Best time to pay Credit Card?

I have recently taken out a credit card for the purposes of building credit. I am after advice because I don’t seem to quite understand a lot of the guidance online.

Is it best to pay stuff off straight away, as you’ve bought something with the credit card and then paid that or wait until your statement is produced and pay it off then?

Seems like a daft question so apologies. Just looking to make sure I am having the maximum positive impact on my credit score.

Thanks 
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  • [Deleted User]
    [Deleted User] Posts: 35,242
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    edited 23 August 2021 at 10:46AM
    Wait for your statement, then pay off in full before the due date. Don't worry when your credit score drops as a result, as long as you are clearing in full each month and not going over limit. You just need to demonstrate low risk behaviour.
  • Thank you.

    They should really teach this stuff in schools. I was always told “Never buy what you can’t afford” and because of that I’ve pretty much always paid for things outright. Only exception was that I took a big £8,000 loan before interest back in 2015 but paid that off with no missing payments. Plus the fact I’ve never missed rent or utilities payments makes it a super frustrating process.
  • Ebe_Scrooge
    Ebe_Scrooge Posts: 7,320
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    As ZX81 says, pay in full when the statement arrives, but before the "payment due" date - there's usually a period of 2 - 3 weeks between the 2 dates.  Simplest and safest is to set up a Direct Debit to pay the full amount.  If you pay off purchases as soon as you've made them, there's no harm done as such - but you do lose the benefit of building up a good credit history, because the way it's reported it looks like you're not using the card.
    I was always told “Never buy what you can’t afford” and because of that I’ve pretty much always paid for things outright.
    That is absolutely and definitely the right approach.  With a credit card, you're just deferring payment for a month or so.  You must absolutely NOT buy stuff on credit that you know you won't be able to afford to repay in full when the statement arrives - it's that sort of behaviour that leads to spiralling debt and high interest charges.  Used sensibly, a credit card can be a very useful tool, but you must never look on it as "free money" or as an excuse to buy things you can't afford.

  • Mrsn
    Mrsn Posts: 1,430
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    That is absolutely and definitely the right approach.  With a credit card, you're just deferring payment for a month or so.  You must absolutely NOT buy stuff on credit that you know you won't be able to afford to repay in full when the statement arrives - it's that sort of behaviour that leads to spiralling debt and high interest charges.  Used sensibly, a credit card can be a very useful tool, but you must never look on it as "free money" or as an excuse to buy things you can't afford.

    ^^^^^

    This is the bit I wish was taught as such... at 18 I really did not understand what I was doing and got myself into quiet a big mess. Possibly not helped by growing up in a spend it whilst you’ve got it environment. Determined not to make the same mistakes with my children.
  • blue.peter
    blue.peter Posts: 1,194
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    As ZX81 says, pay in full when the statement arrives, but before the "payment due" date - there's usually a period of 2 - 3 weeks between the 2 dates. 

    It depends on the card, but it's a bit longer than this for most. 25 days is typical, in my experience. The only exception of which I'm aware is Virgin, which only gives 20 days. Examples from my current cycle:
    Amazon credit card - statement date 22 August, payment due 16 September;
    MBNA credit card - statement date 19 August, payment due 13 September;
    Nationwide credit card - statement date 20 August, payment due 14 September;
    TSB Credit Card - statement date 22 August, payment due 16 September.


    Simplest and safest is to set up a Direct Debit to pay the full amount.  If you pay off purchases as soon as you've made them, there's no harm done as such - but you do lose the benefit of building up a good credit history, because the way it's reported it looks like you're not using the card.


    Agreed. A DD for the full amount is simplest. For most cards, the payment will be collected on the due date, not immediately after the statement is issued. (AmEx is an exception to this rule - their DDs are collected about a couple of weeks before the due date. ) Just for goodness' sake make sure that there's enough in your bank account to meet the DD when it is collected. I've found that it's helpful to have my statements issued a week or so before I get paid (at the end of the month). This means that when I receive my money, I already know exactly how much of it to hold back for my credit cards' DDs.
  • Some_Guy
    Some_Guy Posts: 35
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    edited 24 August 2021 at 3:44PM

    Simplest and safest is to set up a Direct Debit to pay the full amount.  If you pay off purchases as soon as you've made them, there's no harm done as such - but you do lose the benefit of building up a good credit history, because the way it's reported it looks like you're not using the card.

    Agreed. A DD for the full amount is simplest. For most cards, the payment will be collected on the due date, not immediately after the statement is issued. (AmEx is an exception to this rule - their DDs are collected about a couple of weeks before the due date. ) Just for goodness' sake make sure that there's enough in your bank account to meet the DD when it is collected. I've found that it's helpful to have my statements issued a week or so before I get paid (at the end of the month). This means that when I receive my money, I already know exactly how much of it to hold back for my credit cards' DDs.

    For a period after re-entering the world of credit cards (having previously got myself into a mess), I'd pay the full amount due as soon as I'd got the monthly statement - I had this idea that I liked to see a £0 amount owed after I paid it off, thus proving to myself that I was being responsible!

