Why Should You Pay Your Credit Card Bills Before Due Date?

If you're a frequent credit card user, we don’t have to tell you why it’s a good idea to never make late payments on your credit cards. Those accumulating interest amounts, annoying calls from the credit card company and that huge penalty fees for late payments are good enough reasons never to pay your credit card bill late. As there are so many good reasons not to make late payments there are also reasons why you should pay your bill before the due date.

Yes, It’s a good financial habit to pay your bill in full and on time and it’s great to keep your credit score high. But do you know that paying your bills before time has a lot more benefits? It’s true. Here are a few points to support this reason

Save on Interest: As you are well aware that you are charged interest on the amount payable on a daily basis. When you pay your online credit card bill before the due date you reduce the amount payable and thereby also reduce the interest being charged to your account.

Improves your credit score: At the end of your billing cycle when your credit statement is issued, that balance is reported to the major credit reporting agencies as debt, even if you avoid interest late payment charges by paying your balance in full by the due date. This reported debt amount can increase your debt-to-credit-ratio and therefore lower your credit score. This is why paying your card bill before time will help you improve your credit score.

Improves your debt-to-income--ratio: The ratio of your monthly in-hand income and your financial liabilities or debt owed by you is your income-to-debt-ratio. An ideal debt-to-income-ratio is always below 40% if it is higher than that getting a loan of any kind may become difficult. Paying your online credit card bill before your due date can lower your debt to income ratio, improving your credit score and making it easy for you to avail future loans.

Frees up your line of credit: When you use your card for a certain amount, that amount is deducted from your overall limit, therefore reducing your available credit limit. For example, if you have a credit card with a limit of 50,000 and you swipe your card for 25,000. The credit limit on your card reduces from 50,000 to 25, 0000. When you pay your bill early, you free up that 25,000 making the full limit available on your card again.

Helps with Budgeting: Budgeting isn't fun but it is necessary, especially if you don’t want to go into debt. Paying your online credit card bill early will allow you to calculate the amount you have in had for the rest of the month. This way you can ration out and plan your expenses in advance. This will help you spend wisely and manage your finances better.

Well, here you have it, a few reasons why you should consider paying your credit card bill on time. So remember, if you plan on applying for a loan or just increasing your credit score, try clearing your bill before the due date to enjoy a good financial history. It also improves your relationship with your bank and increases your creditworthiness.