If you carry a credit card balance, your issuer charges interest on it every day, so the same payment saves more interest when it lands sooner. Pay as soon as the money is in your account, such as the day each paycheck arrives, instead of waiting for the due date.
The due date is a deadline, not the cheapest day to pay. While you carry a balance, every day the money sits in checking is another day of interest on the debt it could have cleared.
Your issuer divides your APR, the card’s yearly interest rate, by 365 and charges that daily rate on each day’s balance. You can check the math on your own statement in three steps:
- Divide your APR by 365. At 24%, the daily rate is about 0.066%.
- Multiply by your average daily balance, which your statement lists as the balance subject to interest rate. On $3,000, that’s $1.97 a day.
- Multiply by the days in the billing cycle. Over 30 days, that’s $59.18.
If your statement shows more than one APR, such as one for purchases and another for cash advances, run the steps for each balance and add them up.
Since each day’s balance counts, moving a payment earlier shrinks the charge. On that $3,000 balance, sending $600 the day your statement arrives, about three weeks before the due date, trims the next interest charge by about $8.
If you’re paid every two weeks, split the payment and send part as each paycheck lands rather than one lump sum on the due date, so some of the money stops costing interest weeks sooner. Keep autopay set for at least the minimum so a missed transfer never becomes a late fee.
Carrying a balance usually costs you the grace period too, the interest-free window on new purchases, so anything you buy starts collecting interest right away. Until the card is paid off, put everyday spending on a debit card.
Before your next paycheck, schedule a card payment for the day it lands. Every day earlier is a day of interest you never pay.
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