- Paying your credit card bill before the due date allows you to save money in interest over time. Credit card companies calculate interest according to your average daily balance, and interest compounds daily. Paying your bills early decreases the amount of your average daily balance and consequently lowers the amount you pay in interest. The savings in interest payments are small but add up over time. Individuals with high credit card interest rates see the biggest savings. Saving money in interest allows you to pay off your debt more quickly.
- You reduce the chance of incurring a late fee when you pay your credit card bills early. Paying your bills early gives you enough time to recover from any incident that may cause the credit card company to receive your payment late. Late fees can run as high as $35 per occurrence. Avoiding these charges allows you to pay your debt off faster or keep extra money in your pocket.
- Marcia Passos Duffy of Bankrate.com suggests that consumers who cannot pay their bills in one lump sum payment should make several micro-payments before the due date. A micro-payment is your monthly payment divided into smaller portions. For example, instead of sending in a $100 monthly payment by the due date, you can divide your monthly payment into two $50 payments and send the portions in early. The advantage of sending micro-payments is the ability to handle larger payments in smaller, more manageable amounts.
- When paying credit cards in advance, especially micro-payments, you should request that the payment be immediately applied to your principal . Without special instructions, some companies may hold the payment until your due date thus providing little advantage besides avoiding late fees. Keep track of your payments so you know exactly how much you paid, what bill cycle your payments are applied to and your remaining credit card balance.
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