Most people simply wait until the due date to pay their credit card bill. While this is absolutely okay, a bill paid ahead can bring extra benefits to both your wallet and your credit score. Here is why early payments are a smart move.
Lowers Your Credit Utilization
Credit reporting agencies usually determine the credit score based on the balance shown by your credit card provider. In case you make a payment before your statement closing date, the balance that will be reported is going to be lower. In that way, you are lowering your credit utilization ratio that is the main factor in achieving a higher score.
Helps Avoid Interest Charges
In case you are carrying a balance, a payment made at an earlier time will reduce the sum of the interest charged. As interest is calculated daily, the sooner you pay, the less interest will accumulate.
Prevents Last-Minute Stress
Life is hectic, and forgetting the deadline is quite simple. By settling your bill in advance, you totally quit the risk that you will be charged late fees or that your credit report will contain a negative entry.
Builds Strong Financial Habits
Paying early is a sign of discipline and accountability. Gradually, this behavior will lead to your debt being under control and to your staying financially sound.
Improves Chances for Credit Limit Increases
Credit card companies like American Express are giving the responsible users higher limits as a reward. Regular early payments are a proof of good money management, thus, it becomes more effortless to get approved for increases.