If you have a credit card, you probably know that paying your bill on time is essential for maintaining a good credit score. But did you know that there is a simple strategy that can help you boost your score even more? It’s called the credit card 15/3 rule, and it involves making two payments each month instead of one.
The credit card 15/3 rule is a method that some people use to lower their credit utilization ratio, which is the percentage of your available credit that you use. Your credit utilization ratio is one of the most important factors in your credit score, and the lower it is, the better.
The 15/3 rule works like this: You make one payment 15 days before your statement closing date, and another payment three days before your statement closing date. By doing this, you reduce the balance that your credit card issuer reports to the credit bureaus, which can improve your credit score.
But does the 15/3 rule work? And is it worth the hassle of making two payments every month? In this article, we’ll explain the pros and cons of the 15/3 rule, how to use it effectively, and some alternatives that can also help you boost your credit score.
Table of Contents
What is the Credit Card 15/3 Rule?
The credit card 15/3 rule is a strategy that involves making two payments each month to your credit card company. You make one payment 15 days before your statement closing date, and another payment three days before the statement closing date.
The idea behind the 15/3 rule is to lower your credit utilization ratio, which is the percentage of your available credit that you use. For example, if you have a credit card with a $1,000 limit and a $500 balance, your credit utilization ratio is 50%. The lower your credit utilization ratio, the better for your credit score, as it shows that you are not relying too much on credit.
Your credit card issuer typically reports your balance to the credit bureaus once a month, usually on or shortly after your statement closing date. This is the date when your billing cycle ends and your statement is generated. Your statement closing date is different from your due date, which is the date when you have to pay your bill to avoid interest and late fees.
The 15/3 rule aims to reduce the balance that your credit card issuer reports to the credit bureaus by making a payment before the statement closing date. For example, if your statement closing date is on the 20th of the month, and your due date is on the 15th of the next month, you would make one payment on the 5th of the month, and another payment on the 17th of the month. This way, you would lower the balance that appears on your statement and that is reported to the credit bureaus.
How Does the Credit Card 15/3 Rule Affect Your Credit Score?
The credit card 15/3 rule can affect your credit score in two ways: by lowering your credit utilization ratio and by increasing your number of on-time payments.
Lowering Your Credit Utilization Ratio
Your credit utilization ratio is one of the most important factors in your credit score, accounting for 30% of your FICO score. The FICO score is the most widely used credit scoring model in the U.S., and it ranges from 300 to 850. The higher your score, the more likely you are to qualify for credit products and get favorable terms.
According to FICO, the average credit utilization ratio for consumers with a score of 800 or higher is 7%. This means that they use only 7% of their available credit. On the other hand, consumers with a score of 579 or lower have an average credit utilization ratio of 79%. This means that they use almost 80% of their available credit.
As a general rule, you should aim to keep your credit utilization ratio below 30%, and ideally below 10%. This shows that you are managing your credit responsibly and that you have enough room to handle unexpected expenses or emergencies.
The credit card 15/3 rule can help you lower your credit utilization ratio by reducing the balance that your credit card issuer reports to the credit bureaus. For example, if you have a credit card with a $1,000 limit and a $500 balance, your credit utilization ratio is 50%. But if you make a payment of $250 15 days before your statement closing date, and another payment of $250 three days before your statement closing date, your balance will be $0 when your statement is generated. This means that your credit utilization ratio will be 0%, which can boost your credit score.
Increasing Your Number of On-Time Payments
Your payment history is another important factor in your credit score, accounting for 35% of your FICO score. Your payment history reflects how well you pay your bills on time, and any late or missed payments can hurt your credit score.
The credit card 15/3 rule can help you increase your number of on-time payments by making it easier to budget and avoid forgetting your due date. By making two smaller payments each month instead of one larger payment, you can spread out your expenses and avoid cash flow problems. Also, by making a payment three days before your due date, you can ensure that your payment is processed on time and that you don’t incur any late fees or interest charges.
However, it’s important to note that making two payments in a month does not count as two on-time payments for your credit score. You will still get credit for only one on-time payment per month, regardless of how many payments you make. The key is to pay at least the minimum amount due by the due date every month, and to pay more than the minimum if you can afford it.
Pros and Cons of the Credit Card 15/3 Rule
The credit card 15/3 rule has some advantages and disadvantages that you should consider before using it. Here are some of the pros and cons of the 15/3 rule:
Pros
- It can lower your credit utilization ratio, which can boost your credit score.
- It can help you pay off your balance faster and save money on interest.
- It can help you budget better and avoid cash flow issues.
- It can help you avoid late fees and interest charges by paying your bill early.
- It can help you develop a habit of paying your credit card bill twice a month.
Cons
- It can be confusing and inconvenient to keep track of two payment dates every month.
- It can be tempting to spend more than you can afford if you have a low balance on your credit card.
- It can be ineffective if you don’t pay enough to lower your balance significantly before your statement closing date.
- It can be unnecessary if you already have a low credit utilization ratio or a high credit score.
How to Use the Credit Card 15/3 Rule Effectively
If you decide to use the credit card 15/3 rule, here are some tips to help you use it effectively and avoid some common pitfalls:
- Know your statement closing date and your due date. You can find these dates on your credit card statement, your online account, or by calling your credit card issuer. Make sure you pay your bill 15 days and three days before your statement closing date, not your due date.
