Money Management

Why It’s Good to Pay Your Credit Card Bill Early

pay off credit card

Regular readers of financial blogs know that failing to pay a credit card bill in full is not the smartest thing you can do for your financial health. Even if you pay your credit card bill in full each month, there are benefits that you may not know about if you pay your credit card bill early. While you might not think it makes sense because you can invest the money on your own prior to paying off the bill each month, you should read on to discover the reasons you might want to pay your bills early.

1. Improve Your Credit Score

You may think you understand how credit cards work, and how they can affect your credit score, but credit scores are very complex and you may not know that by paying your bill early you can actually give your score a noticeable bump. Credit card companies report your score to the credit bureaus on the same day each month. This date might not line up with the date that you pay your bill and so each month your card company is reporting that you have an outstanding balance. When you pay your bill early, or make several payments in a month you are keeping your outstanding balance low and as a result the amount of credit being utilized that is reported to the bureaus is lower. Since one of the biggest factors in the calculation to determine your credit score is your overall credit utilization, this is a sure way to improve your score quickly.

2. Free Up Your Credit Line

As you know, your available credit is a huge determining factor in whether or not you make that big purchase on your card or use cash or a check. When I am about to make a big purchase I always make sure to look at my credit cards and figure out which one has the best rewards or points for the type of purchase I’m going to make so I can maximize my return on points or cash back. Once I have chosen my card then I go and pay down as much of the outstanding balance as I can so that I can take full advantage of my available credit and then the payment period before interest kicks in.

3. Avoid High Interest Charges

If you are prone to carrying a balance on your credit card then you are accruing expensive interest and fees. When interest rates range from 10%-30% or more you can be taking a huge amount of losses for every day you don’t pay your bill down. Now that you know you can pay earlier than your due date and can even make more frequent payments it makes sense to pay money towards your bill whenever possible. The sooner you get out of credit card debt the sooner you’ll be able to start saving your money in better places and get back on the road to financial health.