man paying his credit card bill
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If you’re like most Americans, you’ve racked up some debt on your credit card. Total credit card balances continue to grow on an annual basis, swelling to $731 billion in the third quarter of 2017, according to TransUnion.

Although the best way to reduce interest charges is to pay the bill in full every month, there’s a simple trick to save money while you work toward taming that debt: Pay your credit card bill early — before the end of the billing cycle.

“If you pay it off before the billing cycle, you could potentially just be paying for the purchase price of the items with little to no interest or fees,” says Bruce McClary, vice president of public relations and external affairs for the ‎nonprofit National Foundation for Credit Counseling.

How it works

When you charge something to your credit card, the issuer charges you interest every day of the month until the bill is paid. And, this interest is compounded. So, on the second day of the billing cycle, you’ll pay interest not only on the outstanding balance, but also on the interest charged on the first day. This cycle repeats throughout the month.

As an example, say you have a credit card with an APR of 17 percent, which is the average variable interest APR for a credit card today, and you have a balance of $10,000. Your daily interest rate is 17 percent divided by 365, which means, every day, you’re being charged 0.047 percent interest on that balance. On your $10,000 balance, you’ll be charged 0.047 percent ($4.70) on day one of the billing cycle.

It may sound like small potatoes, but for anyone struggling to get ahead of their bills, reducing the amount of interest you owe can add up to savings.

If your balance stays at a consistent $10,000 throughout the month and you don’t charge anything else or make any payments during the month, at the end of the billing cycle, you’ll owe $141 in interest. In other words, it will cost you $10,141 to pay your bill in full at the end of the billing cycle.

But if you pay down the balance exactly halfway through the billing cycle, you’d only owe $70.50 — half of what you’d owe if you had waited until the end of the month.

Use a credit card payoff calculator to figure out how much you could save by paying your bill early.

Keep in mind that most people use their cards more than once a month, which means that finance charges can balloon over time.

Other benefits

Paying down your credit card before the end of the billing cycle can also help your credit score, says credit expert John Ulzheimer, formerly of FICO and Equifax.

“I call this one of the few ethical credit score hacks,” he says. “By making payments before the statement closing date, you will reduce the balance that appears on your credit reports, thus helping your credit scores.”

If you pay early, you also reduce the risk of getting hit with late charges, or worse — a penalty APR. Some issuers will bump your interest rate to as high as 29.9 percent or more after just one late payment.

Bottom line

Paying your credit card bill early can be part of an overall strategy to get your high-interest debt under control. But, if you carry a significant amount of debt and you don’t think you can make headway on your monthly payments, you may want to consider a balance transfer card with 0 percent APR offer, or even a personal loan, which often have lower interest rates than those of credit cards.