If you’re new to credit cards, one of the most important things to understand is when to pay your bill. U.S. credit cards can offer generous welcome bonuses and strong everyday rewards, but they also charge very high interest. If you accidentally use your card for a cash advance, or if you forget to make a payment one month, the little bit of cashback you worked so hard to earn can end up going right back to the bank. On top of that, the timing of your payments can also affect your credit score. So let’s go over when you should pay your credit card bill.

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Your credit card billing cycle

To decide when to pay your credit card bill, you first need to understand the billing cycle. In this section, all discussion refers to purchases, not balances from Cash Advance or Balance Transfer transactions. If you have either of those types of balances, please read these two articles carefully:

Back to the main topic—let’s first look at this diagram:

To understand this diagram, let’s go through the terms one by one:

  • closing date: You can think of this as the date your credit card statement closes and your full balance is calculated.
  • statement balance: This amount generally comes from everything you owed during the previous cycle, plus interest and fees. It becomes the amount you are expected to pay for the next cycle.
  • billing cycle: A full billing cycle runs from the previous statement’s closing date to the current cycle’s closing date.
  • Due Date: The due date is the date by which you must pay the Statement balance calculated on the previous closing date in order to avoid interest. This due date normally stays the same every month (you can ask the bank to change it, but the bank generally cannot change it on its own).
  • Minimum due: Banks usually set a minimum payment due by the due date. This is the minimum amount you must pay. If you do not even pay this amount, the bank will usually charge an additional late fee ($25), continue charging interest, and may very well raise your rate in the future.
  • Grace Period: This is the interest-free period. If you paid everything in full by the previous due date, then your purchases during the current billing cycle can enjoy a grace period. That grace period starts from the date of purchase and lasts until the due date in the next billing cycle after that statement’s closing date. We’ll walk through a few examples below.

When should you pay? How much should you pay? (Simple version)

Simply put, after each closing date, you can view or receive your billing statement. It will show your statement balance. As long as you pay that statement balance in full by the due date in the following month, you will not be charged interest.

Be careful not to pay only the minimum payment due. Otherwise, the bank can still charge interest based on the APR (Annual Percentage Rate) on the remaining portion (full balance minus minimum payment).

For example:

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For my AMEX credit card:

  • the closing date is October 22,
  • the Statement Balance calculated by AMEX is $400,
  • the due date is November 16,
  • the Minimum payment due is $35,
  • the Grace Period is October 22–November 16.

So as long as I pay $400 to this credit card before November 16, I will not be charged any interest. At the same time, because I had been paying in full before, I still have a Grace Period. During that period, I do not need to repay that $400 immediately and can continue using the card. As you can see, my total balance is $605.96, which means I spent another $205.96 and have not paid it yet. The only thing I need to do is pay AMEX $400 before November 16, and I will not owe any interest. That $400 will automatically cover the Statement Balance, not the additional $205.96.

If you do not want to pay interest and do not want to overcomplicate things, this is all you need: pay everything in full before the due date each month. It’s simple and hassle-free. That’s what I always do as well.

When should you pay? How much should you pay? (0 APR version)

Some credit cards come with a 0 APR feature, such as the AMEX Every Day card or the Discover it card. A 0 APR period usually lasts for a set time, roughly 6 months to 1 year. In the simplest terms, during the 0 APR period, you only need to pay the Minimum Payment Due; you do not need to pay the Statement Balance in full.

Using the example above, if my AMEX card is in a 0 APR period, then I only need to pay $35. When the next statement’s interest is calculated, because my APR is 0, the unpaid portion ($400-$35) will also generate $0 in interest. So during the 0 APR period, I can simply pay the Minimum Payment Due before each due date, even if my Statement Balance keeps growing every month. In effect, 0 APR is like an interest-free loan from the bank.

But one very important point: if you do not even pay the Minimum Payment Due, the bank may cancel your 0 APR offer, and your APR could even become higher than other people’s. Most importantly, you must pay off all of your Statement Balance on the statement before the 0 APR period ends. We’ll explain why in the Grace Period section.

