How Much of a Balance Should You Leave on a Credit Card?

Using credit cards wisely helps protect your credit score.

Using credit cards wisely helps protect your credit score.

If you’re wondering whether you should leave a balance on your credit card or pay it off in full each month, you aren’t alone. How much of a balance should you carry, especially if you’re worried about your credit score? While large credit card balances can hurt your score, charging a small balance that you pay off every month isn’t likely to harm your credit rating.

Credit Score

While several factors go into determining your credit score, your payment history and how much debt you owe account for about two-thirds of your score. Keeping a minimal balance on a credit card account for which you haven’t missed any payments can actually raise your score since it shows that you are responsible when it comes to managing credit. If you have large credit card balances but want to improve your credit score, work on paying down the amounts you owe. Maintaining high credit card debts can lower your score.

Credit Utilization Rate

Your credit utilization ratio is one of the main factors that go into calculating your credit score. The utilization ratio compares the amount of credit you use to the total amount of credit available to you. A low ratio means you don’t owe a lot of debt, which is good news for your credit score. Generally, you shouldn’t spend more than 30 to 35 percent of the credit you have available, although keeping your credit card balances below 10 percent offers a more secure safety zone.

Credit Card Balances

Having a $0 balance on your credit card isn't necessarily a better way to improve your credit score. The balances that card companies report to the credit bureaus are what lower your available credit. Credit card companies usually report the balance you carry as of the date of your last billing statement, therefore, you can have a balance showing on your credit report even if you pay the balance in full every month. Your debt-to-credit-limit ratio accounts for 30 percent of your credit score so charging less on your credit cards each month is one way to raise your score.

Making Payments

If you want a credit card company to report a $0 balance to the credit bureaus, you need to pay off the balance before the statement date rather than the due date for your payment. Determine when your card company reports balances to the credit bureaus, especially if you want to give your credit score a boost. While most report the balance you have outstanding on the statement date, some card issuers report to the credit bureaus on the last day of the month.


About the Author

Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.

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