How to Pay Your Credit Card Bills & Outstanding Balances?

>> SEE ALSO: Credit Cards 101: How Does A Credit Card Work?

Paying your credit card bill promptly is more than just a financial obligation—it's a vital component of financial wellness. 

Timely payments help you avoid late fees, reduce interest accrual, and maintain a healthy credit score. Whether you prefer to manage your finances actively or opt for automated payments, the key is finding a system that fits seamlessly into your lifestyle. 

Here's how you can manage your payments effectively and what you should consider to keep your financial health in check.

The first thing to understand about your credit card bill is the billing cycle. There are three things to pay attention to here – the statement date, the interest-free period, and the payment due date.

The statement date is the date on which your credit card bill is generated. It is fixed on the same date every month unless there is a public holiday.

As its name suggests, the payment due date is the date by which you have to pay your credit card bill. The difference between the payment due date and the statement date is the interest-free period; typically, this is between 20 to 25 days.

So, for instance, if your bill’s statement date is 13 December, and your payment due date is 6 January, you have an interest-free period of 25 days.

What about transactions made on the statement date itself? Well, such transactions will be recorded in the next credit card bill, which gives you up to an additional month’s time to pay your bill.

For example, if you purchase a S$5,000 gaming computer package on 13 December, this transaction will be counted in the next credit card statement issued on 13 January. You then have a further 25 days to make payment.

Of course, this also results in a larger credit card bill, as you are paying two months' worth of transactions at once. This is where some people can get tripped up, as they may not have sufficient funds on hand to pay their bills in full.

In general, a billing cycle can either be charged by calendar month or statement month. A calendar month is more straightforward – commencing from the first day (1st) of a month to the last day (30th/31st) of the same month (e.g. 1 - 31 January). 

Meanwhile, a statement month depends on your credit card’s approval date as reflected on your card’s (e-)statement. This statement month will normally appear on the top fold of your bill statement, indicating the exact date of when it commences and ends.

Consider a Citi credit card. In a statement month that ends on the 19th of every month, with a payment due date of around the 14th of every month. This suggests that the billing cycle for this Citi credit card ranges from the 20th of the previous month to the 19th of the current month (e.g. 20th September - 19th October).

Timing is everything, especially when it comes to managing your credit card payments. While meeting your obligations by the due date is essential to avoid those pesky late fees, did you know that paying early can unlock a trove of benefits for both your budget and credit score?

Settling your credit card bill before the due date can significantly reduce the interest charged on your outstanding balance, particularly if you clear the total amount owed. This helps you avoid interest on new purchases but also prevents the accrual of interest on existing balances that carry over to the next billing cycle. Additionally, paying early can positively impact your credit utilisation ratio, an essential factor in your credit score calculation, by keeping your balance low relative to your credit limit.

But that's not all. Paying early can also give your credit score a boost. By keeping your credit utilisation low, you demonstrate responsible credit management. Moreover, settling your credit card bill early allows for better financial planning.

Of course, we can't forget the consequences of late payments. Failing to pay at least the minimum amount by the due date can trigger a hefty late fee, often around S$100, regardless of your total bill. This penalty, coupled with the inevitable interest charges, can quickly snowball into a financial burden you'd rather avoid.

Not able to pay your credit card bill in advance? Many credit card issuers offer the flexibility to adjust your payment due date, aligning it more closely with your cash flow or payday, thus easing budget management. For instance, DBS allows you to adjust the billing cycle of your credit card. This flexibility can help synchronise your credit card payment due dates with your income schedule, ensuring funds are available when needed and reducing the likelihood of missed payments.

So, whether you're a seasoned credit card user or just starting your journey, remember that timing your payments strategically can unlock a world of benefits.

>> SEE ALSO: Why You Should Own a Credit Card in Singapore

Navigating your credit card payment options isn't just about keeping the lights on; it’s about smart financial health. 

Let's untangle the web of payment choices available, each with its own impact on your wallet's well-being.

• Minimum Payment Due: This is your basic entry ticket to staying in the good books of your credit issuer. Paying the minimum amount due keeps your account active and avoids late fees, but tread carefully. For instance, for DBS cards, the minimum is 3% of your statement balance or S$50, whichever is greater. This might seem manageable, but it's important to understand that this only keeps your account from falling into delinquency and doesn't prevent interest from piling up on your remaining balance. After all, with time, it can lead to an ever-growing debt pile. So, remember that paying just this minimum means the rest of your balance is still gathering interest.

