A frequently asked question with a very sought out answer; When is the best time to pay my credit card balance?

You might often wonder at what point of the month should you make a payment towards your credit card balance. You may also like to know how much of the balance to pay up at that point too.

9% Utilization

Firstly, know that all your credit card balances get reported to the credit bureaus only once a month. With most credit cards it is when the statement prints (find a detailed list here). Check your statements for the printing date.

Before the statement prints, you want your credit card to be below 9% credit utilization. To calculate the credit utilization of your card, divide the balance by the credit limit, then multiply the result by 100. You now end up with a percentage which is your credit utilization. Try out this calculator to plug in your numbers and get your results.

Now that you have the credit utilization, you want to figure out how much to pay so that you pay up only the portion of the balance which is over 9% credit utilization. First figure out the amount in dollars your balance should be to have a credit utilization below 9%. Take the credit limit and divide it by 100. Multiply the result by 9. The result in dollars is what your balance should be after paying. To figure out how much of your balance to pay to get to that amount, subtract the amount from your balance. Pay that amount towards the balance a few days before the statement prints so your statement prints with a balance below 9% of your credit limit. This is the amount that will be reported to the credit bureaus.

Date Last Activity (DLA)

The reason you, until this point, pay up only the balance that’s over 9% and not the full balance is so that when your statement prints, you want the bank to report a balance due and a balance paid. If you pay the full balance before the statement prints the account will always be reported to the credit bureaus as a $0 balance. This will cause the DLA on your credit report to never update. Fico does not count into their scoring models positive accounts that were not active within the last 6 months. Having your accounts report as $0 month after month will make the account look inactive, which will cause the account, including all the positive payment history, to be excluded from your credit score.

Remaining Balance

Once the statement is printed you should pay up the rest of the balance. You can do so at any point before the due date. Make sure you don’t pay too close to the due date so if the payment bounces or gets lost in the mail, etc. you have enough time to fix it.

I hope this organizes your monthly payments so that they are not only paid, but paid well!

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