RP Funding Credit Corner: How Paying Your Credit Card Bill on Time Saves You Money


Although many people believe that in order to build credit, you need to carry over a balance from month to month on your credit cards, that’s not the case. In fact, doing so can actually cause great harm to your credit score. Additionally, carrying over a balance each month means more charges in interest and more money out of your pocket.

When is the best time to pay your credit card bill?

Robert Palmer CEO of RP Funding weighs in: The correct way to increase your credit score is to pay your bill each month and pay it on time. But at what point in each month is the best time to take charge of your finances and pay your bill? The answer, at the very least, is that you should pay your bill on it’s due date. Not paying your bill on it’s due date can come with large consequences, such as late fees.

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Fortunately, the late fee can be as low as $25-$35 over month— but in the end, it can add up really quickly. Let’s put your late fee into perspective. Say you have only made four late payments throughout the year. If you multiply $25 by four, you’re looking at $100. Keep this up for the next 5 years and you’ve already spent $500 in late fees!

“So what you’re saying is that I should just maintain my payment on the due date?” Yes and no. Yes, we believe that paying your bill on it’s due date is a good choice. However, there could be a better reason to pay your bill before it’s actually due.

The benefits of paying your credit card bill before it’s due date

Clients at RP Funding are always asking for tips to improve their credit score.

Let’s start by noting that the main reason for your billing due date is to signify that the billing cycle has ended for that month and it’s time to pay the piper. Be that as it may, your due date is simply a due date and does not necessarily mean that this is when your balance will be reported to the credit bureaus.

In fact, most of the major credit card issuers report your balance to the credit bureaus on a certain day each month, and we never know when that is. According to Nerdwallet, if your issuer reported a $5,000 balance on the 15th day of the month, the credit bureaus would see a 50% utilization ratio – even if you were planning to pay it off in full the very next day. Your credit score could end up getting dinged, even though your payment habits are solid.” In this case, it may make more sense for you to pay your credit card bill before the scheduled due date so that your credit report will reflect a lower credit utilization.

Let’s take a step back to explain how your credit utilization plays a role in your credit score. Credit utilization ratio is the amount you owe on your card in relation to how much credit you have available. For example, you have a card with a limit of $5000 and your outstanding balance is $2500. Your credit utilization would be 50%. The thing is, using more than 30% of your available credit usually hits your credit score and can lower it, so it’s very wise to stay below that 30% threshold.

Overall, a good rule of thumb when making a credit card payment is to make a payment whenever your credit utilization ratio starts to rise to that 30% mark, regardless of when your bill is actually due. By monitoring your credit utilization, you’ll be more likely to get reported with a lower threshold and you’ll watch that credit score increase in no time.