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Maybe this is a simple question but I have a really bad sense about these type of things. When I got my first credit card the teller "did me a favour" and said if I always paid it off in full, on the 20th of each month I would never have to pay additional fees. I just got another credit card and and am wondering how to tell what day of the month I should pay it on?

My most recent statement period is Apr 13 to May 12, 2021 and the minimum payment is due by June 9th. How exactly do these things normally work? I'm guessing there would be a penalty if I didn't make the minimum payment on time, but either way interest accrues on the unpaid portion? When does the interest accrue? What would happen if you paid an amount greater than the minimum between April 13th and June 9th, would this go towards the minimum? Also is the due date usually the same each month i.e. the 9th?

I always have the money before spending it on my credit cards. Of course I don't want to pay off the credit card every day.

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    Just to be sure you have no confusion about this, you don't have to pay your original card in full on the 20th in order to pay no interest, you have to pay on or prior to the 20th. Thus, the 20th is your due date, for your new card this magic date would be the 9th, pay in full on or before this date (which remains the same each month) and incur no interest. – Glen Yates May 21 at 13:27
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    Keep It Simple and pay for "this" month's expenses at the end of "this" calendar month. You'll never have to worry about paying interest, and it's much easier to manage your money. – RonJohn May 21 at 19:42
  • Does this answer your question? money.stackexchange.com/q/140256/36669 – yoozer8 May 22 at 3:12
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    I'm a bit confused by the wealth of questions on this site about when and how to pay off credit card balances. For every credit card I've had, the amount due has always been deducted by the CC company directly from my bank account after some time (usually the next month, I think), so I never had to worry about that. This (SEPA direct debit) seems to be the default way to pay for credit cards over here (Austria, probably most of the Euro zone?). Is there a reason that this is less common on the other side of the Atlantic? – Heinzi May 22 at 21:04
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    @Heinzi It's what I always do, also, but it's not required and obviously doesn't work for people who don't always have enough money to pay in full. – Loren Pechtel May 23 at 1:53
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My most recent statement period is Apr 13 to May 12, 2021 and the minimum payment is due by June 9th.

When the statement closes on May 12th, a bill is generated. They will either mail you the bill, or post one to their website; or both.

There is a delay between the closing of the cycle, and the due date.

How exactly do these things normally work? I'm guessing there would be a penalty if I didn't make the minimum payment on time, but either way interest accrues on the unpaid portion? When does the interest accrue?

  • If you don't make any payment by June 9th, or a payment that is smaller than the minimum, you will be hit with a penalty for not making the minimum payment. You will also start to accrue interest.

  • If you pay at least the minimum balance by the due date, you will start to accrue interest, but there won't be a penalty.

  • If you pay the entire amount shown on the bill by the due date (June 9th), you will not pay any interest or penalties.

A word about interest. If you keep this cycle of paying the entire amount listed on the statement by the due date, you will avoid interest. If one month you pay less than the full amount, then your new purchases will start to accrue interest which can result in a much larger amount of interest than you expect.

You have to check the website/paperwork to see the interest rate involved, and the size of the penalty for not meeting the minimum payment.

What would happen if you paid an amount greater than the minimum between April 13th and June 9th, would this go towards the minimum?

One line on the monthly bill will tell you how much the minimum payment will be.

lets look at your scenario:

  • Cycle 1 starts: Apr 13
  • Cycle 1 closes: May 12
  • Cycle 2 starts: May 13
  • Cycle 1 payment due: June 9th
  • Cycle 2 closes: June 12
  • Cycle 3 starts: June 13th
  • Cycle 2 payment due: July 9th

A payment made while cycle 1 is open will reduce the minimum amount, but might not count as making a minimum payment. The amount due when the statement closes on May 12th determines the size of the minimum payment.

A payment between May 13 and June 9th will satisfy the minimum required payment.

The only way to avoid interest is to pay it all by June 9th.

Also is the due date usually the same each month i.e. the 9th?

The due date should be the same each month.

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  • On my credit card bills they give the date to pay by for no interest. It is roughly the same day each month – mmmmmm May 21 at 20:11
  • @mmmmmm if you are thinking about the best purchase date, this is not about interest, it's about the cycles. It's the first day of the cycle. If you pay something this day you'll have the whole cycle plus the days until the due date to pay the bill. – Spidey May 25 at 6:22
  • Is it ever possible to pay too early? To continue the example of the cycle being April 13 to May 12 and minimum payment is June 9th: what if I paid in the middle of the cycle like on May 25? Would the money go towards the same balance and the minimum payment would be satisfied with no late penalties (assuming it was enough to cover the minimum payment)? What if before April 13 I had a negative balance, and didn't spend enough to make it positive again. Would I still have to make the minimum payment? – titchseason Jun 10 at 8:57
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There are several good strategies here.

