Paying Your Credit Card Bills

Paying for your credit card is an important step that will affect your financial future. Missing payments or carrying a balance will end up costing you more, as you get charged interest payments or even have your APR increase. You should take steps to make sure you pay your credit card payments on time.

Tips on Paying For Your Credit Card

When you have bills to pay, such as monthly credit card payments, you want to do everything possible to make your minimum payment each month and make sure that your payment is not late. Late payments will generally increase your credit card payment by increasing your APR or Annual Percentage Rate, the amount of interest you will pay each year.

Many bill companies allow you to set up auto pay, which is a great way to ensure that your payments aren’t late. If you’re paying your complete balance on your credit card each month, auto pay may not be the option for you. Instead, set up monthly calendar reminders to make your payments. These can be on your phone, in a planner, or even on a big wall calendar — whichever way works for you.
Paying your credit card payment on time each month has a host of benefits. There are the obvious, such as staying out of collections. Did you know that as much as 35% of your credit score is based upon you making bill payments, such as for your credit card, on time? You can avoid late fees as well as higher interest and monthly payments by making your payments on time.

Mistakes When Paying For Your Credit Card

The biggest mistake you can make when paying for your credit card is not paying your bill on time or not making the minimum payment, which go hand-on-hand. When your payment is late, you will generally be assessed a late fee, and you may find that your APR increases. (These are important things to be aware of when choosing a credit card to apply for.) Some cards offer late fee forgiveness, such as some Discover cards. With this program, the first time your payment is late, you don’t have to worry about a late fee or changes in your APR: your mistake is “forgiven.”

Your late fee may be as high as $25 to $35 each month that your payment is late, and it will generally be reflected on your next card billing statement. You will incur more late fees if you continue to miss the due date on your credit card payment. At the same time, your credit card interest rate may rise with a penalty APR, which can be as high as 30%. If you are in the middle of a promotional 0% APR, you will generally lose that perk and have it revert to the default interest rate on your card.

Other consequences of missing your credit card payments are that this will show up on your credit reports, usually 30 days after you’ve missed a payment. This can drastically decrease your credit score, especially if you had a good or excellent credit score to begin with.

Other Considerations

Most payments that you make will be for a combination of the principal amount of your credit card debt and any interest that you have accrued. One way to shorten the amount of time you are paying off your debt is to make principal-only payments, which many — but not all — lenders allow. This is generally an extra payment made during the month that gets applied just to your principal amount.

If you have more than one credit card, you need to make the monthly minimum payments on each card. One suggested way to pay off all of your card debt is through the snowball method. Make the minimum monthly payments for each card and add an additional payment of whatever you can afford to the card with the lowest amount on it. Once you’ve paid off that card, apply the minimum payment and any additional to your card with the next highest balance, and so on, until you’ve paid off your credit cards.

In Summary

When making credit card payments, you ideally want to pay off the balance each month. If you can’t do that, you should always make at least the minimum monthly payment to avoid penalties, such as higher APR rates and late fees.