Is it better to pay off a credit card every month or make payments toward the balance every month?

Credit Card Q&A

Question

Is it better to pay off a credit card every month or make payments toward the balance every month?

Answer

It is almost always better to pay off your credit card completely if you have the financial means to do so. From a financial perspective, unless you have a special rate on your credit card balance (say 3.00% or lower), you are generally better off paying the monthly balance in full. An exception could be to have cash for emergencies. In today’s economic environment, having cash can be very useful should you lose your job or run into another financial emergency.

From an optimal credit score perspective, paying interest on a balance doesn’t help your score. Using your credit card once every few months is enough to build a history of responsible credit use and payment.

Filed under: Credit Card

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USER COMMENTS(3)

JOHN19437
Sep 30
9:57 am

If I consolidate my credit cards will it lower my score?

If I settle my debt with a card company will it lower my score?

lluckduck30
Sep 25
11:40 am

Pertaining to your answer of how it is best to pay off the balance on the card each month rather than carry a balance, if the cardholder has a fantastic promotional rate...and is in the promotional period, can lenders see this so that there is a reason the individual has a high balance on the card? Or a high balance is a high balance, and so it would bring the credit score down?

CK Moderator

The details of your rate and amount are not on the credit report. So the answer is: there is no distinction. It just looks like a high balance. Hopefully you will have other available credit limits with 0% utilization to compensate.

libbycove
Sep 18
7:32 pm

Use prudent financial management. Don't charge more than you can pay off. i use quicken to track purchases and never go over my ability to pay the total charges every month.