What Is the 15/3 Credit Card Payment Hack?
Most Americans trying to improve their credit score have heard of the 15/3 credit card hack. While there are several ways to stay in the good books of credit card companies and credit bureaus—like making payments on time and staying well below your credit limit—the beauty of the 15/3 credit card hack is that it’s easily actionable
Why Is the 15/3 Credit Card Hack Relevant Now?
Whether or not we’re embarking on another roaring twenties, one thing is clear: Americans are about to begin one of history’s greatest consumption growth phases. This means more and more people will be relying on credit cards to make purchases. If you’re an American, you’ll identify with one or more of these post-pandemic spending patterns:
- A demonstrable shift toward online spending in all categories that isn’t likely to dramatically drop after the pandemic
- Pent-up consumer demand further enabled by federal benefits and relief checks
- Reunions with friends and families after a year and a half of relative isolation, many of which occur at restaurants
- A rise in domestic travel, though global travel remains problematic
More credit card charges mean more chances of defaults, high-interest rates, and additional fees. If you use your card regularly, it helps to know credit card hacks that improve your FICO score and keep you financially healthy. But what exactly is the FICO score?
Why Should You Care about Your Fico Score?
You will encounter expenses in your life that you will be unable to afford in one payment. Whether they are car loans or mortgages, these will be financed by companies that will expect you to repay them over time. Since these companies are assuming risk, they will want to know how likely you are to make those payments. That’s where the FICO score comes in.
It’s a three-digit number that measures your credit repayment capability. It’s important to note that it’s more than a history of your credit card balances and repayments. It’s a measure of your creditworthiness. In other words, it tells credit bureaus and future lenders whether you’ll be able and willing to repay the loans they give you.
The base FICO score extends from 300 to 850. According to the editorial team at MoneyWizard, you should aim for a score above 670. Doing so is an investment in your future financial well-being. One credit card hack to improve your FICO score is the 15/3 method.
What Is the 15/3 Credit Card Payment Hack?
Using the 15/3 credit card hack, you’ll pay twice during a credit card billing cycle. To do this effectively, you must do the following:
- Find the due date: This is the date when your payment is due to the credit card issuer.
- Determine the 15-day marker: This is 15 days before the due date.
- Pay half: On the 15-day marker, pay half your outstanding balance.
- Determine the 3-day marker: This is 3 days before the due date. As there may be holidays on or around the payment date, it’s vital to give yourself this 3-day leeway.
- Pay the rest: Pay the remaining balance on the 3-day marker.
What Does Making Payments Before the Due Date Achieve?
Making two payments to pay your balance won’t in itself improve your credit score. It’s important, however, because it improves your credit utilization ratio. This is the proportion of your total available credit that you use.
The personal finance team at MoneyWizard recommends that you keep your credit utilization below 30 percent. Making multiple payments is an excellent credit card hack to keep it below this level.
Does the 15/3 Credit Card Payment Hack Work?
It does but not for the reasons you might think. As stated above, making multiple payments on your credit card each month won’t automatically raise your credit score.
The Myth: You’re Doubling Your Payment History
A popular misconception is that if you increase the number of times you pay your bill, your payment history will likewise grow. The basis for this belief could be that 35 percent of the FICO score is based on payment history.
The number of payments, however, isn’t a criterion used by credit bureaus or lending companies because it could be misleading. If paying twice a month positively influences a credit score, paying six or seven times should be even more advantageous. Contrary to popular belief, making two monthly payments doesn’t double your payment history.
Your credit card issuer or credit bureau isn’t interested in the number of times you make payments. They are concerned with your total outstanding balance and whether you can pay the complete amount on time.
Real Talk: It’s All about Reduced Credit Card Utilization
So, how exactly does making two payments improve your credit score? You must understand your credit card utilization rate, the percentage of the total credit that you have used available to you.
For example, if your credit limit is $10,000 and your current credit card balance is $4,000, your credit card utilization rate is 40 percent. This ratio matters because it shows your dependence on credit, your ability to repay, and your likelihood of defaulting.
The higher the credit card utilization rate, the more likely that your outstanding balance is big and will continue to increase. To a credit bureau, that means you’re more likely to miss, delay, or default on payments. When you make multiple payments through the 15/3 credit card hack, you improve your credit utilization rate.
Statement Date vs Payment Due Date
To apply the 15/3 credit card payment hack, you must understand the difference between your statement date and payment due date. The date on which the company issues your statement is your statement date. The payment due date is the day on which you should have made at least the minimum required payment.
When you count back 15 days, it should be from the due date, not the statement date, which might be a month earlier.
Why Do Multiple Monthly Payments Boost Your Credit Score?
Credit bureaus dislike high credit utilization rates. Ideally, you should keep yours below 30 percent. Anything above 60 or 70 percent suggests that you’re on your way to maxing out your credit cards and missing payments.
Multiple monthly payments help keep your credit utilization rate in check, telling credit bureaus that you’re in control of your credit situation.
Should You Use the 15/3 Credit Card Payment Hack?
You should use the 15/3 credit card hack to ensure that your credit utilization rate remains low. It will also help you better plan your personal finances, because it keeps you aware of how much you owe and suggests where you can cut expenses.