First, if you carry a balance, you'll pay interest on that amount, which can quickly get expensive. Credit card lenders generally charge an annual percentage rate (APR) ranging from 16% to 25% on purchases made with the card.
If you pay less than the statement balance, your account will still be in good standing, but you will incur interest charges. You can avoid paying interest temporarily with an intro 0% APR card, like the Wells Fargo Active Cash® Card or the Citi Simplicity® Card.
What could happen if you don't pay your credit card debt? If you don't pay at least the minimum amount due each month, your credit issuer could report your account to one or all of the three major credit bureaus—Experian™, Equifax® and TransUnion®—as past-due.
The lower your balances, the better your score. Carefully consider how you want to use your available credit based on your goals and your personal situation. Keep in mind, however, that the best way to maintain a high credit score and lower your financial risk is to pay your balances in full and on time, every time.
Whenever possible, paying off your credit card in full will help you save money and protect your credit score. Paying your entire debt by the due date spares you from interest charges on your balance.
Partial payments will help lower your balance, but you can still face late fees, growing interest and damage to your credit score.
If you regularly use your credit card to make purchases but repay it in full, your credit score will most likely be better than if you carry the balance month to month.
Make a credit card payment 15 days before the bill's due date. You might be told to make your minimum payment, or pay down at least half your bill, early. Make another payment three days before the due date. Then, pay the remainder of your bill—or whatever you can afford—before the due date to avoid interest charges.
This time frame varies by state and type of debt but typically ranges from three to six years for credit card debt. So, by the seven-year mark, most creditors will be unable to sue you over your unpaid credit card debt.
Benefits to paying off a card in full
If you can afford to pay of your debt quickly, do it! Not only will it improve your credit utilization score, but it will save you hundreds if not thousands in interest.
Generally, your overpayment will appear as a credit in the form of a negative balance on your account. This negative balance will roll over towards any new charges you make or outstanding balances for the next month.
Is it better to carry a credit card balance or pay it off? You may have heard that carrying a small balance will help your credit, but that's a credit myth. According to the CFPB, it's generally a good idea to pay off your credit card balance when you can, rather than carrying revolving debt.
If you are more than 30 days past due on a payment, credit issuers will likely report the delinquency to at least one of the three major credit bureaus, likely resulting in a drop in your score.
Your failure to make payment towards the settlement offer within the prescribed time, will make the settlement offer null and void. In such case, you will be liable to pay the total outstanding as on date with interest as per the contractual terms & conditions.
The Takeaway
The 15/3 credit card payment rule is a strategy that involves making two payments each month to your credit card company. You make one payment 15 days before your statement is due and another payment three days before the due date.
Assessing loan and credit costs
The Rule of 72 is also helpful in evaluating the impact of compounding interest on debt. A credit card debt with an 18% annual interest rate will double in just four years (72 ÷ 18 = 4).
These fees are typically a percentage of the sale plus a fixed dollar amount. Fees vary with the credit card provider. For instance, American Express has different rates than Discover. Important to note: surcharges cannot be charged to make a profit and may not exceed 4 percent of the transaction total.
A FICO® Score of 650 places you within a population of consumers whose credit may be seen as Fair. Your 650 FICO® Score is lower than the average U.S. credit score. Statistically speaking, 28% of consumers with credit scores in the Fair range are likely to become seriously delinquent in the future.
It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
Carrying a balance on your credit card does not help your credit score. Doing so can also result in extra fees and interest charges.
Making several card payments during a month or a single billing cycle can indeed improve one's overall financial standing and ultimately increase their credit score, provided all other related aspects like those mentioned above are managed properly.
Don't send in less than your minimum payment unless the creditor has agreed to a lower amount. Be sure the agreement is in writing. Credit card companies and collectors can sue you even if you make partial payments.