Credit Cards: How To Clear Outstanding Before The Bill Is Generated

If you’re a regular credit card user, you’ve likely been advised to clear your dues before the bill is generated. But what does that mean, and why should you do it?

Most people believe the best way to use a credit card is to wait for the bill and pay the full amount due. While that’s a sound approach, many credit card holders pay off the amount they spend through the credit card before the bill is generated. This not only keeps their credit usage in check but also helps build a healthy credit score.

Let’s find out how early repayment works and why it could be a smart move for managing your money.

• Improves Credit Score: Credit bureaus calculate your credit utilisation ratio — the amount of credit you’ve used compared to your total limit. If you clear your dues before the statement is generated, your reported credit utilisation will be lower. This helps in maintaining a high credit score.

• Avoid Interest Accrual: If you're carrying forward even a small amount from your previous statement, interest starts accumulating from the date of the purchase. Paying off the outstanding balance before the bill cycle could reduce your total interest outgo.

• Reduces Over-Spending: By reviewing and clearing dues periodically, you stay conscious of how much you’re spending, rather than being shocked when the bill finally arrives. This will also help you keep a watch on your credit card expenses and avoid unnecessary purchases.

• More Room For Emergencies: If you pay off your usage early, your available credit increases. This can come in handy in case of sudden, unplanned expenses.

The credit card billing cycle is usually 28-31 days, followed by an interest-free period of 15-20 days after the statement is generated. For example, if your billing cycle runs from the 1st to the 30th of each month, your bill is generated on the 30th, and your payment might be due by the 15th of the next month.

To manage your credit card better, find out two key dates:

• Billing cycle end date

• Payment due date

Paying before the cycle ends ensures that the new bill shows Rs 0 or a very low due amount.

• Use Your Bank’s Mobile App Or Website: Most banks show your “Total Outstanding” and “Unbilled Transactions.” You can clear only the unbilled transactions or the total amount at any point before the bill is generated.

• Set Reminders: Create a reminder to check your card balance and make payments. This keeps your usage and repayment on track.

• Use Auto Pay: Set up auto-pay for the full outstanding amount rather than just the minimum due.

Clearing your credit card outstanding before the bill is generated is a simple habit that can help you stay financially disciplined, improve your credit score and reduce the risk of falling into debt. With rising card usage and easy access to credit, adopting this proactive repayment approach can make all the difference in managing your finances effectively.