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How Timely and Chunk Credit Card Payments Can Improve Your Financial Health

July 8, 2022

When budgeting for your monthly bills, you may wonder whether it’s best to pay off your credit card balances in full or make partial payments to free up funds for another purpose.

Many also wonder if paying at least the minimum payment by the due date is best practice or if they should wait until they can pay the balance in full.

Your decisions on these matters can either benefit or harm your financial health, so it is best to know precisely how they will impact your credit scores to ensure you are always ready for financing opportunities.

How do credit card payments affect your credit score?

The most common credit scoring system is the FICO score, which uses five categories reflected on your credit report to generate a score.

Your FICO score considers your payment history, amounts owed, length of credit history, new credit, and credit mix. Each category is weighted differently when your score gets generated with this scoring system, and they are weighted as follows:

  • Payment history – 35%
  • Amounts owed – 30%
  • Length of credit history – 15%
  • New Credit – 10%
  • Credit Mix – 10%

Based on this scoring module, payment history most heavily impacts your credit score. Thus, you must pay close attention to ensure you do not negatively impact this category or risk your credit score plummeting.

Is it best to make full or partial credit card payments?

When dealing with credit card balances, you should always aim to pay off as much as possible as quickly as possible.

Although paying the minimum payment on time will not negatively impact your credit, failing to make chunk payments could forfeit you the following benefits:

  1. Save money

The longer you carry a balance on your credit card, the more you will have to pay interest fees. Often, you can end up paying thousands of dollars more for your purchases due to the interest rates of your credit card.

As interest accumulates, eliminating the debt can be more challenging, making it harder to achieve your financial goals.

  1. Eliminate your debt faster

Making the minimum payment on your credit cards can significantly extend the time it takes to pay off the balance.

For example, let’s say your credit card carries a balance of $8,000 with a 17.5% interest rate, making your minimum monthly payment $320. Simply paying the $320 minimum monthly payment will take 31 months to pay off the debt and cost you $1,860 in interest payments.

However, paying $500 a month instead would only take 19 months to pay off the debt, saving you $825 in interest payments.

  1. Reduce your credit utilization ratio

Paying more than the minimum monthly payment will help you lower your credit utilization ratio faster, boosting your credit score.

Aim for your credit utilization on each credit account to be no higher than 30% since this shows potential lenders that you will not max out the limit and fail to pay it back promptly.

By paying more than the minimum, you can get closer to that 30% ratio faster and improve your chances of future credit and financing approvals.

The importance of on-time payments

Paying more than the minimum will not do much good if they are regularly late.

When you repeatedly miss your due dates, you increase the likelihood of your credit card company sending your account to collections. Once in collections, you will be responsible for paying the entire amount rather than making monthly payments.

Paying your credit card bills on time will also help you secure lower interest rates since a card issuer can raise the interest rate if you fail to pay the amount due within 60 days, known as a penalty interest rate.

Although it is common for this penalty rate to only last for six months, the rate can get extended and cost you thousands more in interest payments over time.

Also, you can avoid late fees by staying on top of your payment due dates. These fees can be as high as $38 on top of your minimum payment. It is best practice to make your payment before the due date to avoid the risk of missing it and dealing with these issues.

Making timely and chunk payments is vital to achieving and maintaining a great credit score.

Many fail to realize the importance of doing so until it is too late, or they require financing. However, by being proactive about your credit card payments, you can ensure your credit score always shows you in the best light to potential lenders.


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