I came across this question a few weeks ago on one of the many discussion boards I frequent on the web. “How many times do you pay your credit card each month?” My first thought was: “Once. Why would anyone give themselves more bills to pay in the same month?” I pay my balances in full on their due date each month and forget about it until the next month. After I got off my high horse, I remembered that I have, in fact, made multiple payments towards my credit cards in the same month in the past. And for good reason, too. Maybe you should be doing the same!
Low credit card limit
Back in college the credit limits on my cards were pretty low. I don’t remember how many credit cards I had open at the time, but it was not many. I liked using cards instead of cash, because I wanted to establish my credit score and get rewards. I watched my balances like a hawk to avoid over limit fees. Anytime I felt the balance was too close to the limit, I would make a small payment.
I carried a balance on my credit cards throughout college. (Luckily, I got a job right after graduation and paid them off in a year.) Although I knew interest was a bad thing, it wasn’t until one of my Finance courses that I learned how interest is calculated. Interest is usually calculated and compounded on a daily basis. This essentially means that your balance, even if you make no other purchases on the card, is growing every single day. Making payments toward your balance, no matter how small, multiple times a month can help reduce the amount of interest you end up paying in the long run.
Pay down principal
No matter how many payments I made toward my credit card balances, it sometimes felt like the number was not getting any smaller. Most of my money was paying off interest and not touching the balance at all. If you are paid weekly or bi-weekly, try making a payment with each paycheck. This will ensure that you are making more than the minimum payment each month and tackling the big balance.
Increase credit score
Your credit score won’t jump 10 points immediately after a payment, but one of the factors impacting your score is credit utilization. In other words, how much of your overall credit (across all your cards and other credit lines) is being used? The lower the amount, the higher your credit score. Making multiple payments each month to keep your debt-to-credit ratio low will help beef up your credit score.
Read more about credit scores and how I got mine to 800+!
Ease of budgeting
Some people find that paying their credit cards with each paycheck helps them budget more efficiently. For example, if you get paid weekly, maybe it makes more sense for you to have a weekly budget instead of a monthly one. Weekly, or even bi-weekly, budgets can help you keep a closer eye on your finances.
Keep good records
Credit card companies make mistakes, too. Keep a spreadsheet with all the payments you make each month. Have a folder on your desktop and save all your payment confirmations. It can get confusing when you are making multiple payments to each card every month. It’s important to keep good records of your hard work! Looking at the spreadsheet to see how far you’ve come can be a great motivator as well!
Finances are a personal thing and you should find the method that works best for you!