Is It Always Bad To Carry A Balance?

Building up and maintaining good credit can be complicated. Carrying a balance on one or all of your cards is almost inevitable but is it always a bad thing?

Sooner or later, even if you are frugal and vigilant, you will have to carry a balance on a credit card. While not a great feeling carrying a balance is nothing to be worried about as long as you are conscious as to what it means for your credit.

Make Sure You Pay On Time

If you can't pay off the full amount then meeting the minimum payment on time is enough to keep your score where it is. Even one late payment can have a devastating impact on your credit score. If you carry a balance on any account make sure you have alerts set up to be sure you know when the payments are due.

Make A Plan To Pay

Having a balance on a credit card is fine but it can easily become a habit. If you have been good at keeping up with payments don't let a balance make you fall into the habit of accumulating debt without making substantial payments. Once you have that balance look at your spending and make some cuts where you can so you can make up the difference in the next billing cycle.

Keep It As Low As Possible

One of the big stats used to determine your credit score is your credit utilization ratio. The lower the credit utilization ratio the higher your score. A big way in keeping that ratio low is making sure you don't have a ton of debt compared to the limit on the card. Having a balance on a card is fine as long as it is less than 30 percent of the limit on the card. 

Be Mindful Of Interest

Carrying a balance on a credit card comes with a big caveat - accumulating interest. This is the trap people fall into all too easily: you have the balance, you continue to make charges meeting the minimum monthly payments and then the accumulating interest balloons that balance making it harder and harder to pay down. If you are carrying a balance you need to understand the interest rate on your card and how to make payments to minimize the accumulation.

All in all carrying a balance isn't a bad thing but can be if you aren't careful with what you are spending.

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