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Credit Card Applications » Questions » User Questions » Other » Why is it such a big deal to make my credit card payments on time?

Why is it such a big deal to make my credit card payments on time?

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Firstly, the only way to make sure that you are not saddled with interest charges on your credit card purchases is to pay off your entire balance, in full, at the end of each billing cycle. What is a billing cycle? Is the period of time that exists between when your creditor send you the bill for what you owe. Usually, a billing cycle interval is roughly a month. Credit card companies charge cardholders interest on any outstanding portion of a balance that is carried over from billing cycle to billing cycle. Many banks allow consumers to adjust their billing cycles to suit their specific financial needs. For example, you can request that your credit card company bill you on the 15th of each month as opposed to the first, to stagger the time when payments are due in order to better plan your budget. If you get a bill, you must make a payment at least equaling the amount of the minimum balance due as indicated on your statement.

If you are carrying an outstanding balance on your card, paying in advance of the payment due date can actually save you some money interest-wise. So, while it is sometimes beneficial to pay your credit card bill early, it is never a good idea to pay it late.

Missed payments are regarded negatively by creditors for obvious reasons. They are expecting you to make a payment by a certain date each month and if you do not send in money in time, the payment is regarded as missed. This behavior is reported to the big credit scoring bureaus that analyze your payment history in order to determine what your score is. All late payments will show up on your credit report as negative activity, and will ultimately drag your credit score lower. Typically, credit card companies send reports to the consumer credit scoring agencies once every month.

If you are interested in applying for a loan, a mortgage or even a new credit card, future creditors will inspect your credit history to get an idea of how you have managed your past credit obligations as well as your current credit obligations in the effort to predict how you will handle your future credit obligations. If you have missed many payments in the past, they will assume that means you are likely to miss payments in the future. They will assess how often you have made late payments, how recently the late payments occurred and the severity of lateness. Someone who has only been late with a payment once or twice and were only late by a few weeks will be regarded more favorably than someone who missed payments on a regular basis and were late by 90 days or more. Regardless, a late payment is a negative strike against you and your credit score and will limit your ability to receive the most favorable financial products such as low interest rates. That is why it is very important to establish a positive history of making payments on time.

All credit cards terms, fees and rates mentioned in this article/post are actual on the posting date. See the current products’ Terms & Conditions on the issuing banks' websites.
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