You may think that paying your minimum due each month is all you need to do to use your credit cards in a way that boosts your credit. You may also realize that paying your balance in full each month helps you avoid paying interest. However, credit cards can be surprisingly complicated. We have put together an easy guide to paying for credit cards.
On your credit card statement, you will see a payment due date. You will also see your statement balance, which is the total you owed on the card on the billing date, and your minimum payment due. You must pay at least the minimum payment by the due date or else your payment is considered late. Some cards have grace periods for late payments, while others do not. You have to look at the terms and conditions for your card to see if it has a grace period.
Obviously, you want to pay at least the minimum due by the due date each month. You can pay online, over the phone using ACH checks, by cash or check, and by money transfer. If you are not paying in a way that results in immediate credit, you want to send payments with plenty of time for them to get to their destination by the due date.
To avoid interest, you want to pay your balance in full each month. However, you may be taking advantage of a promotional deal on your credit card. Many cards offer zero interest on purchases for a set period of time. Different terms and conditions may apply, but if you follow those terms and conditions, you can get interest-free credit. It will not negatively impact your credit score to take advantage of those offers, as long as you keep your total credit utilization under around 30% of your available credit.
If you think that your credit utilization is too high, but you use credit cards to pay your monthly bills, you can pay off your balance before the statements are generated. This will result in your card showing a $0 balance. This will lower your overall utilization rate and improve your credit score when your credit is checked.
If you are paying fees for your credit card, you are wasting money. However, the length you have had an account is one of the factors that is considered when determining your credit score. As tempting as it might be, that may mean not cancelling cards with high fees. Instead, call your credit card company. If you have a history of good payments and card usage, they may be willing to waive the annual fee.