Wednesday, February 1, 2023

How To Know When To Pay Credit Card

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What Is A Cash Advance

CREDIT CARDS 101: When To Pay Credit Card Bill To Increase Credit Score

Credit issuers provide individuals with the option to take a cash advance out against their line of credit. This cash-now loan is different from a normal credit card purchase, and it likely is subject to an entirely different interest rate. On average, youll pay about 24% for the cash advance, which is 9% higher than the average APR. Keep in mind the amount you borrow will contribute to what you owe at the end of each billing cycle related to your monthly balance.

Cash advances can be seen as a riskier way to pay off another credit card compared to balance transfers. As with researching balance transfers, do the math before you commit to a cash advance with your credit issuer. It may not be worth it to take out cash on a 24% interest rate in order to pay off another credit card. Its also important, however, to be aware of all the pros and cons

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Reading Your Credit Card Statement

Each month, you’ll receive a statement showing your account activity. This statement includes:

  • Your total card balance
  • Purchases you made during that billing statement cycle
  • Minimum payment due
  • Payment due date

The minimum payment due is the smallest amount you have to pay for that month. But it’s always a good idea to pay more than the minimum if you can.

Your card statement will also tell you how much it will cost you to pay off the balance over time with interest. You can avoid interest charges on credit card balances by paying your bill in full during the grace period. A credit card grace period is a set time period, typically 20 to 30 days, that you have to pay off recent purchases before interest starts accruing.

If you don’t pay in full, interest begins to accrue. The amount of interest you pay is determined by your card’s annual percentage rate . The APR reflects the interest rate for the card, along with any fees the card charges, annualized as a percentage.

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Three Ways To Figure Out Your Credit Card Due Date

The best way to figure out when your credit card bill is due is to read your . Information about your credit card payment, including the minimum payment amount and the due date, will appear at the top of your statement and on the coupon that you include with your mailed credit card payment.

Your credit card statement must be mailed to you 21 days before your due date to give you a chance to take advantage of the grace period if it applies.

If youve to access your credit card account, you can also check your due date by logging in to verify the next payment due date. Once you’ve logged on, you can also schedule a future payment or make an immediate payment to be applied to your account right away.

Your third option is to call the customer service number on the back of your credit card to confirm your due date. Your credit card issuers automated menu may have an option to give your due date without you having to speak to a representative. Similar to checking your due date online, you may have the option to schedule or make a payment by phone using your checking account and routing number.

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How To Pay Off Credit Card Debt in 2020

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When To Pay Your Balance Early

While you’re required to make at least the minimum payment on your statement balance by the due date to keep your account current, you should always aim to pay it off in full each month.

However, that’s not always possible, especially now due to coronavirus-related layoffs and record unemployment rates.

As a result, you may carry a balance month-to-month. Depending on the size of your balance, this can cause you to incur thousands of dollars in interest charges if you only make the minimum payment. But if there’s a month that you have extra money left over after essential expenses, you should use it to pay your credit card bill early, rather than waiting until the due date.

When you pay the bill early, you save yourself some interest, says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report. Card issuers charge daily compounded interest , and it grows pretty quickly. Even if you pay just a few days early, you can knock off some of those charges and save.

Paying A Credit Card Bill Myth : Make The Minimum Payment

Another myth is that if you pay the minimum payment due each month youre good to go and wont incur extra charges. True, if you fail to pay your cards minimum payment for a given month you will have defaulted on your agreement with the lender and will be charged a late fee$36 on average, according to U.S. News & World Report.3 In addition, your annual percentage rate could rise and the credit card company will likely report the missed payment to the credit bureaus, which could damage your credit rating.

That doesnt mean, however, that all is good if you pay the minimum.

Theres a cost to paying only the minimum. One friend of mine had a credit card statement balance of $5,250 for August 2019, with a minimum payment of $79. According to a credit card payment calculator, if he only ever paid the minimum, and never made another purchase, it would take more than 30 years to pay off that balance! Shockingly, it would cost him more than $24,000, in total, due to compounding interest over all those years.4

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Chasing Credit Card Rewards

Credit card rewards are usually worth far less than the extra interest you’ll accrue if you can’t pay off the money you spend to earn those bonuses. You may, for example, receive one point for each dollar you spend, but you’ll probably need to redeem 5,000 points to get a $100 discount on a plane ticket. Since the interest charged on outstanding account balances often exceeds the typical 2% bonus, it may not be a worthwhile trade-off.

You should also avoid signing up for multiple credit cards, regardless of bonuses. If you already know you don’t manage credit cards well, don’t add temptation in the form of additional cards. It’s also easier to miss a payment deadline when you have more cards than you can manage. Remember, a few late fees or interest payments will quickly obliterate those sign-up gifts or rewards.

You can use your cards more frequently once you have your debt paid off and know how to avoid new debt. As long as you pay your balance in full and on time each month, there is nothing wrong with using credit cards instead of carrying cash or to take advantage of rewards like cash back or frequent flier miles. Just make sure those purchases fit within your monthly budget.

Getting Your Grace Period Back

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If youve carried a balance in a previous statement period, you may have temporarily lost your grace period. Many credit cards work this way. That means all new purchases start accruing interest immediately on the day theyre made.

If youve lost your grace period, youll usually need to pay off your entire outstanding balance down to $0 some time during your statement cycle. Check the terms of your card or call the phone number on the back of your card to get details about how you can get your grace period back if youve lost it. With most cards, youll only need to do this for one billing cycle, then you can go back to paying your statement balance in full on the due date to avoid interest and make the most of your grace period.

