Pay more than the minimum
If you pay the minimum balance on your credit card, it takes you much longer to pay off your bill. If you pay more than the minimum, you'll pay less in interest overall. Your card company is required to chart this out on your statement, so you can see how it applies to your bill.
There is no limit to how many times you can pay your credit card balance in a single month. But making more frequent payments within a month can help lower the overall balance reported to credit bureaus and reduce your credit utilization, which in turn positively impacts your credit.
It would take more than 26 years to pay off a $10,000 credit card balance if you only paid the minimum, assuming an interest rate of 15% and a minimum payment of 2% of the balance.
Review your credit card statement and find the date that your minimum payment is due. Subtract 15 days from your due date. Write down the date from step two and pay at least half of the balance due—not the minimum payment—on that date. Subtract three days from your due date.
While making multiple payments each month won't affect your credit score (it will only show up as one payment per month), you will be able to better manage your credit utilization ratio.
This means you could apply for 2 Bank of America cards within the same month or even the same day. But if you apply for a third within 2 months, a fourth within 12 months, or a fifth within 24 months, you will very likely be denied.
It could lead to credit card debt
In fact, the average credit card interest rate recently surpassed 20%. That means a $5,000 balance could cost you over $1,000 per year in credit card interest. The best thing to do with your credit cards is to pay them in full every month.
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. Your credit utilization ratio is another important factor that affects your credit score.
With the 15/3 credit card payment method, you make two payments each statement period. You pay half of your credit card statement balance 15 days before the due date, and then make another payment three days before the due date on your statement.
What is the 15/3 Credit Card Payment Hack? The 15/3 credit card payment hack is a credit optimization strategy that involves making two credit card payments per month. You make one payment 15 days before your statement date and a second one three days before it (hence the name).
If you happen to receive a financial windfall, you might decide to pay off all your credit cards. Doing that will decrease your credit utilization to zero and give you access to 100 percent of your available credit — and improve your FICO score because utilization counts for 30 percent of it.
Pay more than the minimum payment each month.
If you have 30k in credit card debt, you need to be making significant payments toward your bill or your debt will continue to multiply. This means paying more than the minimum payment each month, and ideally more than what you added to your statement in the previous month.
Paying your credit card early reduces the interest you're charged. If you don't pay a credit card in full, the next month you're charged interest each day, based on your daily balance. That means if you pay part (or all) of your bill early, you'll have a smaller average daily balance and lower interest payments.
Running up $50,000 in credit card debt is not impossible. About two million Americans do it every year.
But ideally you should never spend more than 10% of your take-home pay towards credit card debt. So, for example, if you take home $2,500 a month, you should never pay more than $250 a month towards your credit card bills.
Most generations have a lower average credit card debt balance than the U.S. average of $5,525 in 2021. Generation X and baby boomers are the exceptions, exceeding the average by 30.9% and 12.7%, respectively. These generations are also the only ones to exceed the national average of three credit cards per person.
The average American holds a debt balance of $96,371, according to 2021 Experian data, the latest data available.
Individuals with a classic FICO score above 795 use an average 7% of their available credit. As your revolving debt climbs, your credit score will begin dropping — long before it reaches the recommended utilization limit of 30% of your available credit.
Golden Rule No. 1: Pay 100 per cent of your credit card bills as far as possible. This way you will reduce your interest outgo to a bare minimum.
Pay your credit card bill in full
It's just like paying cash; you only spend as much as you have. If you only pay part of the balance, though, the remaining balance accrues interest.