Some might say I’m a bit obsessive when it comes to my personal finances, credit cards, and my credit score. I’m really not though. What it comes down to is that I don’t like surprises when it comes to money.
Here are 4 reasons why you should pay off your credit cards weekly.
1. Better for your credit score
There are 5, sometimes 6 factors that can impact your credit score but I am going to focus on one at the moment: Credit Utilization, aka. Credit Card Use or Revolving Utilization.
What is Credit Utilization?
Credit Utilization is one of the indicators of how much you owe on your accounts. It looks at what you owe vs. your credit limit.
For example, if you have one Credit Card with a $1000 credit limit and you owe $500, your Credit Utilization is 50%.
Also, if you have four Credit Cards with a total $4000 credit limit and you owe $2000, your Credit Utilization is still 50%.
Key points to know about Credit Utilization
- Credit Utilization looks at credit card use for each individual card
- Credit Utilization also looks at the average use across all your cards
- You want to stay under 30% utilization for each card and total! Under 10% is even better!
- Don’t carry a balance, you don’t need to carry any credit card debt to build your credit
How Credit Utilization gets calculated and why it's important
Banks usually (but not always) share your info with credit bureaus on the same day each month. And no, this isn’t the same day you pay your bill. If only it was that simple.
That means you could have paid your bill down to $0, but a different balance can show up on your credit report.
By choosing to pay off your credit cards weekly, you reduce the chance of being caught with a balance, and a large one at that. This makes staying under 10% utilization easier. And for someone who is just starting out or with lower total utilization, this is going to be even more important!
If you’re someone with a longer credit history, you might have multiple credit cards and banks, and paying off weekly is a super simple and effortless way to keep your credit score looking its best!
2. Help improve your money mindset
I use credit cards for almost all my purchases so I can get the rewards.
I used to wait to pay off my balance until right before the due date and I would cringe every time I made a payment. The larger sum of money leaving my checking account stung.
At some point, I started paying off my credit cards every Friday on what was pay day. The smaller balance felt manageable. It required less thought and I was able to quickly pay the bill and move on with my day. The sting went away.
3. Bring awareness to spending patterns
If you’re someone who budgets or tracks spending, paying off your credit cards weekly could help you be more aware of what you spend in a week.
Working with smaller sums of money will make it easier to spot trends and further develop your budgeting plan.
4. Help you avoid surprises
Making a weekly visit to your bank or credit card company to pay your bill means a greater chance of catching errors or fraud.
I can’t tell you how many people wait to check their accounts until they have a bill due or get notified by the bank that something might be wrong with the account.
Practice due diligence and stay on top of your finances!
While not necessary
Paying off your credit cards weekly might just help you boost your credit score while making budgeting easier. It requires no additional work, just a simple habit shift, which in the long run could prove beneficial.
Are you someone that currently pays off your credit card weekly?
I’d like to hear from you about how you started this practice and why?
Are you someone that just made the shift?
How’s that been working for you? Leave a comment for me below!