What is The Best Time to Make a Credit Card Payment?

As financial strategies vary and payment practices evolve, understanding the best time for settling credit card bills becomes essential. In the vibrant hub of economic activity that is the UAE, where diverse cultures and financial systems intersect, determining the best time to make credit card payments can significantly impact one's financial well-being.

This article will dive into the intricacies of credit card payment timing in the UAE, shedding light on factors that influence this decision. By unravelling this complex web, you will gain valuable insights to make informed choices and maximise the benefits of your credit card usage.

First… Learn the Important Dates on Your Credit Card Statement!

Credit cards work on a billing cycle. Every credit card statement has the following 3 dates -

• The Statement Date - Every month, the company that issued your card gathers all the transactions associated with your card and prepares a summary, which is known as your statement. The specific day on which this compilation occurs is referred to as your statement date or closing date. Any activity that occurs after this date, including transactions between the creation of your statement and its delivery to you via mail, will be reflected in your subsequent statement.

Upon the creation of your statement, it will display a statement balance. This balance is determined by starting with the amount that you owed at the beginning of the billing period, then adding any new charges made during that period, and, finally, subtracting any payments you made during that time.

• The Due Date - It is the deadline by which you will be required to pay the minimum required amount. Typically, the due date falls around three weeks after the statement date. If you don’t make the minimum payment by the due date, a late fee will be imposed.
• The Reporting Date - This is the specific date when your card issuer shares your balance details with AECB. Unlike the closing and due dates, the reporting date isn't visible on your bill. It might vary within the month, yet it's advisable to expect it to align with your statement closing date or thereabouts.

When Should You Make a Credit Card Payment?

Timing is everything when it comes to paying your credit card bill. Late payments lead to dire consequences like high late payment fees and a poor credit Score. Furthermore, even if you are paying your credit card bill on time, the interest amount that you carry on the balance also gets impacted.

So if you are paying the credit card bill early in the billing cycle, it can reduce the interest amount you would need to pay, while improving your credit score.

Having said that, let’s figure out what is the best time to make a credit card payment from the following payment timeframes. We will also understand in which situations you can use these payment timeframes to pay the credit card bill and make things work in your favour. 

Before the Due Date -

As per experts’ advice, you should make the minimum payment before the due date to keep your account in good standing and avoid late payment charges. If you miss your credit card payment date, you are usually charged a late payment fee. Furthermore, your credit report shows the missed and delayed payments.

The late payment fees come to approximately 1% or 2% of the billing amount. Besides an additional charge, you are also charged a high interest rate on the balance you carry.

Before the Account Statement Closing Date -

You should make your credit card payments before the account statement closing date if you want to ensure that your credit card provider or the bank reports a lower credit card balance to al etihad credit bureau (AECB).

This is because if you have a high credit card balance on your credit report, your credit utilisation ratio rises significantly, which ends up negatively impacting your credit score.

A poor credit score will pose a hurdle when applying for a mortgage or car loan, personal loan, or credit card if you apply for the same prior to your next account statement closing date comes.

For this reason, you can make sure a lower balance gets reported to AECB by paying off your credit card bill. Once your reported balance reduces, you should avoid making any new purchases before your next statement closing date comes. 

Early in the Billing Cycle -

While the deadline for your payment could be towards the end of the billing cycle, settling your credit card balance ahead of time within the billing cycle could lead to a reduction in your finance charge.

This is particularly true if you refrain from making additional purchases throughout the billing cycle. This is because your credit card provider will typically employ either the daily balance or average daily balance approach to compute your finance charge.

In either scenario, maintaining a lower balance for an extended period during the month will lead to a decrease in your finance charge.

Before Making Any Major Purchase -

Making a significant purchase using your credit card while carrying an existing balance has the potential to increase your credit utilisation, potentially leading to a negative impact on your credit score.

To safeguard your credit score from a potential drop, it's advisable to reduce your existing balance before making substantial purchases. This approach can help you avoid a sudden surge in your credit utilisation and maintain the stability of your credit score.

Right After You Get Paid -

Paying your credit card bill immediately upon receiving your paycheck guarantees that you have the funds to cover the payment. In fact, this also decreases the chances of encountering a returned payment, which could result in a fee.

Note that you have the option to make your payment ahead of schedule, even if the due date is still a few days away. This provides you with a sense of security that your payment is taken care of.

Prior to making the payment, take a moment to assess your other financial obligations to ensure that you're not attempting to allocate too much from a single paycheck. If your income is received on a weekly or semi-monthly basis, you might have the flexibility to postpone certain credit card payments until your subsequent paycheck.

Tips to Manage Credit Card Bills

Credit cards, if used smartly, can help you make seamless payments and enjoy their plethora of rewards and benefits. However, when using a credit card and paying credit card bills, it is important to make sure that you don’t end up damaging your overall financial health.

Here are a few tips to help you punctually manage your credit card bills -

• Make it a target to pay your credit card balance in full each month. 
• Create a financial plan and prevent exceeding your capacity to repay.
• Carefully assess the option of extended payments for significant purchases, unless a 0% APR offer is available.
• Regularly review your online account to track your funds and be vigilant against any unauthorised transactions.
• Keep a close watch on your credit score to gain insight into the effects of your financial decisions.
• When maintaining a balance, explore various strategies to settle your credit card dues and choose the most suitable path as per your specific requirements.
• If overwhelmed by credit card obligations, contemplate seeking guidance from a credit counselling professional.

Go through the following FAQ section to know more about what is the best time to make a credit card payment.

Frequently Asked Questions