I Paid Off A Credit Card - Now What?

Congrats! You’ve paid off a credit card. Aside from celebrating (which you should) you will also want to do a couple of other things to make sure you keep that zero balance.

After months of penny pinching and hefty payments you’ve finally paid off one of your credit cards. Hooray! Getting down to a 0 balance is never an easy feat and can take some serious financial will-power. Now that one of your cards is done what do you do with it?

Do Not Cancel The Card

Never cancel a credit card. You may want it completely out of your hair now that it is down to nothing but cancelling or closing a credit card account can ding your credit score quite a bit.

One of the biggest factors that make up your credit score is credit utilization. Credit utilization is the percentage of credit you are using versus the amount you are allowed. The lower the number the better. Now if you have a card with a $10,000 limit and no balance that is going to make your credit utilization ratio much better. If you close the account that $10,000 disappears and your ratio will increase.

For the most part credit cards can remain open and not cost you anything unless you have an annual fee. All you do is simply destroy the actual cards and let it live untouched.

Decide If You Will Continue Using It

So you’ve paid off the card - now what? You can certainly still use the card or you can stop. Figure out what you would like to do once the balance hits 0. You certainly don’t have to stop using it by any means! If you decide to continue using it now is the perfect time to start paying off each month’s charges in full every month, avoiding interest. This is a good financial habit that is really hard to start when there is already a large balance and accruing interest.

Since you are no longer beholden to the card you can also shop around to see if you can get one with a better interest rate. Wait until the full payoff hits your credit score and look around, you may be able to find something that won’t bury you in interest.

Start Fresh

Now is the time to start fresh with your financial habits. You likely still have debt, very few of us only have one credit card, but you have an opportunity to get on the right path with your paid off card. Now get in the habit of paying off the months charges in full every month. If you stick to this practice you will avoid interest entirely and that can save you thousands every year.

If you can’t pay off the full balance every month because you had to make a large purchase focus on making sure to wipe it out entirely in two or three months. Keep your eye on that zero. If you start using it like you did before that balance will balloon again and you will have the agony of making hefty interest payments.

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