Should I keep a balance on my credit card?

Paying off your credit card is preferable to carrying a balance from month to month. A credit card balance is the entire amount you owe on your card that will roll into the next billing cycle if it’s not paid before then. 

You may be unsure about the pros and cons of keeping credit card debt or paying it off. If you carry a debt, you’ll typically be charged interest based on your card’s annual percentage rate on the amount of the balance you don’t pay. 

It’s generally best not to carry any credit card debt from month to month. It’s also worth noting that you don’t have to retain a balance on your card to keep it active.

Carrying a balance may affect your credit score

Paying bills on time is one of the things you can do to try to increase your credit score. Paying in full before the due date is the most cost-effective option because it means you aren’t paying interest on the balance. 

High credit card balances can affect your credit score, and although credit bureaus don’t tell you how much debt is too much, the rule of thumb is to keep your balance at less than 30% of the card’s borrowing limit. 

Holding a balance can be expensive

You will typically not be charged interest if you pay your account in full each month before the due date. If you don’t pay in full, you’ll could be forfeiting your so-called “grace period,” and all your newer purchases may start incurring interest in the next month. You can reclaim your grace period by paying in full during two billing cycles in a row. 

If you have credit card debt that you are unable to repay at this time, the best first step is to stop using credit cards for purchases. Paying off debt is likely to be far more challenging if you’re simultaneously accruing credit card debt. Once you’ve stopped using your credit cards to pay for various expenditures, you can devise a strategy to pay them off in full, whether that’s via a lump sum or over time with multiple payments. 

Stay in control of your finances

It’s always best to try to pay off your entire balance each month if you’re able to. It will help you establish yourself as a more responsible credit user each time you pay a bill on time.