When Is the Best Time to Pay My Credit Card Bill?

Mastering payment timing: When to settle your credit card bill

Making sure your credit card bill is paid by the due date each month is the bare minimum. For many of us, that's totally fine. But if you're serious about maximising your credit score and minimising those interest costs, paying your bill earlier can give you an edge. That's because what Credit Bureau Singapore (CBS) sees on your credit report is directly affected by your balance.

To get the most out of early payments, it's important to understand the ins and outs of the credit card billing cycle. Let's break it down, step-by-step.

Key dates of the credit card billing cycle

Credit cards in Singapore work on a monthly billing cycle, usually around 30 days. To know the best time to pay credit card, you've got to be familiar with these key dates:

• The statement date: This is when your bank generates your credit card statement. It's also known as the closing date. This statement is a summary of all your transactions within that billing cycle. Anything after this date goes on your next statement.

• The due date: This is the last day to pay at least the minimum amount. It's generally about three weeks after the statement date. Miss this, and you'll get hit with late fees and potential interest charges!

• The reporting date: This is when your bank reports your account info to CBS. This date is important because it affects your credit scores. Unlike the statement and due dates, this one isn't usually on your bill. It could be any time in the month, but it's safe to assume it's around your statement closing date.

>> MORE: Credit card bill payment

Boost your credit score with early payments

One of the biggest factors influencing your credit score is your credit card utilisation ratio. Simply put, this ratio is the percentage of your available credit that you're using. It's calculated by dividing your current balance by your credit limit.

For instance, imagine you've got a credit card with a limit of S$10,000. If your current balance is S$3,000, your utilisation ratio is 30% (S$3,000 / S$10,000). Generally, the lower your utilisation, the better for your credit score. This is where strategic credit card payment timing works its magic.

Paying down your credit card balance before the statement date is a pro move because it lowers your reported credit utilisation ratio. This, in turn, can give your credit scores a nice boost.

Keeping a low credit utilisation ratio is super important for a good credit score in Singapore. High credit utilisation can drag your score down, making it tougher to get loan approvals and potentially leading to higher interest rates. 

Let's see this in action. Let's say your credit card payment is due on the 25th of each month, but your bank tells CBS your balance on the 20th. If on the 20th, your balance is S$4,000 on a S$10,000 limit (40% utilisation), CBS will get this info, even if you pay it down to S$1,000 on the 22nd. So, your credit score could take a hit, even if you're usually on top of payments.

That's why it's smart to think about making early payments when your credit utilisation gets close to or goes over that 30% mark, no matter when your actual due date is. By being proactive about your utilisation, you make sure your credit report shows your good financial habits, regardless of when your bank reports to CBS.

One thing to remember about credit utilisation: it's not something that sticks around. So, high utilisation in one month won't have a long-term negative impact on your credit score if you bring it back down in the following months. Your credit score should bounce back as your utilisation improves.

>> MORE: Credit card minimum payments: Are they a trap?

Early payments can slash your interests 

Credit card interest is usually calculated based on the average daily balance during your billing cycle. This means the higher your average daily balance, the more interest you're likely to pay.

Making credit card delayed payments or making payments before your due date can help lower your average daily balance, which in turn can decrease your overall interest charges. This is extra helpful if you tend to carry a balance from month to month.

But here's the golden rule in Singapore: if you pay the full statement balance by the due date, you can avoid interest charges altogether. That's the dream scenario for keeping your credit card costs down.

Here's an example to show how paying early can save you some cash on interest:

Imagine you've got a credit card with a 25% annual interest rate, and your 30-day billing cycle starts with a balance of S$2,000.

• Scenario 1 (late payment): If you make a payment of S$800 on the last day of the billing cycle, your balance would have been S$2,000 for 29 days and S$1,200 for one day. Your average daily balance would be approximately S$1,973.33. With a 25% annual interest rate, your interest charge for the month would be about S$40.89.

• Scenario 2 (early payment): If you make that same S$800 payment halfway through the billing cycle (15 days in), your balance would have been S$2,000 for 15 days and S$1,200 for 15 days. Your average daily balance would be S$1,600. With a 25% annual interest rate, your interest charge for the month would be about S$33.33.

By paying S$800 fifteen days earlier, you've cut your interest charge by around S$7.56!

>> MORE: How does credit card interest work?

Why the due date is critical

No matter when you make extra payments, always make sure you pay at least the minimum amount due by the due date. If you don't, here's what could happen:

• Late Fees: Missing the due date can lead to late fees. In Singapore, these late payment fees can be as high as S$100, depending on the bank and the situation.

• Credit Score Impact: If your payments are more than 30 days late, the late payment charge can be reported to CBS, which can seriously damage your credit scores. Payment history is the most important factor in your credit score, so avoiding late payments is key.

>> MORE: What happens if you can’t pay your credit card bill 

Smart credit card management: Essential tips for Singaporeans

Besides knowing the best time to pay credit card bills, here are some other tips to help you manage your credit card like a pro:

• Track your spending: Keep an eye on your credit card transactions regularly to stay within your budget and avoid overspending. This helps you make sure you can pay your bill in full each month.

• Use reminders or automatic payments: Set up reminders or automatic payments to make sure you always pay your credit card bill on time. This is a great way to avoid those late payment fees and protect your credit score.

• Adjust payment due dates: Think about adjusting your payment due dates to match your salary dates. This can help you manage your cash flow better and make sure you have the funds to pay on time.

Be aware of fees: Stay alert about potential credit card fees, like late payment fees. Knowing about them can help you avoid them.