- Pay more than the minimum amount due. The minimum amount due is the lowest amount you can pay to avoid late fees and interest charges, but it does not reduce your balance much. To lower your credit utilization ratio and pay off your debt faster, you should pay more than the minimum amount due every month, especially 15 days before your statement closing date.
- Don’t spend more than you can afford. Making two payments in a month can make you feel like you have more money to spend, but you should still stick to your budget and avoid overspending. If you charge more than you pay, you will end up with a higher balance and a higher credit utilization ratio, which can hurt your credit score.
- Monitor your credit score and your credit reports. You can check your credit score for free on various websites and apps, such as NerdWallet, Credit Karma, or WalletHub. You can also get your credit reports for free once a year from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. You should review your credit score and your credit reports regularly to see how the 15/3 rule is affecting your credit and to spot any errors or fraud.
Alternatives to the Credit Card 15/3 Rule
The credit card 15/3 rule is not the only way to improve your credit score and save money on interest. Here are some alternatives that can also help you achieve your financial goals:
- Pay your balance in full every month. The best way to avoid interest charges and maintain a low credit utilization ratio is to pay your credit card balance in full every month. This way, you will not carry any debt from month to month, and you will show that you can use credit responsibly. You can also earn rewards and benefits from your credit card without paying any extra fees.
- Pay your balance before your statement closing date. If you can’t pay your balance in full every month, you can still lower your credit utilization ratio by paying your balance before your statement closing date. This way, you will reduce the balance that your credit card issuer reports to the credit bureaus, and you will pay less interest on your remaining balance. However, you should still pay at least the minimum amount due by the due date to avoid late fees and penalties.
- Increase your credit limit. Another way to lower your credit utilization ratio is to increase your credit limit, which is the maximum amount of credit that you can use. By having a higher credit limit, you will have more available credit and a lower credit utilization ratio, assuming that you don’t increase your spending. You can request a credit limit increase from your credit card issuer, but be aware that this may result in a hard inquiry on your credit report, which can temporarily lower your credit score. You should also avoid requesting a credit limit increase too often, as this may signal to your credit card issuer that you are in financial trouble.
- Use multiple credit cards. If you have more than one credit card, you can spread out your spending across different cards and lower your credit utilization ratio on each card. For example, if you have two credit cards with a $1,000 limit each, and you spend $500 on each card, your credit utilization ratio on each card is 50%. But if you spend $250 on each card, your credit utilization ratio on each card is 25%. However, you should still pay attention to your overall credit utilization ratio, which is the total amount of credit that you use divided by the total amount of credit that you have. You should also avoid opening too many credit cards, as this can lower your average age of accounts and increase your number of hard inquiries, both of which can hurt your credit score.
FAQs
Here are some frequently asked questions about the credit card 15/3 rule and their answers:
Q: Does the credit card 15/3 rule work for all credit cards?
A: The credit card 15/3 rule can work for any credit card, as long as you know your statement closing date and your due date, and you make your payments accordingly. However, some credit card issuers may have different policies or terms that may affect how the 15/3 rule works for you. For example, some credit card issuers may charge interest on your average daily balance, which means that paying your balance before your statement closing date may not save you much on interest. You should always read your credit card agreement and understand how your credit card issuer calculates your interest and reports your balance.
Q: How often should I use the credit card 15/3 rule?
A: You can use the credit card 15/3 rule as often as you want, as long as you can afford to make two payments every month and you don’t overspend on your credit card. However, you may not need to use the 15/3 rule every month, especially if you already have a low credit utilization ratio or a high credit score. You may also want to use the 15/3 rule only when you need to boost your credit score quickly, such as before applying for a loan or a mortgage.
Q: What are the risks of using the credit card 15/3 rule?
A: The credit card 15/3 rule is generally a safe and effective strategy to improve your credit score and save money on interest, but it also has some potential risks that you should be aware of. Some of the risks of using the 15/3 rule are:
- You may forget or miss one of your payment dates, which can result in late fees, interest charges, and a negative impact on your credit score.
- You may spend more than you can afford on your credit card, which can increase your debt and your credit utilization ratio, and make it harder to pay off your balance.
- You may become too dependent on the 15/3 rule and neglect other aspects of your credit health, such as paying off other debts, diversifying your credit mix, and checking your credit reports for errors.
Conclusion
The credit card 15/3 rule is a simple and effective way to boost your credit score and save money on interest by making two payments each month to your credit card company. By paying your bill 15 days and three days before your statement closing date, you can lower your credit utilization ratio and increase your number of on-time payments, which are two of the most important factors in your credit score.
However, the 15/3 rule is not a magic bullet that can solve all your credit problems. You should also pay attention to other factors that affect your credit score, such as your payment history, your credit mix, your credit inquiries, and your credit age. You should also avoid overspending on your credit card, and pay off your balance in full every month if possible.
If you want to learn more about how to improve your credit score and manage your credit card debt, you can check out some of the resources below:
- How to Improve Your Credit Score
- How to Pay Off Credit Card Debt
- Credit Card Debt Calculator
We hope you found this article helpful and informative. If you have any questions or feedback, please feel free to leave a comment below. Thank you for reading!