Are you the type of person that gets anxious about your next credit card bill? Then, what if we told you that it could be a good idea to anticipate the payment to relieve anxiety and also better your credit score? This might seem like a crazy idea at first, but paying twice a month improves your credit while also expanding your open credit. Besides that, it helps you pay your debt faster and avoid missed payments.
Basically, a credit card payment is on time if you pay it by the due date. However, you can also make a payment before the due date, whether it is after or even before your billing cycle ends. If you don’t know your closing date, you can review your credit card statement or contact your credit card company. Figure out why paying twice a month improves your credit below with CredHelper.
Does paying twice a month improves your credit score
Paying twice a month improves your credit score because it can reduce the balance amount the card issuer reports to the credit bureaus. This way, your credit utilization ratio could be lower, benefiting your credit scores.
One option is to use the 15/3 method, in which the first payment happens 15 days before your due date, and the second happens only three days before the deadline.
How payment timing affects credit utilization
The 15/3 strategy reduces your credit utilization ratio, because even if you pay your expenses in full, new charges go into your open credit with time. However, bi-weekly payments cover the new charges twice as often.
Benefits of making multiple payments per month
Making multiple payments may also help you reduce your interest charges, as you will be accumulating interest on a smaller balance. Also, the higher the balance you carry to the next month, the more interest you pay.
It could also help you avoid late fees, as making your minimum payment during the grace period—between your closing date and your due date—means you won’t incur a late payment fee.
When paying twice monthly actually helps
If you make multiple payments every month, it is more likely that the minimum amount you owe will be paid, so you won’t have any late payments, which benefits your credit score.
At the same time, it is also likely that you will be paying more than the minimum due, decreasing your balance faster. As you have previously read, this results in a low utilization rate, the second most important factor in credit scores.
How to structure biweekly or split payments
Considering that one year has a total of 52 weeks, two bi-weekly payments equal 26 half-payments, or 13 full annual payments instead of 12. This means you get one more full payment extra every year.
This is a good debt-reduction strategy, because most employers pay bi-weekly, so scheduling two automatic credit card payments can coincide with two monthly paychecks, creating stability and predictability.
Impact on interest vs credit score
As credit card interest compounds daily based on your average daily balance, by making two payments per month, you reduce your average daily balance and, consequently, the amount of interest that accrues.
Also, late or missed credit card payments can result in late fees and higher penalty interest rates. Besides, it could also have a negative impact on your credit scores.
Common mistakes when trying this strategy
Even though paying twice a month improves your credit score, it can be harder to remember to make twice as many payments. This is why scheduling automatic payments can make it easier.
So, set up automatic payments or set a reminder on your phone not to forget anything. Also check if your credit card issuer offers mobile solutions to help you pay on time or early.
Other strategies that boost your credit faster
In case you are unable to pay your card in full, making the minimum payment on time can also help you avoid late fees and maintain your financial health going well.
You could also request a limit increase in order to lower your overall utilization percentage and avoid applying for new credit accounts to prevent hard inquiries, which can temporarily lower your score.
Another option is to use tools like Experian Smart Money or a secured credit card to build payment history and keep older unused credit accounts open to maintain a long average credit history length.
Remember to check your credit reports for errors and dispute inaccurate negative items to remove them, and contact collectors to remove collection accounts from your report in exchange for payment.
At last, diversify your credit types to boost your score by demonstrating responsible management, and if you have high credit card debt, keep in mind that a personal loan can lower your credit utilization.
Always have savings
Paying twice a month improves your credit, but it can also leave you with less money to spend on everyday purchases and emergencies, so it is important to have savings.
