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Why You Should Make 2 or More Credit Card Payments During the Same Billing Cycle

March 31, 2020

Of course, the payments you make to your credit card company have an impact on your credit score. But what about the frequency with which you pay your card company? Does that affect your credit score in any way? Let’s find out.

Before we start, let’s make one thing clear. The number of times you pay your credit card bill in a month is not listed on your credit report - nor is it included in your score calculation. So, as long as you pay the minimum amount due on your credit card once a month (and on time), you won’t fall into trouble with your issuer. Nevertheless, you should pay more than once if you can. By adopting this policy, you’ll find that it’s beneficial for your credit health, as well as your score.

Improvement in credit utilization ratio

As you already know, your credit utilization ratio (or in other words, the proportion of available credit that you’ve used), has a significant impact on your credit score. Ideally, this ratio should be kept below 30% at all times.

Consider a scenario where your credit limit is $1,000. Further, let’s assume that during the month, you make purchases amounting to $700. Most credit companies report balances to the credit bureaus at the end of the billing cycle. So, if your outstanding balance is reported as $700, it would mean that your credit utilization ratio for that month is 70%. This would be true even if you paid off the entire amount due on time.

In other words, despite paying up in full and on time, the credit scoring model would nevertheless penalize you for a high credit utilization ratio.

Now, let’s assume that you follow the policy of making multiple card payments. At one point during the middle of the month you make a payment of $400, and a second payment of $300 after you receive your statement but before the due date. This would automatically bring down your credit utilization ratio to 30% as your outstanding balance at month-end would be $300.

Other benefits

Many card companies calculate finance charges as per the average daily balance method. In that case, making multiple payments in a month can lower the amount you pay in interest. Secondly, let’s assume that you have a large purchase lined up for the month, but you’ve already used up $500 of your $1,000 available limit. In this case, too, multiple payments would prove to be beneficial as it would free up available credit limit. Finally, if you are aiming to spend a significant amount each month (to rack up reward points or earn a sign-up bonus), it make sense to start paying your card company more than once a month.

Paying your card company multiple times a month shouldn’t be a hassle, given that most issuers offer the convenience of online payments. Once you’ve paid the amount, it will likely reflect on your account immediately, or within a few days. Just make sure that you have a goal in mind that helps you decide on the number of monthly payments. For example, your goal could be to keep your credit utilization ratio below 30% at the end of each billing cycle.

Paying your credit card dues more than once a month may seem like a hassle to start with; however, it is likely to yield real benefits in the long run.

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Ari Page Ari Page is the CEO of Fund&Grow. He resides in Spring Hill, Florida with his wife and two children.

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