• Statement Balance: This is the full amount you racked up by the end of your last billing cycle. Clearing this balance monthly is your golden ticket to sidestepping interest charges altogether. It’s a great habit that signals to potential lenders that you’re great at managing credit.

• Current Balance: This total includes your previous statement balance plus any new purchases post-statement. Wiping this slate clean before your next statement cycle can lower your credit utilisation ratio. Handy if you’re eyeing up a loan or another big financial move soon.

So, how do you decide how much of your credit card bill to pay?

Smart budgeting is your best pal here. Factor your credit card payments into your monthly budget to avoid nasty surprises. Setting up auto-pay for at least the minimum due can dodge late payments, but if your cash flow allows, aim higher to clear that debt faster. 

>> SEE ALSO: How Does Credit Card Interest Work?

This brings us to our next question: What if you paid your credit card’s minimum amount already? What is the next best course of action to take?

Once you have paid the minimum balance, you should formulate a plan to clear off the outstanding owed amount as soon as possible. Unless you can somehow spontaneously manifest money out of thin air, you are better off opening a balance transfer account.

In short, a balance transfer is an account that lets you move your debt from one account to a new one with a low or 0% interest rate. While the owed principal debt amount remains the same, you are at least able to stave off any interest from incurring – allowing you to both pay off your debt faster and manage your credit score.

For instance, imagine you owe S$1,500 on your credit card bill and require at least one month to fully pay off the remainder (not counting interest). By transferring your outstanding debt into a balance transfer amount, you are now granted an interest-free grace period of about six to 12 months. This allows you to pay off your debt consistently without incurring additional interest.

Needless to say, you should avoid making any new purchases with your credit card (or other credit cards, for that matter). 

There are a variety of payment options available to pay your credit card bill. From traditional methods to modern solutions, each offers its own advantages, especially when aiming to avoid missed payments and subsequent fees.

• Bank Branches and ATMs: For those who prefer in-person transactions, paying at your bank's branch or using an ATM, like HSBC credit card bills, can be paid through cash deposit machines. This method is ideal for immediate payment posting and offers a tangible sense of transaction completion.

• InterBank GIRO: Setting up an InterBank GIRO arrangement supports automatic deductions directly from your bank account, ensuring you never miss a payment.

• S.A.M. and AXS Machines: For quick, on-the-go payments, S.A.M. and AXS kiosks scattered across the city provide an easy way to manage your bills with just a few taps.

• Cheque Payments: While considered old-fashioned by some, cheques are still a viable option for credit card payments. This method is useful for those who keep a paper trail of their financial transactions.

• Online Banking and Mobile Apps: Most banks now offer their own mobile apps where you can complete payments in just a few clicks. This method is not only quick but also allows you to check your balance, view statements, and manage your payments anytime, anywhere.

• SMS Payments: Some credit issuers offer the option to pay via SMS, where you can authorise payments directly from your phone—a great option for those who prefer text-based transactions

>>SEE ALSO: What Should You Do If You Can’t Pay Your Credit Card Bill?

Here’s how you can organise your payments to avoid late fees and optimise your financial resources:

• Consolidate payment information: Keep a detailed record of due dates, balances, and interest rates for all your credit cards. Prioritise which cards to pay off first based on interest rates—paying down the highest rates can save you money in the long run.

• Develop a payment plan: Assess your total outstanding balances and devise a payment strategy. Determine the total amount you can pay each month and allocate funds strategically to minimise interest charges.

• Synchronise due dates: If possible, contact your credit card issuers to amend your billing cycle so as to adjust the payment due dates.

• Automate your payments: Set up automatic payments to reduce the chance of missing a payment. Most banks offer the ability to automatically transfer the due amount from your bank account on or before the due date.

• Set alerts and reminders: Utilise your bank’s mobile app or calendar reminders to set up notifications a few days before your payment is due. This is particularly useful if you prefer making manual payments.

• Prepare for financial fluctuations: In case of unexpected financial challenges, plan how to cover your credit card payments to avoid penalties. Consider setting aside a small emergency fund that can cover minimum payments for a few months.