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Practices & tips for paying your credit card bill & increasing your score



Paying off your credit card bill should be pretty simple: pay at least the minimum amount each month & you will be in the clear right?


Eh…


Depending on who you ask.. 😬


In my opinion there are a few other things you should know & consider.


First of all, it’s important to know how to pay your credit card bill in order to avoid interest fees and establish a positive credit history. *Remember, payment history makes up 35% of your score & length of credit history makes up 15% - being up to par in these areas can result in an increased credit score* 🧠📝


It's important you understand a few of the terms you may see on your statement.


Names & formats will vary depending on the lender, but each statement will have the same basics:

  1. Statement balance: The amount due for the current statement period - sometimes called the new balance or outstanding balance.

  2. Minimum payment warning: Most of my credit card bills don’t show this but some do so - this shows you how long it would take you to pay off your current balance if you only made minimum payments + it usually shows what the interest would be like.

  3. Minimum payment due: This is the lowest amount you can pay before the due date. It’s either a fixed amount or a percentage of the balance, it’s based on your credit card terms.

  4. Account summary: Shows you the overall details of how the current balance was calculated—it starts with the previous month’s balance, subtracts recent payments & credits & then it adds purchases, interest charges & fees.

  5. Payment due date: If the minimum payment isn’t made by this listed date, you will be charged a late fee.

You should also see all the payments & credits you’ve made along with new purchases made during the billing period, fees, interest charges & any rewards or perks you may have.


Depending on your goals & your current financial standing you may want to set up automatic payments so you never miss a payment. One late payment can cost you up to 100 points - I’ve seen it happen with one of my clients.



Ways to pay your credit card bill

  1. Online bill pay: Most credit card lenders will let you link your bank account in order to pay your bill online.

  2. Money transfer: Some lenders will allow you to wire transfer money in order to pay your bill. Most of the time there will be a fee, some cards will offer free transfers - check your terms or call your credit card company and ask them what the fee is, if any.

  3. Cash or check: You might be able to pay your credit card bill in person at a local bank or credit union or even might be able to mail a check to pay your bill.

  4. ACH check: You’ll need to get your bank account & routing numbers which you can do online or over the phone.

Any of these payment methods are fine methods to use, it’s all about what your credit card issuer accepts and what works best for you.


When you decide on a payment method, it’s wise to put a recurring reminder on your calendar, set up automatic payments or set up reminders on your phones Reminder app or your banking app.💡


When to pay your credit card bill


By the deadline would be a great idea. Lol, aside from that obvious answer, you do have a little bit of leeway in terms of when you pay off your credit card bill.


First and foremost, I highly recommend that you pay the full statement by the payment due date for multiple reasons: 1, it has a positive impact on your credit score, 2, it shows lenders that you can borrow money responsibly, 3, it helps you stay away from financial stress racking up high credit card balances can bring.


It’s also good to allow time for your payment to process, so think about paying a few days before the statement date. Paying before the statement date also keeps your utilization looking low to lenders & it can also have a positive impact on your credit score being that utilization makes up 30% of your credit score. 🧠📝


Although I recommend you pay your full statement by it’s due date, it’s not required that you pay the entire balance right away.


Typically—but not always—credit cards have a grace period, which is the time between your billing cycle’s completion & your statement’s due date.


During this period, you will not accrue interest on the purchases you made during the previous billing cycle.


Making minimum payments is a cool option if you use a card with a zero percent APR (annual percentage rate) offer. You’ll still need to make the minimum payments each month to avoid late fees, you’ll have more time before they charge interest.


Paying your credit card bill early


Some people like to pay off their accounts early before the statements are even made, meaning that when the bank produces the statement, it will show a $0 balance.


If your target is to improve your credit score, paying early can help you lower your overall credit utilization.


Carrying a balance


A common misconception is that carrying a balance from month to month will help you build credit, but that isn’t true. 👇🏾


What helps you build credit is keeping your utilization below 15% & paying your bills on time. Most will tell you 30% utilization is key but this blog tells you why they're wrong.


Contrary to what I might do for myself from time to time, I actually recommend you avoid carrying over a monthly balance and instead try to pay in full to avoid interest charges. 🧠📝


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