Making your payments on time
You can choose to pay your balance in different ways such as:
- online
- by telephone
- at an ATM
- in person at a branch
- by pre-authorized debit
- by mail with a cheque
The payment method you choose can affect how quickly the issuer processes it and the date they consider it paid. The time to process your payment will also vary depending on your financial institution. Make sure you know when your issuer will process your payment to avoid making a late payment.
Issuers process credit card payments during business days from Monday to Friday. If a payment is due on a weekend or holiday, you can make your payment the following business day. This will count as paying on time.
Contact your credit card issuer to find out how long it takes to process different payment methods.
Making at least the minimum payment
Make at least the minimum payment if you can’t pay off your balance. The minimum payment is the minimum amount you must pay each month on your credit card balance.
Your minimum payment will be:
- a flat dollar amount, usually $10, plus any interest and fees, or
- the higher of a dollar amount, typically $10, or a percentage of your outstanding balance, typically 3%
Your credit agreement will tell you which method your credit card issuer uses to calculate your minimum payment.
Paying only the minimum amount means:
- it takes you longer to pay off your balance
- you pay more interest
Increasing your monthly payment will shorten the time it will take you to pay off your balance. Even a small amount will shorten the time by a lot.
Use the Credit Card Payment Calculator to compare your payment options.
Your credit card issuer may be a federally regulated financial institution. In that case, your credit card statements must include the time required to pay off your balance by only paying the minimum amount.
Learn more about the information your financial institution must give you about your credit card.
Payment holidays
Your credit card issuer may offer you a payment holiday. This means they'll let you skip a payment. You'll still pay interest.
Your credit card issuer may be a federally regulated financial institution. In this case, they must clearly tell you if you'll pay interest when you skip a payment. This information must come with the payment holiday offer.
For information on payment holidays, check the terms of your credit card agreement. You can also contact your credit card issuer. Ask questions about anything you don't understand.
How credit card issuers apply payments to your balance
If you don’t pay your credit card balance by the due date, you’ll pay interest.
Different interest rates may apply to different types of credit card transactions. For example, cash advances often have a higher interest rate than purchases. This means different interest rates will apply to your balance depending on how you use your credit card.
Typically, your minimum payment will apply to the portion of your balance with the lowest interest rate. Any amount you pay over the minimum payment applies in one of the following 2 ways:
- to the portion of the balance with the highest interest rate
- proportionally to the entire balance
Your credit card issuer may be a federally regulated financial institution. In this case, they can decide how they'll apply your minimum payment to your balance.
Check your credit card agreement or ask your credit card issuer how they apply payments to your balance.
Missing or making late payments
If you don’t pay at least the minimum payment or you make a late payment, you risk:
- your interest rate increasing
- negatively affecting your credit score
- losing the benefit of any promotional rate offer you have
- your financial institution cancelling your credit card
Filing a complaint about your credit card issuer
Federally regulated financial institutions must have a process to resolve disputes between consumers and their financial institutions.
Find the complaint-handling process for your financial institution.
Related links
FAQs
Focus on cards with low balances or higher interest rates first. Some financial experts suggest you pay off credit card debt starting with the smallest balance first. This shows you immediate success and helps create momentum.
Is it good to pay off credit card completely? ›
If you have a credit card balance, it's typically best to pay it off in full if you can. Carrying a balance can lead to expensive interest charges and growing debt. Plus, using more than 30% of your credit line is likely to have a negative effect on your credit scores.
Will my credit score go up if I pay off my credit card in full? ›
Paying off your credit card balance every month is one of the factors that can help you improve your scores. Companies use several factors to calculate your credit scores. One factor they look at is how much credit you are using compared to how much you have available.
Does paying off a credit card increase credit? ›
Paying off debt also lowers your credit utilization rate, which helps boost your credit score.
What's a bad strategy to pay off your credit card? ›
Since paying only the minimum on your credit card debt could end up costing you thousands and take you years to repay, you shouldn't follow this strategy once you can afford to pay more.
How to pay off $5000 in debt in 6 months? ›
If you can afford to pay off your debt during the promotional APR period, a balance transfer card may be your best bet. For example, with $5,000 of debt, a six-month intro APR balance transfer card would allow you to pay off your debt interest-free with $833.33/month payments.
What is the 15-3 rule? ›
What is the 15/3 rule? The 15/3 rule, a trending credit card repayment method, suggests paying your credit card bill in two payments—both 15 days and 3 days before your payment due date. Proponents say it helps raise credit scores more quickly, but there's no real proof. Building credit takes time and effort.
Why did my credit score drop 40 points after paying off debt? ›
If you take out a loan to consolidate debt, you could see a temporary drop because of the hard inquiry for the new loan. Your credit score can take 30 to 60 days to improve after paying off revolving debt. Your score could also drop because of changes to your credit mix and the age of accounts you leave open.
What to do after I pay off my credit card? ›
What You Should Do After Paying Off Debt
- Stop Using Your Credit Cards. If it's credit card debt you've paid off, this is the most important thing to do afterwards. ...
- Keep Your Credit Card Accounts Open. ...
- Revisit Your Budget. ...
- Allocate That Money Towards Your Goals.
Making on-time payments to creditors, keeping your credit utilization low, having a long credit history, maintaining a good mix of credit types, and occasionally applying for new credit lines are the factors that can get you into the 800 credit score club.
Credit cards operate on a revolving credit system, which means that as you pay off your balance, your credit limit becomes available again for future purchases. So, if you have a credit limit of $5,000 and a balance of $2,000, you still have $3,000 available for new purchases even after the due date has passed.
Is 650 a good credit score? ›
As someone with a 650 credit score, you are firmly in the “fair” territory of credit. You can usually qualify for financial products like a mortgage or car loan, but you will likely pay higher interest rates than someone with a better credit score. The "good" credit range starts at 690.
Should I pay off my credit card in full or leave a small balance? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Is it bad to have a lot of credit cards with zero balance? ›
However, multiple accounts may be difficult to track, resulting in missed payments that lower your credit score. You must decide what you can manage and what will make you appear most desirable. Having too many cards with a zero balance will not improve your credit score. In fact, it can actually hurt it.
Why did my credit score go down even though I pay on time? ›
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
What is the best order to pay off credit card debt? ›
Avalanche method: pay highest APR card first
Pay that off and repeat, until you've reduced all of your credit card balances to zero.
What is the payoff trick for credit cards? ›
Pay the smallest balance first.
Repeat this process until all accounts are paid off. This process has been coined the “snowball method” because as you pay off each credit card balance, the payment toward the next balance gets bigger and bigger.
Is it better to pay off your credit card right away or at the end of the month? ›
Rule #4: To Pay Less Interest on Debt, Pay ASAP
Credit card users who always pay in full don't need to worry about paying interest because of your credit card's grace period. However, when you carry a balance from one month to the next—no matter how small—you'll be charged interest for the previous month.
Is it better to pay off one credit card or reduce the balance on two? ›
Interest Rates: Compare the interest rates on both credit cards. If one card has a significantly higher interest rate, it may be more beneficial to focus on paying off that card first. By eliminating the high-interest debt, you can save money on interest payments in the long run.
