When to Pay Credit Card Bills

How To Optimise Your Credit Card Expenses?

Although most credit card accounts carry the same annual interest rates, they do not all calculate monthly interest charges the same way. Consequently, consumers may find themselves paying differing amounts in interest on the same purchases.

For example, if the interest is calculated on the basis of the consumer’s average daily balance, a cardholder who owes $200 at the beginning of the 30-day billing cycle and pays $100 on the 15th day will be charged interest on $150 (15 days at $200 plus 15 days at $100, divided by 30). This means that average daily balance accounts should be paid as early in the month as possible, since this reduces the amount on which interest is owed.

On the other hand, if it is calculated on the basis of the adjusted (or unpaid) balance, that same cardholder will pay interest only on the $100 owed at the end of the cycle. In this case, therefore, cardholders can safely wait to the end of the cycle to pay their bills — provided, of course, that they are careful not to make purchases at that time.

The third method of calculation, based on the previous balance, is illegal in some states and, in any event, undesirable for consumers, since it charges consumers the amount owed when the cycle opens — in this case, $200.

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