What Every Credit Card Holder Should Know About Paying On Time

We are constantly bombarded by the message to not make our credit card payments past the due date because of the financial damage that it causes, but what about other specifics?  There are some other things that you need to know that will help motivate you to keep your payments on time.  Here they are:

Avoid interest charges.  By paying off your balances before the due date, you will avoid interest charges all together.  This strategy will also help you avoid fees and interest increases that come from less than responsible activities on your accounts.  Consider that the credit card issuers cannot charge you interest when there is no balance upon which they can do so.

Pay early in the month.  This strategy can help because if you do carry a balance on your account, making a payment earlier in the month can save a few dollars on your finance charges.

Your balance matters.  Your credit score is based (in part) on the balances that you carry on your credit cards so focusing on reducing those balances will help you a great deal and paying those on time fits well into this strategy.
Your debt to credit limit ratio.  Your debt to credit limit ratio is called utilization within your credit score.  And, it makes up 30% of your score.  There are two parts to utilization:  one for each individual account, and the other for the total of all of your credit card accounts.  When you pay early, you reduce your utilization which increases your score.

Pre-pay before the next closing date.  If you pre-pay for your current charges before the next closing date, then you will have a zero balance and thereby avoid having a balance reported to the credit agencies and keep you free from charges.

Pay at least the minimum.  If you carry a balance you must pay at least the minimum before the due date even though you might have already pre-paid for some of the charges.  This is just part of the rules of making payments on your account to keep it current.

This might have you asking “so what is the use of using a credit card if you are going to be paying early?”  You still have the benefit of using someone else’s money for a short period of time.  That is the draw for any kind of financing.  Why pay it all up front if there is a company that is willing to front you the money?

Put your money to work in other areas like investing, for example.  Learn how to move your money around so that it is always working for you.  Keep your accounts simple and easy to manage by not opening too many.  Look for opportunities to improve your position then capitalize on them.  This is the mindset of a winner when it comes to using money to improve their position.

The methods that you should use for increasing your credit score and saving money on interest and fees will pay off if you:  Pay on time every time – set up reminders on your PC in order to help with this; keep balances low – as low as you possibly can; only apply for credit if you need it, not if you want it – there is power in self-discipline and restraint; and utilize less than 30 % of your credit limit to help increase your score – this will help with any further credit that you may need to apply for in the future, like for cars or houses.  Feel the good vibes that come from knowing that you are in charge of your money and not the other way around.

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This entry was posted on Friday, May 15th, 2009 at 11:11 pm and is filed under Credit Card Advice, Credit Card Debt, Credit Card Use. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.