How to Pay Off Your Credit Card

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Don’t feel bad if you’re wondering how to pay off your credit card? Some people may have just received their credit card statement for the first time and have no idea how to pay. Alternatively, you may be in a situation where you’ve used your credit cards a little too much and now you’re looking for ways to pay off your balance as quickly as possible. Regardless of your situation, you’ll want to know how to pay off your credit card.

How to pay off your credit card

Let’s assume for a second that you’ve just received your credit card statement for the first time. You’ll see the total amount you owe, what your minimum payment is, and when your statement due date is. As long as you pay the full balance by the due date, you won’t incur any interest charges.

Paying off your bill is easy, and you have a few options, so choose the one that’s most convenient for you.

Pay your bill online 

You should see a pay bills option if you have an online bank account. Click that, and then it’ll ask you to search for the payee. For example, if you have an American Express credit card, you’d search American Express. Once you’ve selected your provider, it’ll ask for your account number. That’s the number on your card. 

Now that you’ve set up your credit card as a payee, you can pay them. Select them in the payee menu, and choose the account you’re paying from, the amount, frequency, and date. Once you click next/submit, your transfer will be initiated. Note that it’ll usually take two business days for the payment to clear, so don’t wait until the last minute.

It’s also worth mentioning that if your credit card is from the same financial institution as your day-to-day banking, you can usually choose the transfer option to move funds directly. This process clears almost instantly.

Pay in person

If your credit card is with a financial institution that has brick-and-mortar locations, you can go in person and pay in cash or with funds from your account if you bank there. All you need to do is line up and a teller can process the payment for you.

Pay via an ATM, phone, or cheque

Some financial institutions allow you to pay your bills via their ATMs. You’d have to be a client with a debit card to do so. Alternatively, you could pay your bills through telephone banking if you prefer to be old school. The last option is to mail a cheque. If you’re getting paper statements sent to you, it would likely include an addressed envelope. Put your cheque in that with the appropriate postage and throw it in the mailbox. 

Don’t forget if you’re going to cancel your credit card, you need to pay off your balance first.

How to pay your credit card from another bank?

Some people don’t realize that you can get a credit card from financial institutions you don’t bank with. In fact, some of the best travel credit cards in Canada are from American Express, and they don’t even have any physical locations. 

If you’re wondering how to pay your credit card from another bank, you’d follow these steps:

  1. Log in to your financial institution
  2. Select pay bills
  3. Select add Payee
  4. Type in the name of your credit card provider 
  5. Add your account number (your credit card number)
  6. Click finish/submit
  7. Select the payee you just added 
  8. Choose the account and amount that you want to send
  9. Confirm the date and verify all the information
  10. Click submit/finish

You’ll get a verification number to confirm the payment of the bill. Note that it may take 2-3 business days for the payment to clear.

Can you pay off your credit card before the statement?

Yes, nothing is stopping you from paying off your credit card before the statement’s due date. Some people will do it weekly or bi-weekly because it’s easier to track their spending and manage their debt. There’s no added benefit to paying off your statement early, so it’s entirely up to you.

Even if you only plan on paying your bill once a month when it’s due, it’s still worth reviewing your online statement every week. That’s because it’ll allow you to catch any suspicious activity. If there’s a purchase you don’t recognize, you could investigate it further. This could lead to a fraud investigation or a chargeback.

What happens if you don’t pay off your credit card?

Anytime you make a payment that’s anything less than the full amount, you’ll pay interest charges. Since credit cards typically charge 20%-24% interest, you could easily go into debt.

Generally speaking, if you pay at least the minimum payment required, your credit score will remain in good standing. However, if you’re making only minimum payments and racking up a lot of debt, your credit score could drop since you have a high credit utilization ratio. 

Now, let’s say you decide not to pay your bills at all. It won’t take very long for your credit score to completely tank. Your credit card provider will likely try to get in contact with you quickly to get bills settled. If you ignore the calls or refuse to pay, your debt will likely be sold off to a collection agency. Once that happens, your credit score will be ruined and it may take many years to repair.

How to pay off your credit card debt fast

Let’s be clear, there’s no quick way to pay off your credit card debt fast. If you come across a company saying they can clear your debt and fix your credit score quickly for a fee, the odds are it’s a scam.

Use a line of credit

Instead of looking for a quick fix to your credit card debt, you should look for ways to reduce the amount of interest you’re paying. Doing this will allow you to pay off your balances quicker since more of your payments will go towards the principal amounts owing.

Assuming your credit score is in good standing, you may qualify for a line of credit from your financial institution. This is another loan, but it comes with a much lower interest rate of around 3%-7%. 

If approved, you would take your loan and immediately pay off your credit cards. Your line of credit would then be your only remaining debt. Since the interest rate is lower, you could pay off the balance quickly.

While a line of credit is appealing, it’s still another form of credit. If you don’t use it responsibly, you could end up in more debt. Plus, lines of credit typically only require you to make interest-only payments. In other words, your balance may never hit zero if you’re not actively paying down your debt.

Switch to a low interest credit card

As you’ve likely figured out by now, paying off your credit card debt will be tough if you’re paying 20%+ interest. What you might not realize is that there are low interest credit cards that usually offer you an incentive to switch.

With low interest credit cards, your interest rate is typically 8.99%-12.99%. That’s an instant savings of at least 7% compared to most credit cards. Many of these cards offer a balance transfer option that usually comes with an even lower interest rate for a limited time. For example, you might pay 0% interest for six months. Since you’re not paying any interest during that time, you can greatly reduce your debt. Once your promotional period ends, you pay the regular interest rate.

Paying off your credit card balance in full and on time every month should be your priority. Anything less, and you’ll be in debt while paying crazy interest charges. If you find yourself constantly in the red, you may want to consider using a prepaid credit card instead. This way, you’re only spending money that you have available. 

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi

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