Pay your credit card every two weeks

I have made a habit of paying my credit cards every two weeks and I recommend this strategy to everyone. While you should always strive to pay your bills in full to avoid interest, this approach is even more effective for cardholders who carry balances.

If you have month-to-month credit card debt, you don’t have a grace period. Interest accrues every day. Card issuers calculate this in different ways – it’s often a daily periodic interest rate applied to your daily balance – but the main point is that if you have credit card debt, interest is constantly accumulating and paying earlier is always better than waiting until later.

If you pay off the entire balance on your credit card statement the next month, you should be granted a grace period. the MAP law states that if issuers have grace periods, and they usually do, then they must last at least 21 days. For example, one of my credit cards emailed me a statement on December 8th. Since I paid the entire balance the previous month, I won’t be charged any interest if I pay in full by January 5th.

Cardholders who pay in full can enjoy the float even longer, depending on when they made their purchases. Building on my previous example, if I made a purchase on December 9, this invoice wouldn’t even arrive until January 8, and I would be interest-free until February 5 (again, assuming I paid in full. the previous month).

Still, I like to pay my credit cards a lot more often than that.

Start a payday ritual of an extra mid-month payment

I made it a troubleshooting ritual (every other Friday). A tangible benefit is a decrease use of credit ratio, which helps my credit score. A credit usage rate is the amount of credit you use divided by your total credit limit. It is calculated per card and on all your cards combined. Many people don’t realize that they can have a high credit utilization rate even if they pay off the full balance on their statements each month.

Credit usage is usually reported on your statement date, so if you charged $ 4,000 against a $ 5,000 limit, you have a very high usage rate (80%), even if you pay the full amount before interest is charged. It is generally better to keep this ratio below 30 percent, and a lower rate would be even better. Many people with excellent credit scores keep their usage below 10%. Making an extra payment or two mid-month is a useful way to accomplish this.

Additional payments also help you monitor your budget

If your cards are “out of sight, out of mind,” you might have a nasty surprise waiting for you when the statement arrives. This is especially true at this time of year thanks to holiday shopping, travel, parties, etc. Even if you don’t like the idea of ​​paying extra mid-month, you should at least log into the apps and websites of your credit card issuers every week or so to keep tabs on your spending. Look for fraudulent transactions while you’re at it.

Credit and debit cards can help you map your spending habits, as they provide a digital and / or paper trail. When we spend money, sometimes it is difficult to remember where all that money has gone. And once you know where you’ve been, you’ll be better equipped to set your course for the future.

What to do if you’re already in debt with your credit card

Obtain a 0% Balance Transfer Card (these offers last up to 21 months), take the time to fend for yourself, sell unnecessary goods, and reduce your expenses. Squeeze as much extra money as you can toward your credit card debt as often as possible.

Credit card debt is easy to contract and difficult to eliminate. Interest rates are very high (often 17-25%, depending on your credit score). Our sister site CreditCards.com found 56 percent of credit card debtors have been in debt for at least one year, and 37% have been in debt for at least two years.

Look for a warning sign on your credit card statement

You could be on the verge of incurring credit card debt if you are able to pay your monthly statement balance in full, but you are unable to afford the additional fees that you charged between the due date. closing of the statement and the date of your payment. It’s the difference between the “statement balance” and the “current balance” that you see when you pay your credit card bills online.

If you can pay the statement balance but not the current balance, you’re living close to the edge. You basically depend on your next paycheck to fund the purchases you’ve already made. A bi-weekly payment routine gets you out of this rut. You get ahead of your bills rather than catching up all the time. Plus, becoming more money conscious helps you avoid overspending and allows you to focus on what’s most important in your life.

Ted Rossman is the Industry Analyst and Columnist at Bankrate.com and CreditCards.com. He has been interviewed by hundreds of media outlets, including the Wall Street Journal, Forbes, NBC Nightly News, CBS News, CNBC, and Fox Business. Ted also writes the Wealth and Wants column for CreditCards.com, which focuses on cash back cards. Previously, he spent seven years as a member of the award-winning communications department of CreditCards.com and its sister sites, The Points Guy and Bankrate.com.

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