When it comes to credit cards, there’s a lot of misinformation out there. One of the most damaging myths is that paying down your entire balance each month won’t earn you any credit. Not only is that info completely false but, as it turns out, you could potentially help your credit score by making payments more than once a month.
This is a trick I heard of a few months back that’s so simple you’ll wonder why you hadn’t considered it sooner. See, when I was first approved for my Discover card, the credit limit was set at only $4,500. Not that I planned to spend that much in any given month, but I did want to keep my credit utilization — which is the second largest factor in determining your credit score — under 10% while still getting all the benefits that spending on that card entailed. So what’s a boy to do in this situation? Keep my balance low by making additional payments throughout my billing cycle.
After my purchases had posted and that 10% usage barrier ($450 in my case) was surpassed, I’d simply make a payment to bring my balance back down. In doing so, I still received all the cash back I was entitled to but my credit scores started gaining a few points as I continued to employ this method. Better yet, by making sure my balance is paid in full each month, I’ve never had to pay interest on my card.
Although I can only speculate on whether it’s the direct result of this practice or just my good borrowing in general, Discover has steadily increased my credit limit in recent months. Because of this, my need to make extra payments to remain under 10% usage has diminished. Still, there have been some months where my spending is heavier than normal and I bust this credit-saving method out once again.
As simple as it may seem, the practice of making multiple monthly payments to keep your credit card balance low is surprisingly effective for helping your credit score. While you may not see a huge boost, it will at least prevent you from getting dinged by a rising credit utilization. In the end, getting into this easy habit will allow you to earn rewards, avoid interest fees, and keep your credit score as pristine as it can be.