First, the statement period is not really relevant here. What counts is the due date, usually at least a week after you receive the bill.

If you have the money to pay the statement balance in full:

  • Pay on or before the due date. That's the strategy the teller recommended. Advantage: you will never pay interest. Note: there is no harm in paying earlier than the due date if that is more convenient (see Advanced Strategy below).

If you are not able to pay the statement balance in full (avoid this since the interest can be exorbitant):

  • Pay as much as you can, and as early as you can. Always pay at least the minimum amount, and pay it before the bill due date. Advantage: the earlier you pay, the fewer days you will be paying interest (on the amount paid). If you receive money several times a month (like a weekly paycheck), you can make multiple payments, too. They just have to add up to at least the minimum payment by the due date.

Advanced strategy:

  • Always pay all your bills the day after your payday even if they are not yet due, and also contribute to a savings account that day. If your payday is not between the CC billing date and due date, ask the credit card company to change the due date. They will usually be happy to accommodate you.

Advantage: this makes budgeting a breeze. Whatever is left over after you pay all your bills this way is spending money.

Edit: the above statements assume that you are not collecting any interest on your checking account (which is usually true in today's environment, but could of course change in the future).

It also assumes that none of the strategies will lead to overdrafts on your checking account. Those can be very expensive, and more than wipe out any benefits from any of the suggested strategies.

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  • +1 for the suggestion of asking the credit card company to change your billing cycle so the due date better fits your schedule. If all your bills are due mid-month or at the end of the month, having your credit card bill line up with the rest makes things simpler. – Dan C May 22 at 16:19
  • For the advanced strategy, how can you pay at an arbitrary time? You can't change the due date of a bill, right? But you can always pay it early? But what if the statement for the cycle hasn't come out yet? – titchseason Jun 10 at 8:58
  • I once heard someone say some people set it up so they pay ALL their bills on the same day each month. Is this even possible or BS? Because not all bills come out on the same day each month. – titchseason Jun 10 at 8:59
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    @titchseason That's where my suggestion to call the CC company (and other billers) comes in. Most companies are either very willing to work with you on changing due dates, or the amount is fixed so you may not need to have the actual bill. There may be occasional exceptions where, for whatever reason, it's not possible. In one case, I had to always pay a particular bill one day late (which most of the time is not a problem, except CCs). – Kevin Keane Jun 12 at 5:37
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Currently, there is no account that will earn you a perceptible rate of interest on your cash reserve. So, if you have the money, just pay all bills on the day they arrive. You lose nothing, and it keeps you as far as possible from a situation where you will be charged interest.

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  • You do lose something, even if not very much in the current environment. And you establish a habit that might hurt you if the environment changes. – jamesqf May 23 at 4:47
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    It won't hurt you MUCH. And, whatever the base rate, paying interest will always hurt you more. It might be worth it for the big banks and traders, dealing with millions in short-term investments at marginal interest rates. But not for you and me! – Laurence Payne May 23 at 16:05
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If you pay your bill in full every month, you won't be charged interest on the balance. This is known as the "float". If you pay only some of your bill, however, you will be charged interest the next month.

The credit card has to give you at least three weeks between when they issue the bill and when payment is due, at least in the US (the rules are probably similar in Canada, but they may be different). These rules come from when both the bills and the payments were usually mailed, so there need to be some time for them to go back and forth. This period between the end of the billing cycle and the due date is the "grace period".

You generally can change when the dates are, so if you want you bill to be due earlier in the month, for instance, you can probably arrange that, although it will take a month or two to take effect.

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Of course, pay the balance in full before the due date.

But. The balance on the statement will appear as credit utilization, and can impact your credit score. I adopted the habit of paying off the balance in full the day before the statement was cut. Until I saw a score drop, and found my main card began reporting on the last day of the month. I started paying twice each cycle.

I tend to make a lot of charges in December. Insurance is due, house, rental property, auto. I also make most donations at year end. The above is the impact of high credit utilization. The December balance on 12/31, billed in January and paid in full in January. A 60+ point swing. In effect, the credit bureaus are suggesting I should have 5-10X my highest balance of the year as an available credit line. Or, in busy months I can just make multiple payments.

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