 credit card payoff hack could help keep you on track. 

Paying off your credit card balances is great financial management 

Using a credit card can be tempting. You have access to borrowed money, allowing you to make large purchases even if you do not have the money in the bank to do so. However, poor credit card management can catch up with you if you’re not careful. Credit card interest is typically high and also compounds, which means you can quickly fall into debt. 

When should I pay my credit card bill? The answer, in short, is that you want to pay it in full by your due date. Doing this can prevent you from being charged interest or late fees. But if you’re looking for ways to build credit, you can consider timing your payments to maximize the potential growth of your credit score. 

If you need help making on-time payments, be sure to consider Tally†. Tally is a credit card payoff app offering a lower-interest line of credit that can help you manage due dates and pay off existing debt efficiently. 

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.