How Often to Pay a Credit Card

Money Girl discusses whether you should pay your credit card off in 2 smaller payments each month vs. 1 large payment once a month.

Laura Adams, MBA,
March 15, 2012

Jessica posted on the Money Girl Facebook page:

I've always wondered if it's advantageous to send 2 smaller payments a month to a credit card vs. 1 large payment only once a month. I know the devil is probably in the details as far as when and how the bank calculates the interest accrual, but is there a calculator anywhere that you can use?

ANSWER: Sending more than one payment to a credit card each month can help you better manage money and save interest. Here's how: Credit cards charge you a daily interest rate--which is the annual rate divided by 365--on the balance of your account. You have a grace period that lasts until your statement due date--so if you charge a new outfit and pay off your account in full, no interest accrues. {C}That means if you never carry a balance from month to month, there's no financial advantage to paying the bill any sooner than the due date. However, making a payment once a week or every other week can still help you manage money wisely.

In my book, Money Girl's Smart Moves to Grow Rich, I recommend using a credit card for the rewards, but treating it more like a debit card where you transfer funds to pay it down more frequently than once a month. That way you never think you have more money than you really do! If you carry a credit card balance from month to month, the sooner you pay some or all of it down, the less interest accrues on the account. How much money you could save by making more than one credit card payment a month depends on the interest rate you're charged, the payment amount you'd make, and outstanding balance you owe. You can use a Daily Periodic Rate Calculator to find out the daily interest rate you're paying on an outstanding credit card balance.Money Girl's Smart Moves to Grow Rich

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