When should you pay? How much should you pay? (No Grace Period version)

Most banks we deal with now offer a Grace Period. That means even if you have not paid off the previous statement’s Statement Balance, you may still keep spending, and those new purchases can remain interest-free. However, if you do not have a Grace Period, then if you keep spending before paying off what you owe, those new purchases will start accruing interest automatically. This concept can be a little tricky, so let’s explain it in detail.

When will the bank remove your Grace Period?

Here’s an example:

  • You spend $100 at Amazon on January 1, and the closing date for that statement is January 15.
  • On January 15, you see that your Statement Balance is $100, the due date is February 13, and the minimum payment is $35.
  • Before February 13, you pay only $99. After the February 15 closing date, your statement shows the unpaid $1 plus interest.

At that point, all of your spending after February 15 no longer has a Grace Period. In other words, suppose you spend another $50 at Amazon on February 17. That $50 will begin accruing interest immediately. So when your March statement closes, you will see that the unpaid $1 has generated another month of interest, and that $50 has also accrued nearly a month of interest starting from the purchase date.

On the other hand, if you had paid the full $100 before February 13, then the later $50 purchase would automatically enjoy the Grace Period, and by the time the March statement comes out, that purchase would not have been charged interest.

The relationship between Grace Period and 0 APR

In the previous section, we said that during a 0 APR period, you only need to pay the minimum and do not need to pay extra interest. But based on the Grace Period discussion above, if during the 0 APR period you pay only the minimum, then although you will not be charged interest (because APR=0), you do not have a Grace Period.

That means once your 0 APR period ends, if you did not pay off the entire Statement Balance on the previous statement, all future purchases will begin accruing interest immediately from the moment you make them.

So I recommend paying off the entire Statement Balance on the statement before your 0 APR period ends, or else do not make new purchases on the statement right after 0 APR ends and pay everything off immediately.

What if you have no Grace Period?

The solution is simple: pay off the entire Statement Balance, then stop using the card. Once the next statement comes out (and to be safest, wait two full billing cycles), your Grace Period should return.

How payments affect your credit score

Late Payment/Miss payment will lower your credit score

There’s no question about it: if you do not pay your bill, the credit bureaus will absolutely lower your score. So unless you are in a truly unusual situation, try to pay the full Statement Balance. And even if you do not currently have enough money to pay everything off, you should still pay at least the minimum payment before the due date. Otherwise, your interest rate can jump, and your debt can quickly snowball.

Statement Balance and your credit score

We know that your credit score is also related to your debt ratio. If your Statement Balance is too high relative to your total credit limit, your score may drop. But once you pay those balances off, that proves you can repay what you borrow, and your score may rise again.

So if you have extra cash and can pay down part of your balance before the statement closes, it may make sense to do so. That way, the Statement Balance reported after the statement closes will be lower, which can help your credit score.

The opposite extreme is also not ideal: if you always pay off everything before the statement is generated, then your Statement Balance will always be 0. That can also hurt your credit score, because from the credit report’s perspective, there is no visible pattern of borrowing and repayment. If you never owe the bank anything, how can others see your repayment ability? So it can make sense to intentionally leave a small amount unpaid before the statement closes, then pay it off after the statement is issued.

One important note: this applies only when you have a Grace Period. Also, leaving part of your spending unpaid does not mean failing to pay in full by the due date. Using my AMEX card example above: first, I would definitely pay the $400 before the due date. Then I might pay another $150, leaving my total statement balance at about $50. That means when the next statement comes out, I would owe AMEX $50. In that case, my debt/credit line would be about $50/$10,000=0.5%, which is pretty healthy.

Generally speaking, keeping your debt/credit line around 1%-5% tends to be better for building credit. It’s best not to exceed 20%, because going above that may lower your score. But staying at 0% all the time is not ideal either.

Summary

This article explained the key terms in a billing cycle and when you should pay off your credit card balance. If your finances are in good shape, it’s a good idea to pay off your balance every month while keeping the Statement Balance reported on the statement around 1%-5% of your credit limit. Done correctly, that can help your credit score keep rising.