Should You Carry a Credit Card Balance?

Find out when it's OK to carry a credit card balance.

In May 2018, the average interest rate on new credit cards rose to a whopping 16.71 percent, according to USA Today. That means carrying a balance on a credit card can be … expensive. And if you carry a balance on a credit card and penalty interest comes into play, you’ll be paying even more. But is carrying a balance on a credit card always bad?

Keep reading to find out when it might be OK to carry a balance on a credit card — and when it’s definitely not.

How Does Carrying a Credit Card Balance Affect Your Credit Score?

If you think carrying a balance on your credit card will improve your credit score, think again. The factors that go into your FICO credit score include your payment history, the length of your credit history, the amounts you owe, your credit mix and the amount of new credit you’ve opened. In other words, carrying a balance on your card does not go into your credit score calculation.

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Don’t keep a balance on your credit card because you think it’s boosting your credit score. Instead, try to pay off your balance each month. That will cut down on the amount you owe and help fix your credit score.

FICO Score vs. Credit Score: What the Difference Means for You

What Are the Benefits of Carrying a Balance?

Competition in the credit card market is fierce — many companies battle it out by offering intro deals with 0% APR on all purchases. Credit card issuers also offer 0% APR balance transfer credit cards, which might be an option if you have high balances on your other cards.

If you can get a card with 0% APR, you can take advantage of the intro period and carry a balance. Keep in mind, however, that once that intro period ends, your interest payments begin, so make sure you pay off your balance beforehand.

Another benefit of carrying a balance on a 0% APR credit card is that if you take advantage of a 0% APR on balance transfers, you can transfer your balances from other cards and use those interest-free weeks or months to pay them off.

What Are the Consequences of Carrying a Balance?

Carry a balance on your credit card and you will watch that balance grow — quickly. Because interest rates are often in the double digits, it really adds up when the credit card company applies them to your balance, and it only gets more difficult to pay off that large amount. Instead of paying all of that money in interest, you could be paying down your balance.

Let’s say you have a credit card with a 15% APR and you carry a $2,000 balance on it for 12 months. That means you would pay $300 on that balance in interest alone. If you used that $300 to pay down the balance, it would improve your credit utilization ratio — which is how much of your available credit you’re using — and improve your credit score to boot.

Also See: 10 Best Balance-Transfer Credit Cards

Should You Carry a Credit Card Balance?

If you have a 0% APR credit card offer, by all means, use it to carry a balance on your credit card. Just remember to pay off the balance by the time the intro period ends.

However, if you carry a balance on your credit card and have interest piling up on that balance each month, you might find the balance insurmountable to pay off. If you’re in that position, consider looking for a 0% APR credit card — with no balance transfer fee — and make a balance transfer to it. Then, pay it off before the intro period is over.

Click through to read about the best credit card offers and bonuses available.

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About the Author

Barri Segal has 20+ years of experience in the publishing and advertising industries, writing and editing for all styles, genres, mediums, and audiences. She has been writing on personal finance topics for 12 years and gains great satisfaction from making a difference in consumers’ lives.