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Some folks have trouble paying their credit cards on time. Paying them early seems completely out of the question. Yet we got this great money tip from a reader named Steve who does just that:

I have a money tip for credit cards. Let me know what you think.

About six months ago, I started paying the amount due as soon as I received the bill. This way, I only have one month’s worth of expenses on my card at any time, rather than the two months’ [worth] I used to have when I paid it on the due date. This keeps my utilization rate low, which we know affects credit scores.

Do you think this makes enough difference to affect one’s credit score? All I know is that mine is at an all-time high and broke 800 for the first time.

Let’s examine Steve’s tip.

First, the utilization rate is the outstanding balance on revolving debt – credit cards and lines of credit – divided by your total credit limit. For instance, if you have just one credit card with a total limit of $10,000 and you’re carrying a $5,000 balance, your credit utilization rate is 50% ($5,000 divided by $10,000).

FICO calculates credit utilization in two ways. It determines your utilization for each individual credit card or line of credit. It also calculates an overall credit utilization. Both are important factors in your FICO score.

If you listen to the podcast where I interviewed FICO’s credit expert Tom Quinn, he says that the most important thing for your credit is paying your bills on time. But the second most important thing is credit utilization.

He recommends that consumers keep credit utilization below 30%. So if you have $10,000 of available credit, you don’t want your balances to go over $3,000. And the lower your utilization rate, the better. Below 30% is fine, but 20% is even better, and 10% is even better than that.

Here’s why: If you’re maxed out on your credit cards, that tells the folks from FICO that you could have a problem. If something goes wrong with your finances, you don’t have a lot of available credit to deal with it, and you’re basically living life on the edge, financially speaking.

So FICO likes to see lots of available credit. This is why keeping your credit utilization below 30% can really help keep your score up. And this is particularly important if you’re looking at buying a home or refinancing your existing mortgage in the near future.

But why pay early?

But let’s get back to the original tip. Why does paying off your credit card bill the day you receive it versus the day it’s due help?

For credit utilization purposes, the credit bureaus take a snapshot of your credit each month. Whenever they take that snapshot, you may have a balance on your credit card. Even if you pay it in full each time the bill is due, you may still have a balance on the day they take that credit “snapshot.”

Wherever your credit utilization is at that time, that’s what the credit bureau will record into your file for that month – even if you pay off your card in full the very next day. The credit bureaus simply don’t have the resources to update your file daily.

So whatever your balance is on the day that the snapshot is taken, that’s what will be used to calculate your score for that month.

If you consistently pay off your bill as soon as you receive it, your balance will remain lower. If, on the other hand, you continue to charge up the card between receiving your bill and paying it off on the due date a couple of weeks later, your reported balance will be higher. This increases the chances that when the credit bureau takes the snapshot, your credit utilization will be higher.

Budgeting with your credit card

There is a side benefit to Steve’s tip. Paying off your credit card early can help you budget.

One of the hardest things about using a credit card is budgeting. When you swipe that credit card, the money doesn’t come out of your bank account immediately. If you’re looking at your bank account balance to decide how much you have left to spend, you may be deceived if you don’t factor in that credit card spending.

This is one of the things I like about YNAB, the budgeting software I use. I don’t look at my bank balance to decide how much money I have left over that month. I look at my budget.

But it’s tempting for most of us to look at the bank account balance. When you see how much is available, you can be tempted to spend that money, even though you’ve been spending on your credit card, too.

One thing I do to combat this problem is to make multiple credit card payments throughout the month. I just log in to my bank or credit card site to make a payment. This forces my checking account balance down appropriately, so I don’t think I have more money than I actually do.

A big thank you to Steve for sharing this tip. If you have money tips you’d like to share, shoot me an email at dr [at] doughroller [dot] net. I’d love to hear from you.

Author Bio

Total Articles: 1080
Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Article comments


That’s really a great tips for boosting one’s credit score. Thanks for sharing!

Dave Walczak says:

We tend to pay everything by credit card. Like the points/rewards and the protection from unauthorized charges.

This past year I also started making multiple payments on my credit cards during the month. Much better to make the smaller payments during the month verses one larger, and perhaps shocking, payment if you tend to not closely track your spending.

Michael says:

I have observed that card balances usually get reported on the statement closing date, or when a card is issued with a new account number. Payments made after you receive the bill will usually be reflected in the following month’s utilization ratio. To reduce your current month’s utilization ration, you should make a payment before the closing date.

Rob Berger says:

Michael, thanks for the tip.

Stephanie says:

American Express doesn’t allow a card to be paid off in full. Sounds like they like their customers carrying the largest balance possible. I just had to call and ask for a higher level manager in order to pay off my balance in full (their website would not allow me to, nor could the first customer service rep I spoke with). Sounds fishy to me…..

Justin says:

I make weekly payments to my credit cards and my score is hovering around 800. This keeps that utilization low regardless of when the statement closing date occurs on each card. Right now, the two negative factors weighing on my score are length of credit history and the lack of having a mortgage yet. At that score I can be picky with interest rates.

This idea came to my attention after I became a business traveler with weekly expense reports. I would submit my business expense report on Sunday and then login to my credit card accounts and pay them in the same setting. It’s a great way to boost a score if you start a few months out before that next home, car, or boat purchase.

carol says:

This may appear to be a great and wonderful option for credit card companies who favor their customers paying their accounts early. However, and you did not make note, there are some companies who do not accept early payments in the month if they are paid prior to their due date. Synchrony bank is one of them. You say 3 reasons to pay early – I say NOT. Synchrony bank does not take into consideration any early payments unless they are paid on your posted due date. If you pay before your due date all payments are posted to the prior month and here are the 3 things Synchrony bank give you for paying early:

1. Late fee

2. Additional interest

3. 30 day delinquency


Guess we as consumers need to break out our magnifying glasses to read all the very, very fine print and do all of our due diligence before accepting a loan from a bank.

Randy Levine says:

I’m not sure this is true… If a credit agency takes a snapshot of my credit report once a month, it is highly unlikely that my credit card company will have reported any current mid-month statement information to them. They will only have the information reported to them at statement closing date…Therefore, continuing to charge on a credit card (Raising the utilization ratio) would not be present in that snapshot until the closing of the next month’s statement – but by which time making early payments would have taken care of that… So the key is to bring your balance below 30% BEFORE EACH MONTH’S STATEMENT CLOSING DATE so the higher utilization will never be reported which would result in 30% or lower reporting of your credit utilization.

Am I missing something here?