Why I Pay My Credit Card Twice Per Month

Why I Pay My Credit Card Twice Per Month
December 24, 2012 by

I pay my credit card twice a month every month. I started bi-monthly credit card payments when I got my first job out of college, and I strongly believe that is the best way for the average person to handle their bills.

Match Income to Expenses

I don’t get paid once a month, so why would I pay my bills once a month? I get paid every other Friday. I pay my credit card balances in full each payday. That allows for me to match my income cycle to my expense cycle.

I find this valuable because I don’t have big swings in my bank account balances and my credit card balances are never too high. If I have a rare payday where my credit card balances are higher than my paycheck, I can take a small amount from my checking account to make up the difference. I never need to tap into savings or put a lot from checking into my credit cards.

Keep Balances Low

Paying credit cards bills that are thousands of dollars can be intimidating. It feels like a lot of money is going away at once and the accumulated balance can cause anxiety. Why wait for your balance to build up when you can pay as often as you want?

I keep my eyes on my balances every day using tools like Personal Capital. A quick login gives me my balances and recent transactions in one place. I plan my spending to ensure no balance ever goes too high. I spread out large purchases between paychecks to ensure I never have a credit card balance higher than my paycheck.

Encourage Saving and Investing

I pay my bills twice a month and I put money into saving once a month. After I pay my credit card bill, I do the math on what I need to cover my monthly mortgage and HOA payment plus a small cushion. Any amount over that cushion goes straight to savings or an investment account.

My automatic Roth IRA investments and 401(k) deductions take place on payday, so I have built a system that allows me to take care of my bills and savings on payday as well. It takes a lot less work when you only move money around twice a month and have a set system to take care of it.

Find the Best System for You

While paying each payday works great for me, and I believe is the best system for most people, it is not perfect for everyone. Some people prefer monthly automatic payments, others prefer to save up throughout the month and pay every bill on the same day, and there is not a right way to handle your bills.

I just encourage you to look past the status quo of paying each time the bill arrives. We can be very flexible in how we deal with our personal finances and use that to our advantage.

Your System

How do you handle your credit card payments? Do you pay when the bill arrives, each payday, or with another method? Please share what works for you in the comments.

First posted on December 25, 2008, updated December 23, 2012. Image by Tax Credits / flickr.

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Eric

President and CEO at Narrow Bridge Media
Eric is the founder and editor of Narrow Bridge Finance. He is a financial analyst with an MBA and undergraduate degree in finance.
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  • http://www.moneylifeandmore.com/ Lance@MoneyLife&More

    Very interesting. I definitely only pay once a month but my limits are high enough where my normal spending doesn’t affect my ratios that much.

    • http://www.narrowbridge.net Eric

      I also have very high limits. I primarily use this strategy for peace of mind and expense/income cash flow matching.

      • Sustainable PF

        I often do the same Eric, however, I don’t actually believe this is a great “best practice” for folks who are in control of their PF. It is akin to paying too much pretax from your pay cheque – this essentially gives the government an interest free loan while your money isn’t earning anything for you. Sure the tax return is nice but it is worth less than if you had been able to earn interest or growth on it.

        While CCs are smaller scale (I hope!) than your income taxes (remember, I am in Canada and taxed out the wahoo) – by paying down the debt often you aren’t putting that money to work. Many CCs give 30+ days from purchase before interest is accrued. If you pay off that debt you aren’t GAINING interest on a basically interest free loan.

        The trick is to be in control of the bill payments and never miss a single one. Yank invested money that is currently dedicated to paying off the CC regularly from the investment vehicle you place that money in on a temporary basis, earn some interest and avoid paying interest on the CC. The best way to get ahead IMO.Leave a message…

        • http://www.narrowbridge.net Eric

          Very good point, and one I have considered. The cash in the bank has more earning power than cash you have already given away. My checking and savings compound daily, so the interest is real money.

          The way I look at it, though, is that I am not losing much for the peace of mind. For each $1,000 that you pay 2 weeks early, at today’s rates, you are losing so little that my calculator rounds it to zero. (I just tried!)

          Being in 100% control is important with all of your finances, as you point out. For me, this is the best way to control my inflow and outflow.

  • Emily @ evolvingPF

    We try to pay our credit cards three times per month around the 10th, 20th, and at the end so the balances never get appreciable. We are paid on the 25th and that money is what we draw from to pay for the following month, so we only use our credit cards for spending for the current budget period (1st through last day of the month). Did I read correctly that you use your paycheck to pay for your previous spending? I think it would be more important to only spend money you already have in the bank (treat credit like debit) than to pay twice per month for any other reason.

    • http://www.narrowbridge.net Eric

      That’s a great strategy to keep you balances low. I do use my most recent paycheck to pay current expenses, which is very calculated and monitored. However, I also have nearly a year’s living expenses saved in a combination of saving and investment accounts. I would never advocating buying something you can’t already pay cash for.

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  • http://twitter.com/RFIndependence Pauline

    I pay my CC bill in full once a month. There is no option at my bank to automate bi monthly payments so that would imply a manual action for nothing. If I carried a balance I would do it in order to save extra interest.

    • http://www.narrowbridge.net Eric

      I use my bank’s bill pay to send the payments to my credit card company. I keep my money and my credit with different companies for extra protection.

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