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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 their 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?

Ryan Kohn
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Ryan
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8 Answers8

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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.

MattK
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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.

JohnFx
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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.

mbhunter
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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.

mpenrow
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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.

David
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I'm really going to go against the crowd here--paying it too fast could be a problem.

The thing is you want them reporting that you paid the bill as agreed. To do that you need to pay the bills--which means you need to leave the charges there to get billed for. Paying less than the total is fine, paying as soon as they bill you but before you even get the bill is fine.

Loren Pechtel
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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.

stands2reason
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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.

MrChrister
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