Credit cards usually work out interest based on the balance they see each day. When the balance drops earlier in the month, interest is calculated on a lower figure for more of the cycle. That is why spreading payments across the month can sometimes reduce the overall interest compared with making one payment right at the end. The effect is not dramatic for everyone, and it depends on how the card calculates interest. In the end, the biggest influence is simply the total amount paid.
Overpaying Credit Cards: Does It Really Help?
Learn how simple extra payments can save you money on interest and help you clear your debt sooner.
Learn what happens when you overpay your credit card balance, and whether it helps improve your credit profile.
Glancing at your credit card statement and paying the minimum amount due can feel like a small win. It keeps your account in good standing and frees up cash for other things. But is that small payment costing you more in the long run?
The answer is yes. Sticking to the minimum can keep you in debt for years and cost a fortune in interest. It’s time to explore a more powerful card repayment strategy: making overpayments. Let’s break down how you can make extra card payments to save money and clear your debt sooner.
What Happens When You Overpay Your Credit Card?
“Overpaying” simply means paying more than the required minimum payment for the month. While the minimum payment stops you from being charged a late fee, it often barely covers the interest and a tiny fraction of your actual balance.
When you overpay, the extra money goes directly towards reducing your principal balance. This has an immediate and powerful effect:
- Faster Balance Reduction: You chip away at the amount you actually owe much more quickly.
- Lower Interest Accrual: This is the key benefit. Most UK credit cards calculate interest on your average daily balance. By paying more, you lower this balance, meaning there is less debt for interest to be charged on for the rest of the month. This helps you reduce your credit balance faster.
- Quicker Debt Clearance: A lower balance and less interest mean you become debt-free years ahead of schedule.
Benefits of Making Extra Payments
The credit card overpayment benefits go beyond just clearing your balance. It’s one of the best habits you can build for your overall financial health.
- Shorten Repayment Timelines and Reduce Total Interest: Paying an extra £50 a month on a typical credit card balance could save you hundreds, or even thousands, of pounds in interest and shave years off your repayment term.
- Improve Your Credit Utilisation Ratio: This ratio is the percentage of your available credit that you’re using. Lenders like to see it below 30%. Overpaying directly lowers your balance, which improves this ratio and can have a significant positive impact on your credit score.
Things to Watch Out For
While overpaying is a fantastic strategy, it’s important to be clear on two points.
- Overpaying vs. A Positive Balance: In this context, “overpaying” means paying more than your minimum due. It’s different from accidentally sending more money than your total outstanding balance. Doing so creates a positive balance on your account. While this isn’t harmful and can be refunded upon request, your goal is to clear the debt, not to lend money to your card provider.
- It’s Not an Instant Credit Score Fix: A lower card balance reduces credit utilisation, which is one of the factors that credit reference agencies include when building a credit file. It isn’t the only factor, though, and changes don’t always appear immediately. Credit scores reflect a range of data points over time, so any shift tends to be gradual rather than instant.
How to Plan Your Overpayments
The best way to succeed is to create a plan. Knowing exactly where your money is going and what impact it will have is the key to staying motivated. This can be particularly challenging if you’re trying to clear balances on several different credit cards. If you’re wondering about the best strategy when managing multiple accounts, our guide, ‘How Many Credit Cards Can I Get?’ Ask This Instead, can help you think about a simpler path forward.
- See the Impact: Use our Payoff Calculator to see exactly how different extra payment amounts will change your debt-free date and reduce the total interest you pay.
- Find the Money: Not sure where the extra cash will come from? Our Salary Saving Calculator can help you analyse your budget and find spare cash for your additional repayments.
- Automate It: Once you have a number in mind, set up an automated standing order for the extra payment each month through your banking app or the Updraft app. This removes the guesswork and builds a consistent habit.
Discover more practical tips to manage your credit cards. Check out our Clearing Card Debt page to find out more ways to clear your balances faster.
Final Thought
Want to take control of your money? If you’re looking to consolidate credit card debt and cut down on high interest, download the Updraft app today.
About Updraft
Updraft is an FCA-authorised lender and UK-based fintech aiming to help people swap financial stress for a little more headspace. We blend clever tech with practical tools – including ways to help manage and structure borrowing – designed to make money management feel less like a chore and more like getting your life back on track. Find out more about how we’re rethinking borrowing and money management at updraft.com.
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Frequently Asked Questions
Is it better to make one big payment or multiple small ones each month?
Does overpaying hurt my credit score?
Paying more than the minimum reduces the balance, which in turn lowers credit utilisation—one of the factors that credit reference agencies look at. A lower utilisation rate can support a healthier credit profile, but it is not the only thing that matters. Scores shift over time as many different data points update, so any change tends to be gradual rather than instant.
Will my bank refund a positive balance?
Yes. If a payment exceeds the total amount owed, the account moves into a positive balance. Card providers can return that money on request, or it can sit there and be used against future spending. It does not have any special status other than being funds held on the account rather than in a bank balance.