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When is the right time to pay off your credit card?

Alex Ritchie avatar
Alex Ritchie
- 7 min read
When is the right time to pay off your credit card?

Gone are the days that flashing your plastic was a sign of wealth and status. Years of having debt hanging over the heads of millions of households has left many with a debt hangover.

So, it’s no surprise that more and more Aussies are working at paying down their debts or cutting up their cards for good.

The latest Reserve Bank of Australia data shows that Australians are becoming diligent about paying off their credit card debt. $1.64 billion has been wiped off of the total credit card debt accruing interest in May. Further, there are 1.22 million fewer credit card accounts year-on-year.

The popularity of buy-now-pay-later apps, such as Afterpay, may have also contributed to the shift. Younger generations may be choosing to avoid credit cards altogether in favour of convenient payment methods that don’t charge sky-high interest rates.

If you’ve been struggling financially and mentally with the pressures of credit card debt, you may feel the right time to pay it off was yesterday. But taking the steps today to pay down your debt is a better time than any to start.

When should you pay your credit card?

1.When your credit card bill is due

The best time to pay off your credit card is on time, every month, when you get your statement.

This isn’t just to give yourself a gold star for paying bills on time, but it’s also to help reduce the amount of interest that may be charged to your outstanding balance.

Every time you don’t pay your credit card balance in full each statement period, you accrue interest on said balance. This is one of the most common ways Aussies spiral into credit card debt.

If you’re the type of cardholder who always finds themselves paying interest on their card balance, you may want to consider switching to a lower rate option. This can help you to lower the rate you accrue debt while you work on paying off your credit card balance.

2.When you’re only making minimum repayments

Making only the minimum required payments on your credit card bill can feel like you’re ticking the right boxes, but in reality, you’re potentially delaying the time it takes to pay down your debt by years, even decades.

The minimum required repayment on a credit card is typically 2 per cent of the balance or $20, whichever is higher.

On a $10,000 credit card bill with an interest rate of 15 per cent, for example, it may take you 31 years and 3 months to pay off the balance. Your total credit card debt could also snowball into $25,095 due to interest.

That’s over an extra $15,000 you may wind up paying your card provider just for the convenience of making the minimum repayment amount.

3.When you get a windfall

Whether you’ve just gotten a large tax return, or won big at the pokies, if you’ve suddenly come into some money, you may be tempted to spend it on a holiday or home redecoration. However, if you wanted to be responsible, financial experts would recommend you put this money towards your debts.

If your credit card isn’t your only debt and you’re still paying off a personal loan, for example, the general rule of thumb is to pay off the debt with the highest interest rate first. This is also typically your credit card debt.

Credit card interest rates can climb as high as 24 per cent, not to mention the potentially high annual fees charged for perks like rewards programs and travel insurance. This is why if you suddenly come into some money, you may want to consider putting it on your credit card debt and cutting it down or clearing it once and for all.

4.When it starts hurting your credit score

If you’ve accrued credit card debt and are struggling to meet your repayments, this can potentially negatively impact your credit score.

Your credit score signifies your ‘trustworthiness’ as a borrower, as determined by your credit history. An excellent credit score means a potentially higher rate of approval for financial products and the opportunity to be offered better interest rates. A bad credit score may mean you’re locked out of being able to get financial products.

If you’re missing credit card repayments, you may be hurting your chance to get approved for loans or any other financial products from credit grantors. Further, you may receive a default listing on your credit report, start being chased by debt collectors and even face legal action for the outstanding payments.

5.When it impacts your mental health

One of the biggest signs that it’s time to get serious about paying off your credit card is when it begins to impact your mental health.

A study by Associate Professor Christopher Davis defines financial stress as the “subjective, unpleasant feeling that one is unable to meet financial demands, afford the necessities of life, and have sufficient funds to make ends meet”.

Further, according to Head to Health, signs that financial stress is affecting your mental wellbeing include:

  • Arguing with the people closest to you about money
  • Having trouble sleeping
  • Feeling angry or fearful
  • Mood swings
  • Tiredness
  • Loss of appetite
  • Withdrawing from others

Having a credit card debt looming over your head can seriously contribute to these feelings of stress, anxiety and depression. This is why it’s so crucial that you address, and try to get on top of, financial problems as early as possible.

What to do if you have outstanding credit card debt?

There are a few things you may want to consider when it comes to paying off your credit card:

  • Create a budget and stick to it. The best way to work off your credit card debt is to take a look at your budget, work out what you can cut down on and commit to putting a percentage of your income into your debt until it’s paid off.
  • Sell your belongings. Have you done a spring clean recently? Now is the perfect time to go through your house and look for any items you can part with on Facebook Marketplace or Gumtree and use this cash to chip away at your debt.
  • Balance transfer credit card. This involves you transferring your existing balance to a new card with a zero per cent interest-free period over a number of months. Balance transfer cards may offer some much-needed breathing room for you to pay off the outstanding balance. Just keep in mind that if you don’t pay off your balance by the time the interest-free period is up, you will begin to be charged interest on your balance.
  • Debt-consolidation loans. If you have multiple debts, a debt-consolidation loan may be a more convenient way of managing them and keeping interest down. Instead of juggling multiple repayments with multiple interest rates, you then make one monthly repayment with one interest rate.


This article is over two years old, last updated on July 8, 2020. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent credit cards articles.

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This article was reviewed by Finance Writer Alison Cheung before it was published as part of RateCity's Fact Check process.