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I'm a college student and I just got my first credit card (through Chase). The only reason I got the card is to try and build my credit score. I also have a checking account with Chase, and they let me pay off my credit card any time I want.

For example, right now I have a balance of $92 on my credit card, but my bill won't come until September 2, and the payment isn't actually due until September 27. But through there website I could go ahead and pay it off with money from my checking account.

My question is, is it better for my credit score if I pay off that $92 balance right now, or should I wait for the bill, or does it not matter either way?

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As the answer below states, in terms of credit score, anything that isn't late is on time. In terms of real-world differences, if you're earning interest on the money you might as well wait until it is due to send it away. –  Jeff Swensen Mar 24 '11 at 4:12
    
I have paid my bill before the statement since 2011 and my score is 786. –  abe Jan 7 at 22:29
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7 Answers

up vote 13 down vote accepted

It does not matter. Your credit score is affected by late payments, by credit usage and by age of credit.

DO NOT PAY LATE.

Paying early is only good in that it means you don't pay late.

Your credit usage is calculated by percentage of the credit you have that you actually use. Keep your usage to under 20% of your limit and you look great as a credit risk as you have lots of buffer.

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I am going to break rank slightly with the consensus so far.

Here's the deal, it probably DOES help your credit slightly to pay it multiple times per month if it isn't a hassle, but the bump is likely to be minimal and very temporary.

Here's why: A key component of your score is your credit usage ratio. That is the ratio of how much of your credit limits you are using. You want to keep this number down as low as possible. Now here is where it gets tricky. Although you have a grace period to pay off your card with no interest, the credit card companies don't generally report the balance as of the due date. They either report the high balance or an average balance over the month. That is, it is based on how much you use, not how much balance you carry over each month. It isn't very intuitive, but that's just how it is.

So technically, keeping that balance lower over the course of the month WILL probably help you, but the credit usage ratio is generally a rolling average over the last x months, so the effect will wear off quickly. So it is probably not worth doing unless you know you are going to apply for a loan in the next 6 months and need a temporary, small bump.

Another consideration is that paying early provides no real financial benefit in terms of finance charges, but you are giving up liquidity which does have some value.

1) You probably could get at least a little interest for keeping the money in your account a few more weeks.
2) If you have a major financial emergency, e.g. broken down car, you might appreciate the fact that you kept your options open to carry that balance over a month.

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+1 This is a great answer and an often overlooked component of a person's credit score. Especially for those who use credit cards as charge cards. –  Justin Ohms Jul 16 '11 at 17:55
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I have money withdrawn near when the bill is due (not early at all) and my credit score is top-notch. It's far, far more important that you don't pay late. I don't think paying early earns you brownie points with FICO.

Now, if you have an interest-bearing checking account, and if you pay your balance in full each month, and are very, very organized, then paying at the last minute, but on time, lets you take full advantage of the free float that the credit card issuer gives you.

If you have trouble rubbing two brain cells together when it comes to bills (like I do sometimes) then either set up auto-deduct from your checking account or pay the bill as soon as it comes in.

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Unfortunately I don't have an interest bearing checking account. :( But thanks for the tip! –  Ryan Aug 22 '10 at 18:59
    
"... paying at the last minute, but on time, lets you take full advantage.." All my credit cards allow me to set up a payment on a date that I choose. So, when I get e-mail notification that the statement is ready, I go to the card web site, make sure that there are no purchases that I did not make, and set up a bill payment (authorization for credit card company to withdraw the statement balance on or before the due date, and enter the amount in my checkbook. In short, take care of the bill as soon as it comes in but set it to pay not today, but some time before the due date. –  Dilip Sarwate Sep 7 '12 at 3:52
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If you carried a balance from the last month, then pay the card off as soon as possible. Otherwise I agree with @mbhunter that you should wait until close to time for the bill to become due. Then always pay the credit card off in full and you will borrowing Chase's money interest free for up to 30 days.

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+1 for the "pay off the old balance ASAP, pay off this month whenever". But "borrowing Chase's money interest-free for up to 30 days" is mostly profitable when you're earning money off of the funds staying in your bank account... and in a low interest-rate environment, that's probably not a lot. –  fennec Dec 14 '12 at 17:55
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It is COMPLETELY no use to pay earlier (during a billing cycle) to better your credit score! Your credit score gets affected ONLY once a month from each creditor, and that happens when they post your monthly statement. Thus, no matter what you do or pay and how many times a month or how many days earlier than your due date, it has NO EFFECT WHATSOEVER on your score. Anything you do will be reflected only after the statement. What you pay in between those two statements is irrelevant. So, as far as credit score goes IT DOESN'T MATTER.

However, if you want to save on interest being charged, it is wise to pay as early as possible, so your balance is as low as possible for day-by-day calculation of your interest.

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This is wrong information. Yes credit cards companies typically report your balance on your statement date or there abouts but paying the balance before the statement date will give you a lower utilization ratio. The affect on your score would be temporary assuming you maintain your spending patterns. It might still be useful before buying a house or car if your score is borderline. –  stoj Dec 16 '12 at 2:34
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It probably doesn't matter since your credit and your checking are at the same institution, but I don't like to let my credit auto draft my checking. I always do it the other way around (and keep them at different places)

I feel like there is more control when my money is gone that way.

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Didn't Tyler Durden have something to say about the illusion of control. =) –  JohnFx Aug 21 '10 at 22:16
    
What is the first rule?!? vOv –  MrChrister Aug 21 '10 at 23:31
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It's not just illusory; if you let your credit card take money out of your savings account whenever a payment is "due", you may be surprised when you want to prevent a payment from occuring, e.g. if you have an emergency expense, or you have a dispute with the credit card company. It can be very difficult to revoke automatic debiting. –  Ether Aug 22 '10 at 4:57
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Theoretically there is always a time value of money. You'll need to keep your cash in a Money Market Fund to realize its potential (I'm not saying MMFs are the best investment strategy, they are the best kind of account for liquid cash). Choose an accounts that's flexible with regard to its minimum required so you can always keep this extra money in it and remove it when you need to make a payment.

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Welcome @stands2reason. This is a valuable answer, but could you expand on why the time value of money comes into play, and how the interest earned in a MMF is valuable compared to paying off a no interest loan? Comment me back if you edit so I can vote for it. –  MrChrister Dec 16 '12 at 18:43
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protected by Chris W. Rea Jan 8 at 12:50

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