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I want to pay my credit fast but I'm thinking that being too early would cause me to lose on some of the interest I would otherwise have gotten on my savings account.

What is the best route for me to take? Do I have nothing to worry about as long as I always pay by the payment due date?

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    What is the interest rate on that savings account? Oct 29, 2014 at 2:05
  • @JoeTaxpayer 3.6% for the savings account, and 20.7% for the credit card one, I think.
    – Zaenille
    Oct 29, 2014 at 2:08
  • Yes. Why would you pay before the due date? Pay the entire due amount on the due date. Don't pay interest.
    – Guy Sirton
    Oct 29, 2014 at 2:57
  • where are you getting 3.6% on a savings account!?
    – warren
    Oct 29, 2014 at 18:51
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    @warren In Australia it's common.
    – Zaenille
    Oct 30, 2014 at 0:49

3 Answers 3

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If you have the ability to pay online with a guaranteed date for the transaction, go for it. My bank will let me pay a bill on the exact date i choose. When using the mail, of course, this introduces a level of risk.

I asked about rates as the US currently has a near zero short term rate. At 3.6%, $10,000, this is $30/month or $1/day you save by delaying. Not huge, but better in your pocket than the bank's.

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    One minor drawback to this: If your credit card company offers free monthly credit scores with your statements (as mine does), they generally pull your information a few days prior to your payment due date. This may lead to an increased utilization reading on your monthly reporting.
    – Noah
    Oct 29, 2014 at 14:33
  • @Noah - my understanding is that the number reported is the number on the monthly statement. Some delay has to occur between the payment and the statement getting cut. This anecdotal evidence (which is worth little, I know) is from 3 cards I use and my Credit Karma report. Oct 29, 2014 at 16:34
  • I have a CU and Discover that both report monthly, and they both say "as of [date], your score is ___". Discover pulls data 1 day before payment due (on the 14th), my CU pulls data on the 3rd. That time difference provides some interesting reporting differences (A $7,300 payment this month).
    – Noah
    Oct 29, 2014 at 16:49
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To avoid nitpicks, i state up front that this answer is applicable to the US; Europeans, Asians, Canadians, etc may well have quite different systems and rules.

You have nothing to worry about if you pay off your credit-card statement in full on the day it is due in timely fashion. On the other hand, if you routinely carry a balance from month to month or have taken out cash advances, then making whatever payment you want to make that month ASAP will save you more in finance charges than you could ever earn on the money in your savings account. But, if you pay off each month's balance in full, then read the fine print about when the payment is due very carefully: it might say that payments received before 5 pm will be posted the same day, or it might say before 3 pm, or before 7 pm EST, or noon PST, etc etc etc. As JoeTaxpayer says, if you can pay on-line with a guaranteed day for the transaction (and you do it before any deadline imposed by the credit-card company), you are fine.

  • My bank allows me to write "electronic" checks on its website, but a paper check is mailed to the credit-card company. The bank claims that if I specify the due date, they will mail the check enough in advance that the credit-card company will get it by the due date, but do you really trust the USPS to deliver your check by noon, or whatever? Besides the bank will put a hold on that money the day that check is cut. (I haven't bothered to check if the money being held still earns interest or not). In any case, the bank disclaims all responsibility for the after-effects (late payment fees, finance charges on all purchases, etc) if that paper check is not received on time and so your credit-card account goes to "late payment" status. Oh, and my bank also wants a monthly fee for its BillPay service (any number of such "electronic" checks allowed each month). The BillPay service does include payment electronically to local merchants and utilities that have accounts at the bank and have signed up to receive payments electronically.

  • All my credit-card companies allow me to use their website to authorize them to collect the payment that I specify from my bank account(s). I can choose the day, the amount, and which of my bank accounts they will collect the money from, but I must do this every month. Very conveniently, they show a calendar for choosing the date with the due date marked prominently, and as mhoran_psprep's comment points out, the payment can be scheduled well in advance of the date that the payment will actually be made, that is, I don't need to worry about being without Internet access because of travel and thus being unable to login to the credit-card website to make the payment on the date it is due. I can also sign up for AutoPay which takes afixed amount/minimum payment due/payment in full (whatever I choose) on the date due, and this will happen month after month after month with no further action necessary on my part. With either choice, it is up to the card company to collect money from my account on the day specified, and if they mess up, they cannot charge late payment fees or finance charge on new purchases etc. Also, unlike my bank, there are no fees for this service. It is also worth noting that many people do not like the idea of the credit-card company withdrawing money from their bank account, and so this option is not to everyone's taste.

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    One advantage with using the credit card website is that you can schedule the payment week before it is due, but only have it execute on the due date. Oct 29, 2014 at 3:10
  • my credit cards all allow me to setup auto payments for the minimum due, the total balance, or some other amount
    – warren
    Oct 29, 2014 at 18:53
  • How electronic payments work probably depends on your bank. My bank lets me schedule payments in advance. They also say that they will guarantee that the recipient will be paid by the date I specify. One time they weren't and the bank was very helpful getting it straightened out. I don't recall if there was a late fee or any such in that case.
    – Jay
    Oct 29, 2014 at 19:22
  • Ditto the very important point: It's fine to wait until the due date to pay IF YOU ARE PAYING IN FULL. Otherwise, you are going to pay interest on the unpaid balance from the date of the transaction, and the interest rate on a credit card is almost certainly more than any interest you are collecting on a savings account.
    – Jay
    Oct 29, 2014 at 19:23
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    @warren My answer is dense text and the point is easy to miss among all the verbiage, but note that I did say about AutoPay that it can be set up to "take a fixed amount/minimum payment due/payment in full (whatever I choose)". Oct 29, 2014 at 20:55
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Mostly ditto to Dillip Sarwate. Let me just add:

I don't know how you're making your payments, whether through the biller's web site, your bank's web site, by mail, in person, etc. But whatever the mechanism, if there is a chance that waiting until the due date to pay may mean that you will miss the due date: don't. The cost of a late payment charge is likely to far exceed any interest you would collect on your savings.

Bear in mind that we are talking pennies here. I don't know how much the monthly bills that we are discussing here come to. Say it's $3,000. I think that would be a lot for most people. You say you're getting 3.6% on your savings. So if, on the average, you pay a bill 2 weeks later than you might have, you're getting an extra 2 / 52 x 3.6% x $3,000 in interest, or $4 per month. I think the last time I paid a late fee on a credit card it was $35, so if you make one mistake every 8 months and end up getting a late fee it will outweigh any savings.

Personally, I pay most of my bills through either my bank's web site or the biller's web site. I schedule all payments when I get a paycheck, and I generally try to schedule them for 1 week before the due date, so there's plenty of breathing room.

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