Though paying credit card bills on time is imperative, clearing the dues before the payment due date has several added advantages and positive reflection on your credit score. Users must be aware of the fact that nearly 35% of the credit score is based on bill payment history. Hence, an early bill payment can enable users to leave a positive impact on the score via a lowered credit utilization.
Additionally, there are several other essential factors that users must be aware of to understand the benefits of making credit card bill payment before the due date.
Important events before the statement closing date of credit card payment
Firstly, several important changes occur and are recorded in a credit card’s statement before the last day of the billing cycle. Before the closing date of the running billing cycle, the monthly interest charge and minimum payment are calculated. The borrower’s transactions are evaluated and updated for a final record. Lastly, the outstanding balance is notified by the issuer and shared with the credit information bureaus.
How does paying the credit card bill before the due date prove beneficial?
Listed below are some of the primary ways in which credit card payment before due date proves to be beneficial.
- Eliminates interest charge
Timely payment of the bills before the due date results in nil applicability and accrual of interest. Cardholders can thus save on any additional cost borne as interest charge if the payment in made within time.
- Positive Impact on the credit history
Early payment can improve the credit profile of an individual immensely. The credit utilization ratio measures the credit used as a percentage of the total credit limit available for your credit card. Ideally, a credit utilization ratio of 30% and less is considered healthy.
As mentioned earlier, credit card issuers report the statements of the account balances with the credit bureau. Therefore, if the users maintain a high credit utilization ratio, then it will be regarded as a negative credit performance by the bureau and affect their credit scores.
- Helps to manage credit line for future purchases
Staying under the credit limit is imperative, and in this regard, paying credit card bills in time helps to free up the credit line in your account especially if you are nearing your credit limit.
Often, credit card issuers decrease the credit limit or close an account and charge high interest rates if a user carries over the debt from a previous billing cycle. Further, if you clear the dues before the payment due date, it also reflects on your card’s balance, and hence proves beneficial for your credit history.
- Lower risk of a failed payment
Paying the bills before the statement due date eliminates the risks of failed payment when making future transactions, and is an important step towards using credit card wisely.
Users can pay bills of credit card online, through several options provided by the card issuer. Payment options like UPI, net banking, debit card, etc. can be conveniently chosen by the users in accordance with their preferences.
Further, many credit card issuers allow online payment up to a certain time limit and expedite specific charges when making payment within the limit. If a borrower pays the bills before the due date, then he/she will be exempted from these charges.
- Helps to make budgeting easier
Finally, paying your bills early can also help to maintain your budgeting plans effectively. If you clear away the dues all at once and in time, then you might adequately calculate and plan out your budget for further spending throughout the month.
All these factors establish the importance of how making credit card payment bill before its statement due date proves extremely advantageous for the users. However, it is also important for the borrowers to select a reliable financial institution who are transparent about their charges and also opt for the right credit card so that they can enjoy the maximum benefits. For instance, the Bajaj Finserv RBL Bank Super Card comes with exceptional features and is a benevolent financial friend.
Individuals can also check their pre-approved offers provided by the card issuer simply with their names and mobile numbers. These offers simplify credit processing and are available on several financial products, such as personal loans and business loans.
As for making timely payment of credit card bills, often the interest rates cancel out several added values of credit card offers and rewards, if accrued due to late payment. Hence, if you pay your bill before the due date, you can avoid these negative impacts and enjoy added advantages.
