Credit card debt can be a huge burden, but if you pay off your credit card early, it’s one you’ll hopefully never have to experience. There are other benefits to paying off your balance early too. Here are four reasons to pay your credit card off as soon as possible:
1. You’ll be less likely to go into debt.
If you tend to overspend, paying off your credit card balance early can help you break the cycle and stay out of debt. The sooner you lower your balances, the less likely you’ll hit your limits should an emergency happen where you need quick access to credit.
If you’ve made mistakes with your credit in the past, you know how difficult it can be to dig yourself out of debt, so doing something small like paying your cards one week earlier than the deadline might be the thing that keeps you from slipping back into debt again.
If you’re currently in debt, there’s no better time to get out of it than right now. Use this debt payoff calculator if you need help creating a strategy for becoming debt-free as quickly as possible.
You’ll save money on interest.
Credit card interest rates are typically determined by the going market rate and can be quite high, especially as compared to interest rates on other types of debt like student loans or mortgages.
Interest also compounds every month, essentially increasing the cost of the things you’ve bought every month until the balance is paid off in full. The earlier you pay off your credit card, the less interest you’ll pay. Plus, paying your monthly bill ahead of time ensures you’ll never miss your deadline and get hit with penalties or accrue interest at all.
You’ll improve your credit score faster.
You’ll improve your credit score by paying your credit card off early. Paying your credit card off in full every month is one of the best ways to improve your credit score because it shows lenders that you’re responsible with your money and can handle debt. Your creditors typically report your credit activity to the three credit bureaus (Experian, Equifax, TransUnion) once a month.
Making your payment early can ensure your credit score improves quickly, which is critical when applying for a new loan or credit card. Plus, if you have a high credit utilization ratio, paying off your credit card balance early can lower it and help improve your credit score.
You’ll have one less bill to worry about each month.
It might seem like a silly benefit to mention, but the sooner you reduce your monthly bills, the more your mental health will benefit. Decision fatigue is a term used in psychology for the amount of stress and exhaustion we all face after making thousands of micro-decisions every month that run the gamut from what to eat for breakfast to where you’ll spend your retirement.
Even having one less thing to worry about can create a ripple effect that reduces your overall stress level and better improves your mental health.
The bottom line
Paying off your credit card balance early can provide several benefits, including saving money on interest, improving your credit score, and improving your mental health. Use this as your motivation to open those apps and pay off those cards today, and you’ll experience these benefits sooner rather than later.