Carrying a balance on your credit card means youâve paid off a portion of what you owe and left the rest for the next billing cycle.
There are lots of reasons you might carry a balance. But itâs important to understand how it might affect interest charges, credit scores and more.
People often leave a small balance on their credit card, but is it a good idea? This article will talk about the pros and cons of carrying a credit card balance and help you decide if it makes sense for your finances.
What Does It Mean to Leave a Small Balance?
Leaving a small balance on your credit card just means you didn’t pay off the whole balance by the due date. For instance, if your bill says you owe $1,000, you could pay $950 and save the other $50 for the next billing cycle.
The idea is that leaving a small amount of your balance unpaid will show that you are using the card. Some people think this can help your credit score over time.
The Pros of Leaving a Small Balance
Here are some potential benefits of leaving a small unpaid balance on your credit card:
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May help build credit – Carrying a small balance could show lenders that you’re actively using credit, which can strengthen your credit profile. However, it’s debatable how much of an impact this really has.
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Keeps account active – Having a balance, even a tiny one, helps keep your account open and active. Inactive cards may eventually be closed by the issuer.
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Helps you remember—Seeing a low balance will remind you to make your next payment. If you forget when things are due, this can help you make sure you don’t miss dates.
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Provides a credit cushion – A small buffer gives wiggle room in case you overspend one month. It prevents your balance from zeroing out completely.
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May be more practical – Some people find it easier to manage small monthly balances based on their income and payment cycles.
The Cons of Leaving a Small Balance
Here are some potential downsides to consider:
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Accrues interest – Any unpaid balance will start accruing interest based on your card’s APR. Even a small amount can add up over time.
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Increases credit utilization – Carrying a balance increases your credit utilization ratio, which can lower your credit score if too high.
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Encourages debt – Having a rolling balance makes it easy to accumulate and carry larger balances month to month. This builds debt rather than financial responsibility.
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Forfeits grace period – Most cards offer an interest-free grace period when balances are paid in full each month. Carrying a balance forfeits the grace period.
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Possibility of late fees – If you forget to pay even the small carried balance one month, you could incur late fees.
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Myth about building credit – Many experts agree there’s no credit score advantage to carrying a small balance versus paying in full each month.
Expert Opinions on Leaving a Small Balance
Financial experts seem to agree that carrying a credit card balance is generally not beneficial or recommended. Here are a few authoritative perspectives on the topic:
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“It’s a myth that carrying a balance helps build credit…the best practice is to avoid carrying a balance.” – Experian
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“We recommend paying your balances off in full every month.” – Consumer Financial Protection Bureau
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“You do not need to carry a balance to have a good credit score.” – Credit Karma
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“Carrying a balance won’t help boost your credit scores.” – NerdWallet
The consensus is that paying in full avoids interest charges, keeps utilization low, prevents debt, and demonstrates responsible credit management.
When Does Leaving a Small Balance Make Sense?
Here are a few scenarios where carrying a small credit card balance could be reasonable:
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If you occasionally need flexibility with due dates and income schedules.
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To keep old credit card accounts open and active.
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If you are very disciplined about minimizing and paying down balances each month.
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To build a thin credit file for a short time.
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If the interest on a small balance is negligible to you.
However, these situations do not apply to everyone. You really need to assess your own spending and repayment habits.
Tips to Avoid Unwanted Credit Card Balances
If you want to pay your card in full but struggle to do so each month, here are some tips:
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Make payments as early in the cycle as possible. This limits interest fees.
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Pay more than the minimum due to chip away at balances faster.
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Set up automatic payments for the full balance or a fixed amount.
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Use balance transfer or low introductory APR offers strategically.
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Only use cards that fit within your budget and don’t tempt overspending.
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Build an emergency savings fund to avoid relying on credit cards during hardships.
The Bottom Line
Overall, credit experts tend to recommend paying your credit card balance in full and on time whenever possible. But an occasional small balance is unlikely to do major damage, especially if repaid quickly.
Evaluate your own financial habits and situation to determine if you can responsibly manage a revolving balance. And aim to minimize interest fees above all else. With the right approach, you can use credit cards strategically without incurring debt or damage to your credit score.
It can help you avoid interest charges
Paying your card in full each month by the due date can help you avoid paying interest on new purchases. If youâre struggling to make payments on time or have accrued interest, you could consider a balance transfer credit card. A balance transfer card could let you take advantage of a low introductory APR to pay off a high-balance card.
FAQ about carrying a balance on a credit card
Here are answers to common questions about carrying a balance on your credit card.
How quickly does paying off a credit card balance affect credit scores?
In general, it may take a few months for someone to notice a change in their credit scores after paying off their credit card balance. Credit card issuers typically send the credit bureaus monthly updates after the end of a cardholderâs billing cycle. So how soon the payment is reported depends on where the cardholder is within that cycleâand also whether they continue to use the card.
Does closing a credit card with a balance impact your credit scores?
Closing a credit card can reduce the length of your credit history. It can also increase your credit utilization. Both can negatively affect your credit scores.
And keep in mind that closing a credit card that still has a balance doesnât mean that debt is gone. Youâre still responsible for paying off the remaining balance.
How can you avoid carrying a balance on your credit card?
The only way to avoid carrying a balance on a credit card is to pay the card off in full every month.
If youâre having trouble managing credit card payments, it may help to plan and create a budget.
Does your credit improve if you carry no balance?
If you pay off your credit card balance in full each monthâmeaning that you donât carry a balanceâyour credit scores could improve. One major reason is that youâll have a lower credit utilization ratio, which is an important factor in determining your credit score.
Should You Carry a Small Balance on Your Credit Cards | Limitless Kredit Podcast
FAQ
Should you leave a little balance on your credit card?
To help you get and keep a good credit score, keep your balance at or below 30% of your credit limit. This means that you should have no balance at all times.
Does keeping a small balance help your credit score?
Credit Myth #54 – Carrying a small balance builds credit. It most certainly does not. There is no way that carrying a balance on a credit card or even a loan will “build credit.” This is sort of a follow up post to piggyback off of Credit Myth #3 from almost a year ago.
Is it better to have a low balance or no balance?
There is no reason to carry a $1. Some people (older people tell their kids) think that having a small balance on your account will help your credit score, but that’s not true.
How much balance should I leave on credit card?
According to the Consumer Financial Protection Bureau (CFPB), experts recommend keeping your credit utilization below 30% of your total available credit. Here’s an example: Say someone has only one credit card.