A Better Way to Pay Your Credit Card

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First, a few questions:

Do you know your credit card’s closing date?

Do you know your card’s minimum payment due?

Have you heard about the “grace period” for your credit card payments?

If you answered “no” to any of the above questions, this story’s for you. (Even if you answered “yes,” it’s a good refresher.) And if you do have debt to pay down, or are looking to improve your credit score, we have helpful tips for you, too.

First, there are several different dates and numbers you should keep in mind when it comes to managing those little pieces of plastic in your wallet. We’ll tell you what you need to pay attention to:

1. Know Your Billing Period

Each month, a new billing period will start on your credit card, but not typically on the first on the month. Let’s say your credit card has a billing period that begins on the 25th of one month and ends the 24th day of the next month. Any transactions that post during this 25th-to-24th timeframe will be reflected on your bill for that month.

2. Understand Your Closing Date

Your credit card statement closing date wraps up your bill for that month–any transaction posted after the closing date will go on your next statement. Your card’s closing date can be located on your monthly statement.

RELATED: My Quest for the Perfect Credit Score

Let’s take the same example above of the card with a billing period of the 25th to the 24th. The closing date for that card is the 24th day of the month–the last day of the billing cycle. The balance on the card as of that date is the one that’s reported to the credit bureaus and reflected in your credit reports.

Your credit card utilization rate is also reported at this time. We’ll talk more about that in a minute.

3. Don’t Forget Your Payment Due Date

Most credit card issuers will send you reminders to pay your bill so you won’t miss your payment due date. You can also use LearnVest’s Money Center or Credit Karma’s account monitoring to set up reminders. If you miss a credit card payment or make a late payment, it can damage your credit score and cost you in interest charges.

  • Scondor

    Now that you know what they are, don’t even bother with knowing when your statement dates and due dates are. Don’t conform to credit card company schedules, they are designed so you start thinking “Oh I have another month…” And soon enough you will have another month…of payments and interest charges. Don’t play with fire, just keep it simple – if you get paid biweekly or semi-monthly, pay your credit card(s) in full every time you get paid. If you can’t behave this way about 10 out of 12 months, then credit cards will soon become your very powerful enemy.

    • Shawn Neil

      Excellent strategy especially those of us that use cards for all expenses for rewards and points. Higher expense months can really ding your debt ratios if you don’t pay the balance before the closing date. But if you use this strategy, your ratios will remain intact.

  • Deb T

    I find it helpful to write my due dates (in order) for all of my bills on a post it note that I put on my computer monitor. I check the off as I pay them. As I near the end of the month I make a new one for the next month. If a non-monthly bill such as Life Insurance comes in I add it immediately (even if it is for the next month, just to have it in front of me) so that I don’t forget about it. This way I don’t need to worry and always know what’s been paid and what hasn’t.

    • http://www.styleaesthetic.com Bethy Hardeman

      Sounds like you’ve found a system that works well for you – awesome!

    • J. Lee

      I have been doing the exact same thing (but in a notebook because I’m so old-school) and it’s worked out best! No late fees for meeee.

  • BoomerangRetiree

    From my experience, I think you are mistaken about two things: 1) a credit utilization rate up to 30% is acceptable, and 2) paying before the statement closing date is not important to your FICO score.

    I have three credit cards with a total limit of $35,500 and I subscribe to myfico.com to help me monitor my credit score. Before I retired in April 2013, I ran up total monthly balances of $1,600 (4.5% utilization) and each month when the bills came, I always paid off the full balances. I had no accounts other than those credit cards on my report, and my FICO score from Equifax was 766. The analysis on myfico.com told me that a high revolving credit card balance was hurting my score and that my score could improve if I lowered my revolving balance.

    After I retired, my total monthly credit card charges went down to $1,100 (3.1% utilization). I paid the full balances each month the day my statements posted online. My FICO score went up to 788–still below the 800 I want before I start looking for a condo (I’m now renting). The analysis on myfico.com still mentioned a high revolving credit card balance.

    This past December, quite by accident, I paid my full balances before my statements posted–the statement closing dates fell on a weekend so I made my payments the Thursday before the closing dates. The next week I got an alert from myfico.com that my revolving balance had gone from $1,100 to zero and that my FICO score had gone up to 809.

    So it took not a 30% or 3%, but a zero utilization rate, to bring my credit score above 800. From now on, I’ll remember to pay off my credit cards online three days before the closing dates to make sure the payments post before closing and the balances reported to the credit bureaus are zero.

    I still might have problems getting a condo because mortgage lenders look at debt-to-income ratio as well as credit scores. I don’t know how they calculate income for a retiree living on investments and I don’t know whether they’ll interpret the zero credit utilization as zero debt. But I’m pretty sure a credit score in the 800s will help.

    • http://www.styleaesthetic.com Bethy Hardeman

      Really interesting! it’s always cool to see how small actions/behaviors can influence your credit score. From my experience, I’ve seen that reducing my credit card utilization to zero has a negative impact on my credit, so this may be an individual-basis thing.

      Also, from a statistics standpoint, out of all Credit Karma members, on average those with a credit utilization rate of 0% have a lower credit score. Correlation, not causation, but still an interesting metric to note.

      Awesome that you pushed your score past 800, but I’m curious if you’re able to get any better rates at 800+ than at 788, especially considering creditors will likely check a different score.

  • 2deuces

    To avoid Penalties, I set up an automatic payment from my bank for an amount that will cover any minimum charge. This way, even my bill gets lost in the mail, I will avoid Penalty Charges and late fees (but not Finance Charges if I don’t pay the bill in full).

    I have also always refused the “convenience” of electronic bills. I like to have my monthly bills delivered in paper form so I don’t forget them.

  • nicole golomb

    I have a question I opened a secure credit card and have been paying the minimum due balance every time but now my credit score went down why. I spoke with a mortgage company and that is what they told me to due but now it hurt my score even more.

    • richard mccourt

      You should never charge more than 30% of your credit card amt. Example if the card had a 300 limit never charge over 100 on it. You will find that advice everywhere. Now as for paying the balance you should either pay it in full every month or leave only a small amt but never just pay the min amt due unless you have no choice but that is why your score went down I am sure.

      • guest

        Thank you, that’s something I didn’t know or chose to ignore