You should avoid carrying a balance on your personal credit card unless it’s necessary to do so. You can still make purchases with a credit card and pay the bill in full by the due date, but carrying an unpaid balance from one billing period to another will usually trigger expensive interest charges.
While paying off your balance by the due date can help you maintain a good credit profile and avoid paying interest, it’s important to note that a recent study from the Consumer Financial Protection Bureau (CFPB) indicates that less than half of all credit card users pay their bill in full every month. So, there’s a disconnect between how often people should carry a credit card balance and how often they actually do.
What You Should Know About Carrying a Balance on Personal Credit Cards
- If you have a 0% introductory APR offer, you won’t be charged interest for a specified period on purchases, balance transfers, or both, as long as you make the minimum payment by the due date every month. However, once the intro rate expires, you’ll pay interest on any unpaid balance at the card’s regular APR.
- When you must carry a balance without a 0% intro APR offer, you should make at least the minimum monthly payment by the due date and pay off the remaining balance as soon as you can.
- If you maintain a low balance every month, it will help your credit utilization, which is a key component in calculating your credit score. A high credit utilization ratio indicates you could be overspending, which may raise a red flag with potential lenders.
- Most credit cards offer a grace period, typically a window of around 21 to 25 days, during which you can pay your credit card bill in full without interest accruing. If you carry any portion of the statement balance past the grace period, you will lose the grace period and get charged interest on the remaining balance each day. You can have the grace period restored after you pay your balance in full for two straight billing periods.
You can learn more about paying credit card bills here on WalletHub.
This answer was first published on 07/21/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
