Home > Credit Cards > The Right Way to Pay Your Credit Card

Comments 0 Comments
Advertiser Disclosure


Article updated by Brian Acton June 20, 2018

Unlike most monthly bills, credit card payments give you the ability to decide your payment amount, letting you pay multiple ways. The right way to pay your credit card depends on your budget and financial goals, and you might even switch up strategies month-to-month. But before you determine which payment method is right for you, you need to understand all your options.

Most credit card companies let you make payments using the following four methods.

Making the Minimum Payment

What it Means: For every billing period, your card issuer will set the minimum amount you must pay to keep your account in good standing. The minimum payment is usually a small portion of your overall balance. If you don’t make the minimum payment, your issuer may charge a late fee, impose a penalty interest rate, and even report the delinquency to the credit bureaus, which can hurt your credit score (most creditors won’t report a missed payment to the credit bureaus until it’s at least 30 days late).

What You Should Know: You must make at least the minimum payment if you wish to keep your account in good standing and avoid negative consequences. If you are having trouble paying your bills, paying the bare minimum can help get you through the month.

However, you should always try to pay more than the minimum. If you rack up too much credit card debt, your minimum payment could increase to the point that it becomes unaffordable. And if you only pay a small portion of your credit card balance every month, your credit card balance could easily balloon out of control. Finally, only making the minimum payment will cause interest to accrue on any purchases you haven’t paid off.

Other than not paying at all, making the minimum payment is your worst payment option. It’s not a long-term strategy, and you should only resort to it in times of emergency. If you do have trouble making the minimum payment each month, you should look for alternative ways to reduce your credit card debt.

Paying the Statement Balance

What it Means: Your statement balance is the total amount of charges made during your previous billing cycle, plus any outstanding balance that was already on the account. Paying the statement balance is also know as “paying in full,” and will eliminate any balance you have up to the beginning of your current cycle.

What You Should Know: If you always pay your statement balance, you can take advantage of the grace period between the end of the billing cycle and your bill date, during which your purchases for the previous billing cycle will not accrue interest.

This is one of the best ways to pay your credit card. It allows you to take advantage of the perks and conveniences of credit cards without going into debt or accruing interest on any balance you carry over. (Cash advances don’t usually come with a grace period, so check your credit card’s terms before you make one).

Always paying your statement balance requires smart budgeting, and only making purchases you can afford to pay off in full each month. If you have your credit cards et up to auto-pay, you should make sure you have enough money in your bank account to cover your previous billing cycle’s charges.

Paying the Current Balance

What it Means: Often confused with the statement balance, the current balance is actually the total amount of charges that have cleared your account to date and have yet to be paid. For example, your credit card’s current balance on day 15 of your billing cycle will include any balance left from previous cycles and purchases that have cleared within the previous 15 days.

In other words, the current balance is the most up-to-date version of your credit card balance.

What You Should Know: If you use your credit card frequently, your current balance will probably differ from your statement balance. That’s because your current balance is completely up to date.

Paying your current balance is another one of the best ways to manage your credit card. It conveys all the benefits of paying your statement balance (e.g., avoiding interest) but also zeroes out your credit card balance up to the date you pay. It also requires careful budgeting and paying attention to your spending habits so you have enough at any given time to pay your current balance.

Remember, current balances will not include any pending charges that haven’t cleared yet.

Paying a Custom Amount

What it Means: You can pay any amount you wish, whenever you want (provided your credit card issuer allows it).

What You Should Know: There are many reasons to pay a custom amount. Maybe you want to pay more than your minimum payment, but you can’t afford to pay the entire statement balance. Or maybe you like to pay a little bit at a time, several times throughout the month, whenever you can.

If that describes you, custom amounts are a good way to pay, as you can login to your account and make a payment that fits your current situation. Just don’t lose track of when your payment is actually due, or you could accidentally pay late or accrue interest on charges you intended to pay off.

The right way to pay your credit card depends on your financial situation, budgeting preferences, credit score goals, and debt strategy. But remember, to completely avoid interest and keep your balances low, you need to pay off the statement balance or current balance every billing cycle; this is the best way to use a credit card to your financial advantage. If you have trouble making your payments, it may be time to set a budget and reduce your credit card spending.

Keeping a low balance and making timely payments will also help you build credit. You can see how your credit cards are impacting your credit scores for free at Credit.com.



More on Credit Cards:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team