Most people know the dangers of credit card debt. If you don’t pay your credit card bill on time, you may end up buried in a mountain of debt that can wreak havoc on your financial health. The key to responsible credit card use, therefore, is to pay your bill in a timely fashion. However, making your payments well before the due date may be even better in many cases, as doing this offers many advantages to a cardholder. This strategy can help you shave off a few dollars in finance charges and reduce your interest rates. The bottom line is that timing is everything for some credit card payments.
Does Paying Off Credit Card Bills Early Help?
Paying off credit card bills on time is one of the best ways to stay out of debt and improve your credit rating. It’s also a good way to avoid late fees and interest charges. What about making early credit card payments? Can this help you save money on interest and avoid penalties?
Nowadays it is easy to pay credit card bills on time. All you have to do is to turn on your computer and access your online banking account. However, this doesn’t mean that bills are always paid on time. Lack of funds, computer problems or just plain old forgetting can prevent you from making timely payments. This looks bad on your credit report and inevitably leads to your having to pay hefty late fees. Thus, it is recommended to make early credit card payments or pay your balance in full. Early payments prevent late penalty charges.
Pay Your Credit Card Bill Early and Save
Customers are charged interest on all purchases they make using credit cards that are not immediately paid off. Making early repayments prevent further interest from accruing on your credit card debt. This won’t save you a fortune each month, but the savings do add up. Every early payment you make saves you some money in interest.
When you pay off your credit card balance early, you don’t have to worry about remembering to pay your bill at the end of the month. You don’t even have to wait around for the lender to send you a bill. The less time you are carrying a balance on your credit card, the less time you will be paying that huge interest rate.
When you make a payment or how many times a month you make payments is not going to directly affect your credit score. Early payments, however, may reduce the reported balance, which can help raise your score. And the higher the score, the more likely you are to get low interest rates and receive credit in the future. Making payments early is also a great way to show lenders that you can manage your funds effectively.
If you are considering paying your credit card bill early, check your loan contract to see if there are any prepayment penalties. Auto loan and home loan lenders sometimes include these penalties to offset the interest they will lose if borrowers pay off their balance before the due date.
Keep in mind that the credit card company can cancel your account if you don’t make any purchases after paying off your balance. This can hurt your credit rating by lowering the age of your oldest account. That aside, paying your credit card bill early should be part of a general program you undertake to get rid of debt and save money in the long run.