Is It Bad To Pay Credit Cards Early?

Most people believe that the earlier you can pay off a debt, the better it will be for you in the future.

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The question is, does this concept also apply to credit cards? Most good credit repair companies in Dallas will tell you that this is the case–paying off credit card debt is a good thing that offers a number of benefits.

What It Means To Pay Your Credit Card Early

Paying your credit card on time means making the necessary monthly payment before the due date. There is typically a grace period before a payment is considered late, but this could result in some additional payments each month. Paying on time or early is particularly important for anyone trying to understand if it is bad to have a lot of credit cards, as timely payments play such a big role in your credit status. 

What Are Credit Card Grace Periods?

Most credit card providers offer consumers something known as a grace period–this is the timeframe between the end of one’s billing cycle and the payment due date. It is intended to offer some breathing room between when you purchased an item and when you have to start paying for it.

In most cases, the grace period is usually between twenty-five and fifty-five days. Various factors can affect how the grace period is applied to a particular purchase; for example, whether or not you paid your previous balance in its entirety by the due date can make a difference. You can also check the terms and conditions of your credit card to establish what the term is for your grace period.

Benefits of Paying Off Your Credit Card Fees Early

When it comes to credit cards, everyone’s situation is unique. In most cases, however, making extra payments toward your current balance before the due date could have a significant impact in a number of ways.

Lower Credit Utilization

When you make an extra payment toward your current balance before your billing cycle is over, you can lower your credit utilization ratio (the amount of credit you are using divided by the amount of credit available).

Reduction of Interest Charges

Whenever you carry a balance from one month to the next on your credit card, your card issuer will charge you interest. By paying your balance in its entirety every billing cycle, you will be able to incur much smaller interest costs than if you were to carry it over from month to month. If you can’t pay your balance in full, the Consumer Financial Protection Bureau recommends that you pay off as much of your debt as possible. This is because the higher the balance you have, the more interest you accrue. This is also very important when looking at whether paying off student loans helps your credit score. 

Making early payments also means that you will be able to reduce your interest costs even if you do not pay off your entire balance. Every payment you make to reduce your credit card balance will help chip away what you owe. Because the interest is calculated on the outstanding balance, interest costs will go down as the balance is reduced. You can even use a payoff calculator to help figure out how much you may be able to save.

Avoiding Late Fees

Making a minimum payment during your grace period means you avoid getting hit with a late payment fee. To make things easier, you can schedule your payments in advance, create an automatic payment system, or set reminders on your phone or tablet device so you don’t forget. In certain situations, your credit card provider may offer various tools to help you make early payments.

You should also be aware that if you carry over a balance from the previous month, any payments you make before your due date will be applied to the prior balance. As a result, you will still need to pay at least the minimum amount on the current bill.

Final Thoughts

When it comes to paying off your credit cards early, the bottom line is that there are benefits that can come with taking such steps. You should therefore remember to make minimum payments on time to avoid any additional fees–this will help keep your account in good standing, which is something you always want.

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