Getting your first U.S. credit card is an important financial milestone. While the perks of using a credit card are many, one important aspect that is often overlooked is the perks of paying your credit card bills on time.
More often than not, you might feel tempted to postpone or even completely miss out on paying your credit card bill for a few days, particularly when you're low on cash or have a slew of other bills due. This is why being aware of the consequences is just the push you need to ensure your credit card bills are paid on time. Just brush those thoughts aside and rather, consider the perks of making timely payments.
Improve Your Credit Score
Your credit score is also dependent on whether your credit card bill payments are made on time. While we understand the positive impact your credit score will have if you consistently pay your credit card bills on time, it is also imperative to understand the consequences.
- Avoid High Insurance Premiums
Most insurance companies in the U.S. factor in your money habits during the assessment of your risk. A dip in your credit score could prevent you from getting the lowest possible rate when it comes to insurance premiums.
- Lack of Career Opportunities
In most states in the U.S., your future employers are allowed to access credit reports (with your permission) to make hiring decisions. Good credit habits will ensure there are no roadblocks, especially in your career.
- Possible Problems Renting an Apartment
With a low credit score, you’ll face a tough time renting an apartment in the U.S. Most landlords actually do a credit check before signing a new lease.
Pro-Tip: If all variables are in your favor, the time taken to improve your credit score (>750) could be faster.
Credit Utilization Ratio And Its Impact
Your credit utilization ratio is the amount you owe compared to how much credit you have available. So, if your credit card has a $5000 limit and your outstanding balance is $1500, your credit utilization is 30%. Utilization greatly impacts your credit score.
An optimal utilization is beneficial. Your balance is notified to the credit bureaus on a certain day each month, and, as mentioned, that's not necessarily your due date. So regardless of when your bill is actually due, make your credit card bill payments when your utilization rate is closer to the threshold (30%).
Pro-Tip: This does not mean you can't use >30%, even if your credit utilization is higher, paying full balance on time will help balance the impact.
The Best Time To Pay Your Credit Card Bill
The due date isn't always the only possibility for making your payments. It is best advised to make your payments even earlier than your due date. You also have the option to make multiple payments each month. So, do yourself a favor and make a payment whenever your credit utilization gets close to 30%.
Pro-Tip: If you’ve chosen auto-debit or ACH, don't wait for the due date to deposit money in the bank account given for auto-debit or ACH. Deposit the money well ahead in advance, preferably a day prior. This is important because sometimes the clearing house may present the debit request in the morning hours itself and dishonored payment fees can be avoided.
Why It’s Worth Paying Early
The due date of your credit card simply signifies that a billing cycle has ended and it’s time to make the payment. The due date is not necessarily when your current balance will be notified to the credit bureaus. That's why you can actually benefit from paying your bill well ahead of time.
Pro-Tip: Zolve score which comes with its host of benefits, considers this positive behavior
Paying Early Also Cuts Interest
Ideally, we suggest you pay your credit card balance in full every month. Whenever you pay your balance completely with each billing cycle, you never get charged interest. At the very least, if you do have to carry forward a balance from month to month, making payments early can significantly reduce your interest amount.
Pro-Tip: There are no restrictions on multiple small payments, however small it may be.
Realize The Power Of Automating Your Bills
Using the auto-debit feature, you can automate your credit card bill payments on a predetermined date every month. By doing this, you are scheduling a recurring payment that automatically debits the amount due for the month, as per your credit card bill. A practice that can save you from the worry of remembering due dates and the headache of missing a payment. This will ensure no payment ever gets overlooked.
By doing this, you are scheduling a recurring payment that automatically debits the amount due for the month, as per your credit card bill.
Pro-Tip: Avail amazing benefits for auto-debit sign up with Zolve U.S. account. More details coming soon.
Avoid Late Fees
When your credit card payment is not done before the due date, a late fee is charged. Avoid late fees by making your credit card payment on time. Pay your credit card bill before the due date to ensure you don’t miss out on the payment cutoff time.
Pro-Tip: Clearing late fees along with the bill helps any interest accrual on it. It’s a good practice to clear all charges, in case you missed a payment.
The Key Takeaway
Ensure your credit card bill payments are made on time, if not well ahead in advance. If you use your card for daily expenses every month, consider early payments or multiple payments every month. This will keep your credit utilization in check and your credit score healthy.