Credit Card payment: What is the best time to clear your credit card bill? An explainer

If you are a regular credit card user, it is vital for you to clear your bill on time to keep your credit score intact and avoid paying late fee as well as interest at an exorbitant rate. There is no denying the fact that the best time to clear your credit card bill is before the due date.

Not many credit card users are aware that the 45-day interest-free period (or 50-day) is offered only when you clear your credit card bill on time. In case you miss the deadline, the interest will start accruing and the card issuer will also levy the late payment charges. 

Notably, the interest in this case will accrue from the date of transaction and not from the last date of payment.

These are some of the key points to remember with regard to timing your payments to avoid extra interest.

Key points to remember 

I. Make payment prior to the due date: By paying your full balance before the due date listed on your statement, you avoid interest charges, as most credit cards offer a grace period. This will also help you keep your credit utilisation ratio low, thus impacting your credit score positively. Ideally, you should aim to keep your credit utilisation below 30 per cent.

II. Early in the billing cycle: If you make a payment soon after receiving your statement, rather than right before the due date, you effectively reduce the balance that is reported to credit bureaus. This can improve your credit utilisation ratio.

For instance, if your statement closes on the 15th of the month, pay on or right after that date to keep balances low on your next statement.

III. Multiple payments: If you use your card frequently, you can consider making multiple payments throughout the billing cycle. This can help keep balance low and help with budgeting. This also prevents any high spending during the month from adversely impacting your credit utilisation ratio.

IV. More than the minimum due: Always remember that paying only the minimum due will keep your account current, and you will owe interest on the remainder of the balance. So, it is advisable to pay more than the minimum, ideally the full balance.

V. Setting up auto-pay: To avoid late fees, you may consider setting up auto-pay for at least the minimum balance, with manual payments to cover the rest if needed. In other words, you can pay as early as you can within the billing cycle to keep balances low and avoid interest.