Credit card payment: Beginning of Month Vs. End of Month

[Bob B.]

I made a simple spread sheet today. I have a very high interest rate credit card: 16.99% APR. The company will accept payment as early as the sixth of the month, and credit the paymant against this month's balance. The due date is the 28th of the month.

My question was: How much can I save in accumulated interest by making my payment on the 6th versus waiting until the due date? My balance is $2,278. The rate that is calculated against my average daily balance is 0.04718%. I plan to pay $200 toward the card this month. What I came up with is that I would accumulate a whopping $1.98 less in interest this month if I make payment tomorrow vs. the 28th.

Now, I realize that two bucks isn't going to make me or break me, but I sure do like the idea that the interest calculation will be made with a balance that is $1.98 less than it would have been if I were to wait until the due date to pay the bill!

[Frugal]

I personally would pay it early to save interest. However, I sometimes wait until closer to the due date on my bills, if I get more interest in my savings account.

[greenskeeper]

I pay all my bills on the 1st of the month, regardless of when they are due during the month. Having a whole month to enjoy without worrying about due dates is great.

[supercar]

I've currently set up auto payments of the minimum payments for all my cards on the same day my paycheck gets direct deposited into my account. And that very same night (usually every 1st and 15th) I pay off the rest of the money to the credit cards and mortgage. I calculated and this way I pay least interest possible as money stays least amount of time possible in my checking account and pays off the card as soon as possible.

[wincrasher]

I would say that with such a low balance, you should just pay it off and not worry about paying interest. Having no revolving balance has not so obvious benefits.

Then, when you don't carry a balance, you can use their money for free from the post date to when the next statement is due. That's what I do. If I charge something after the 4th, it is not due until the 28th of the next month. Interest free, as long as that balance is paid in full. You also can earn points on your spending to use to make other purchases cheaper.

[Bob B.]

Originally Posted by wincrasher

I would say that with such a low balance, you should just pay it off and not worry about paying interest. Having no revolving balance has not so obvious benefits.

Then, when you don't carry a balance, you can use their money for free from the post date to when the next statement is due. That's what I do. If I charge something after the 4th, it is not due until the 28th of the next month. Interest free, as long as that balance is paid in full. You also can earn points on your spending to use to make other purchases cheaper.

Huh. Gee, I hadn't thought just paying the balance off. Lemme just see. Gee, you're right. I would save a lot of interest if I just paid the balance off. I wish it were just that simple. I just wish my wife and I hadn't made foolish decisions the first dozen years we were married, and that credit card was just the only debt we have to repay. If it were just that simple, I would just pay off that debt and save just oodles and oodles of money.

[scot184]

Why not just execute a balance transfer to a 0% APR credit card? Or ask them to reduce your rate? It's true that the savings aren't going to be huge, but might as well pay early if you can.

[wincrasher]

Originally Posted by Bob B.

Huh. Gee, I hadn't thought just paying the balance off. Lemme just see. Gee, you're right. I would save a lot of interest if I just paid the balance off. I wish it were just that simple. I just wish my wife and I hadn't made foolish decisions the first dozen years we were married, and that credit card was just the only debt we have to repay. If it were just that simple, I would just pay off that debt and save just oodles and oodles of money.

Cool. Glad I could help!

[1yearfrom0debt]

In all reality, you are not going to save that much by paying it early. However, it could prevent you from paying it late, which would drive up your rate. I'm sure you are like many of us, and struggle to pay debts down, but keep working at it! You will get there!

[ShawnaC123]

The two dollars a month paying it earlier isn't going to make a huge difference, but if you think about it, that $2 is going towards principal. So that's less and less interest you have to pay every additional month. Also, I'd second the idea that you should try to transfer to a 0% interest card. Even for just a year, having no interest can help a lot in taking a chunk out of the debt. Or you can transfer again when the promo period is up.

[jteezie]

There used to be a thing called universal credit where your payment behavior allowed banks and credit cards to change interest rates on you based on random other payment behavior, like your water bill. Lets say you pay your water bill on the 4th each month but this month you pay on the 5th because you took your kid to a baseball game. Well the companies will say "wow what a deadbeat, he must be struggling this month because he's late (relative to usual), he's a credit risk, lets raise his rates". Soon all the banks do it in response and it cascades... and you're screwed.

So, it's best to pay on the last day due consistently using autopay everything.

A few years back Congress banned the blatant use of universal credit but I'm sure it's still being used in a more covert way to assess risk and make more money.

[TheGooch]

Do this every month. If you are only certain that you can pay the minimum, then pay that. If you find money later, you can always send it as an additional payment.

Once you are in control of your debts and rebuilding credit, charge 1%-10% of your cards credit limit sometime during the billing period, and then pay it off in full the day after. This gets you the maximum "points" for payment history on your credit score. Do this with 2 cards.

Check out Dave Ramsey's Debt snowball method of getting out of debt, use credit repair techniques to clean up your history as quickly and cheaply as possible.

Good luck in turning this around and coming back like a rockstar.

[photo]

Originally Posted by greenskeeper

I pay all my bills on the 1st of the month, regardless of when they are due during the month. Having a whole month to enjoy without worrying about due dates is great.

Don't you have any bills that are due within 2-3 weeks of when they're sent out? I agree with your premise, however, if I only paid bills once a month, then several would be late.

[Student Loan Settlement]

Here are a couple of excellent resources that may help you figure out the potential savings.
wwwdotbankratedotcom

[greenskeeper]

Originally Posted by photo

Don't you have any bills that are due within 2-3 weeks of when they're sent out? I agree with your premise, however, if I only paid bills once a month, then several would be late.

My bills are spread out over the first 3 weeks of the month.

Paying everything on the first is easy since I won't forget anything.

The whole month is taken care of at once and no worries during the month.

I might be paying some bills almost 3 weeks ahead of the due date but it doesn't bother me.

[nitemarecooper]

It is rather irrelevant how much it will save in interest by paying it early. It will definitely save you interest and is therefore worth it provided you won't be charged any fees for making those early or extra payments. Never heard of any cc doing this but hey, who knows. By my math, it would only save likely about 45 cents per $50 payment for doing it the approx 3 weeks early. Still worth it imo.

I get paid weekly at my job and I normally make payments every week against my cc debt.

"Go for it, live dangerously and just do it" to paraphrase a saying.

[greenskeeper]

I pay in full each month so the finance charge savings is a non-factor. Unless you are talking about the interest I could pocket if my money was held in my checking account?

[artwest]

I don't think it really matters when you make your payment as long as it is not late.

The most effective way to get out of debt is to list your debts smallest to largest. Make minimum payments on all but the smallest debt. Pay as much as you can against the smallest debt until it is paid off. Then take the money you were spending on the smallest debt and apply it to the next smallest debt. Continue doing that until every debt is paid.

[naomibatac]

If you only have one credit card, it is better that you pay the total amount payable at least a few days before due date or on the beginning of the month. This way, you will have a good credit record of paying ahead of time and paying what is due. If your have several credit cards, it is better that you try to pay more than the minimum amount on each card before the due date.