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When Should I Pay My Credit Card Bill

As weve noted above, we recommend that you always pay the full statement balance . If you cant afford the full statement balance, it is still very important to pay at least the minimum payment by the same due date. This makes it easier to stay out of credit card debt by avoiding expensive late fees.

can vary in how long they take to post a payment to your account, so for your first few payments, give yourself a few extra days of cushioning. If youre concerned about this, check with your specific bank to find out what counts as an on-time payment and how long payments typically take to post to your account.

How Interest Charges and Late Fees Work

If you only make the minimum payment on your card, you will be charged an interest fee . The reason why credit card debt can get so expensive so quickly is because of very high interest rates that can compound daily.

The daily average balance is a normal way that credit cards assess interest charges. This means that credit card interest applies to your average daily balance over the course of a billing period. Once you start carrying a balance on your card , you will start incurring interest expenses daily.

Bottom Line: If you carry a balance on your card, its very possible that the amount you incur finances charges on will be greater than your original balance. This happens if you start with a balance and continue to make purchases throughout the month.

Information About Your Account

This area of your statement will include common legal disclosures, calculation information, and instructions on how to deal with errors. Youll also learn really useful information, like how your payments are applied, details about reporting to credit bureaus, and how your balance is calculated.

Bottom Line: The information here doesnt typically change from month to month, but you may still find it useful to read through this once to familiarize yourself with your credit cards policies.

This section will also include ways to contact your card issuer if you have any questions or concerns.

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Cash Withdrawals Cost Money

With a debit card, there are no fees unless youre using a privately operated cash machine. If a fee is charged, youll be told how much youll be charged before you take the money out.

With credit cards, your card provider will charge you a minimum amount or a percentage of your cash withdrawal if you take money out from any type of cash machine.

You might not be told about this before you take out the money. Youll also start being charged interest by your card provider straight away, even if you pay it all off before your bill is due.

The same applies to other transactions that are treated as cash such as using a credit card to purchase foreign currency or gift cards, or for gambling transactions.

Its best to avoid taking out cash on a credit card.

When Card Issuers Report Your Balance To The Bureaus

First Credit Card Advice

Your credit card balance is reported to the at varying times throughout your billing cycle, depending on each lender. If you’re unsure when your balance will be reported to the bureaus, call your card issuer to ask the exact date, Harzog recommends.

“Very often, it’s the day after the closing date on your statement, but not always,” she says. “Find out when that is so you can strategically make your payments.”

The dates will probably differ based on the billing cycle for each card. Most lenders calculate your utilization rate based on your statement balance instead of the current balance.

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Convenience Fees Vs Credit Card Surcharges

You may be charged a convenience fee when you use a credit card but thats not the same as credit card surcharges. Each credit card brand has its own guidelines for convenience fees.

Surcharges are the fees that cover the cost of a card transaction. While convenience fees are charged for payment methods that a merchant doesnt usually accept. For example, a company might charge a convenience fee when you pay over the phone instead of online.

Making Minimum Payments On A Credit Card Will Cause Interest Rates To Climb Higher

This is the next big drawback to making minimum payments only. You feel like youve got more money because youre paying less a month and keep more in your pocket, right? What they dont tell you is that only works if you have a zero annual percentage rate agreement . Even if you got a zero percent deal when you started your card that probably only applied to certain purchase and probably lasted for a brief time. If you do have such a deal, stop making minimum payments immediately if you can. Pay off that debt entirely and you will pay no interest on it. Youll be glad you took care of it early and saved yourself so much money.

If your zero percent deal has expired, or if you never had one to begin with, lets look at how the interest rates climb when you make only minimum payment per month.

Interests charges add to your total debt amount. That means next month when the same minimum payment calculation is done, the one hundred sixty-eight dollars will make the next interest cost even higher. It doesnt take a math genius to see how this quickly gets higher and higher, and worse and worse. What looks like its saving you money each month is actually putting you further into debt, and you may end up needing to consider if something like debt settlement might be worth it for you eventually.

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When You Cant Pay In Full

In between the most and least ideal credit card payment amounts is the amount you can afford to pay toward your balance. Review your income and expenses and decide how much you can realistically put toward your balance without straining yourself financially. Anything above the minimum will help reduce your balance, allow you to pay less interest, and help you pay off your balance faster. The more you can pay toward your credit card balance, the better.

Find Out What Other Types Of Perks Are Available

When To Pay Credit Card Bill (INCREASE CREDIT SCORE!)

“Points are one thing, but perks are another,” Kelly said, adding that American Express has a purchase protection feature in which lost or stolen items are fully refunded, and most credit card companies have similar protections. There are also travel protection features available for missing bags or canceled flights.

Southwest Airlines just melted down last month,” Kelly said. “When your flight’s delayed or canceled, the airline does not owe you a hotel room. In the United States, the airlines owe you nothing except a refund if you miss a flight. So if you miss a cruise, if you all of a sudden have to pay for a hotel, the best way to get that covered is by using a credit card with purchased travel protections on it.”

Kelly said additional perks include access to exclusive events. “Each of the major loyalty programs are getting more and more into experiences,” so it’s easy to “use points to get access to events you can’t even buy,” such as attending the Grammys using Marriott points or attending golf tournaments.


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Eric is a duly licensed Independent Insurance Broker licensed in Life, Health, Property, and Casualty insurance. He has worked more than 13 years in both public and private accounting jobs and more than four years licensed as an insurance producer. His background in tax accounting has served as a solid base supporting his current book of business.

One of the most important credit card rules to follow is to make your credit card payment on time each month. Timely payments not only help you avoid late payment penalties, they also help you build a good credit score. But to make your credit card payment on time, you have to know when the credit card bill is due, right?

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