    However I moved on to DD for the full amount. Now I actually use a seperate bank account for the DDs for my two credit cards, and top it up each month (plus I keep a bit of a buffer in there). Yes this does require a degree of active management on my part but my thought process is that I'm keeping that money ringfenced away from my main current account. Might not work well for others though - as blue.peter says above the crucial thing is that when the DD is collected, there has to be enough money for it to go through (that or in the last resort an active overdraft facility that will cover the DD amount).

    This useful video is from a guy who has had a career in the UK credit card industry, Sasha Yanshin - it's entitled "When To Pay Your Credit Card Bill & How Much To Pay":

    In the above video he details why paying by DD in full is the best way to improve your credit profile, and the rationale behind why he says that.

    (And yes - whilst he does use the term "credit score" in the descriptions to this and other videos, he is very clear in the content of his videos that the magical 'scores' offered to consumers by Experian, Equifax and Transunion are nonsense, and that it is your overall credit record/profile that determines your credit worthiness in the eyes of lenders.)
  • blue.peter
    blue.peter Posts: 1,194
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    Some_Guy said:

    Now I actually use a seperate bank account for the DDs for my two credit cards, and top it up each month (plus I keep a bit of a buffer in there). Yes this does require s degree of active management on my part but my thought process is that I'm keeping that money ringfenced away from my main current account.
    If that's what works for you, do that. It's a perfectly valid way of working. (I suppose that that's actually quite similar to what I did for a period. I had a second bank account to meet all of my bills, but that was in the days when my gas, electricity, phone etc. had to be paid quarterly. I needed to put money by in months 1 and 2 so that there'd be enough to pay the bills in month 3. Oh, and my mortgage was payable six-monthly(!).)

    Nowadays, I simply use AceMoney to help me ensure that my current accounts always hold enough to meet each month's bills.

    Some_Guy said:

    ...(that or in the last resort an active overdraft facility that will cover the DD amount).
    Very much a last resort, I think. Not a good idea at all. I understand that overdraft interest rates are generally running at about 40% pa. If a credit card is charging 20%, or even 30%, wouldn't it be better financially to pay less than the full amount due on a credit card - and accept the interest charge there - than to pay overdraft interest if you can't pay the credit card in full? Of course, this approach makes sense if, and only if, your credit card charges interest at a higher rate than your bank overdraft.
  • Some_Guy
    Some_Guy Posts: 35
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    Some_Guy said:

    ...(that or in the last resort an active overdraft facility that will cover the DD amount).
    Very much a last resort, I think. Not a good idea at all. I understand that overdraft interest rates are generally running at about 40% pa. If a credit card is charging 20%, or even 30%, wouldn't it be better financially to pay less than the full amount due on a credit card - and accept the interest charge there - than to pay overdraft interest if you can't pay the credit card in full? Of course, this approach makes sense if, and only if, your credit card charges interest at a higher rate than your bank overdraft.

    Absolutely agreed, yes. I was just thinking about a situation where things might have gone a little awry at the last moment - allowing the credit-card DD for the full amount to go through might at that point be the only way of being sure that the CC bill gets paid on time (i.e. might be too late to cancel the DD with your bank, and too late for other methods of payment to reach the CC account in time). In such a scenario, protecting one's clean record of paying the CC bill on time might be worth it - but it'd certainly be something to be avoided - as is the situation where one's finances might 'go awry' at the last minute.

    For what it's worth, I've recently opened a First Direct account, attracted by the £250 interest-free overdraft facility. I've no intention of making use of it (and certainly not regularly), but it just feels like a very useful thing to have 'just in case'.
  • blue.peter
    blue.peter Posts: 1,194
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    Some_Guy said:

    Absolutely agreed, yes. I was just thinking about a situation where things might have gone a little awry at the last moment

    Ah. I see where you're coming from now. I think that the real point is that we absolutely need to keep on top of our finances and plan ahead to ensure that this situation simply doesn't arise.

    A personal finance management program (e.g., AceMoney, Money Manager EX, Microsoft Money) can make this pretty easy. Using AceMoney, I can easily see exactly how much there'll be at all times until my next payday, and how much I should have left over at the end of the month. All I have to do is ensure that my ad hoc cash spending doesn't bring that leftover amount below zero. If that looks like happening, I can pull a bit of cash back from savings before it's a problem. By keeping an eye on things, I can act in plenty of time.

    Yes, the First Direct £250 free overdraft is quite nice. I had an account with them for 25 years (1990 - 2015). In all that time, I never had to use the overdraft facility simply because I watched what I was doing. After getting myself into an overdraft (and receiving a string of unpleasant letters from my bank manager) in the mid-1980s, I learnt my lesson.

  • Doshwaster
    Doshwaster Posts: 6,130
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    I used to leave my payment until the last day possible thinking that they money was better in my account than theirs but now I just let the direct debit sort everything out as it removes the risk of forgetting or paying the incorrect amount and guarantees that you will pay no interest.

    The only thing to watch is that if there is an unusually big credit card bill (e.g. paying for holiday) then I need to transfer enough from savings into the account to pay for the bill but in a normal month there will be enough balance to cover the direct debit.
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