Now that you’ve mastered how to approach spending and some key basics and terms, it’s time to make your first credit card payment. There are tons of “right” ways to pay your bills, but there are also a few ways of paying your card that you’ll want to be sure to avoid. We’re here to make sure you avoid those pitfalls and keep stepping up your financial game.
One number that most credit cards make pretty prominent is your minimum payment. As you may remember from our first post in this series, making your minimum payment is the least you can do to avoid late fees, but is not the payment amount you should be shooting for. The low number may be a tempting option, but the first rule of when and what to pay your credit card: don’t just make your minimum payment.
Your goal should be to always pay your full statement balance at least a few days before the due date. Especially with the low credit limit you probably have on your first card, paying more often will be helpful. But, if all you remember is that one rule, you’ll be doing pretty well. If you really want to master your first credit card payments, keep reading!
Tip #1: Make first credit card payment on time or early
This seems obvious, but paying your card on time is crucial if you want to improve your credit score and avoid interest payments. Whatever you need to do to remember your due date – alarms, calendar notifications, message in the sky – make sure you pay those bills on time and in full.
Your payment history makes up 35% of your FICO credit score, so late or missed payments have a big effect on your score. Especially when you’re first getting started with credit cards, you’ll want to show a very responsible payment history to get approved for bigger credit limits and cards with better rewards programs in the future.
Tip #2: Pay more often to reduce credit utilization
One of the downsides of your first credit card? You probably have a small credit limit. This means that you can’t buy as much with your card, and it’s hard to keep your credit utilization low. However, there is a way around it!
Keep your utilization rate lower by making frequent payments to your card. Instead of waiting till the end of the month to pay for all of your purchases at once, make payments every other week, once a week, or even more often to keep your balance and utilization lower. Just make sure that the total amount you’ve paid every month covers your statement balance, and you’re good to go!
Tip #3: Make a payment plan that works – and stick to it
Knowing everything you do now about your cards and your first credit card payment, pull out your calculator (or at least your calculator app) and create a payment plan. Think realistically about your budget, spending, and how often you’ll need to make payments to keep your credit score in a good place.
If you don’t already have a budget, start there. Once you know how much you’ll be spending, decide how much of that you’d like to put on your credit card. Now, all you have to do is figure out how often to pay your card to keep your utilization below your target level! Set up recurring calendar reminders for those payments, and stick to your plan!
Now that you know the ins and outs of paying your first credit card, you’re ready to start swiping! Keep these tips in mind to make sure your credit score improves and you never have to pay interest or late fees.