Today I received a question from a reader about the timing of credit card payments. He asked, “Is it better to pay credit off right away or wait until the bill is due?”

Assuming you are in the habit of paying off your credit card every month — and therefore you are never charged interest — go ahead and wait. In the mean time, your cash can earn interest at a bank like HSBC Direct. You don’t want to wait until the last minute as the postal service can be somewhat unpredictable. I’d suggest sending the check at least a week in advance of the due date. This may minimize your interest-earning period, but it’s safer than taking the chance of getting charged a fee for a late payment.

The best solution is to pay your bill using an “ACH transfer,” which is basically a bank-to-bank transfer of money, rather than sending a paper check. This is normally the type of processing that takes place when you pay your credit card online from your card issuer’s website.

If you are not in the habit of paying your credit card bill in full each month, then send money in as soon as possible to reduce your average daily balance. Your interest charged each month is based on the credit card’s rate and your average daily balance, so you are better off reducing that number as much and as soon as possible.

Feel free to send me questions by emailing tips at this domain name. I’m not a financial advisor, but if I can help, I will.

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