Owning a credit card comes with many responsibilities. For example, you must make your payments on time, work on improving your credit score, and keep an eye on your interest. When you carry a balance on your credit card a penalty interest can take affect.
Normally, when you have a balance on your credit card, it can turn out to be pretty expensive. But, does it mean it’s a bad thing to carry a balance on your credit card? Read below for more information on when it’s okay and when it’s not okay to have a balance on your card.
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How Does it Affect Your Credit Score?
When you have a balance on your credit card, it will definitely have an impact on your credit score. However, it will not be a great impact for your score. Credit bureaus normally look at your payment history, how long it is, how much you owe, and your credit mix. So, when you carry a balance, this won’t translate very well on your report if it’s not paid off in time.
It’s a good idea to not carry a balance for too long since you always want to improve your credit score. In other words, try paying your balance off every month to help reduce how much you owe. This will help work on your credit score a little bit.
Advantages of Having a Balance
Normally, people would think that carrying a balance on your credit card is a bad thing. But, it’s not always the case with how competitive credit cards can be in the industry. There are several credit card companies that offer great rates and 0% APR for balance transfer credit cards. Plus, owning a balance transfer credit card is beneficial to you if you have large balances. Make use of a cards introductory period when they have a 0% APR. Since, after the intro period is over, the interest payments will start.
In other words, be sure to pay what you owe before the introductory period is over. Another great perk of having a balance on one of these cards is balance transfers. You’ll be able to transfer your balance from one card to another. This will earn you an interest-free period to pay your balance off.
Disadvantages of Carrying a Balance
Obviously, there are some downsides to having a balance on your credit card. One main thing to worry about is having that balance grow bigger and faster. Typically, interest rates nowadays are pretty high and can add up pretty fast. This happens when the credit card company puts it onto your balance, which will make it harder to pay off.
Rather than paying off your interest that can build up just as easily, pay your balance off instead. Additionally, carrying a balance on your credit card will decrease your credit score and will be reported.
Is it a Good Idea to Carry a Balance?
It’s not a bad idea to carry a balance if you sign up for a 0% APR credit card. As mentioned before, they offer an introductory period that you’ll definitely be able to benefit from. Be sure to pay your balance off in time before this period is over.
But, if you do have a balance on your credit card, it will most likely pile up your interest every month. This results to you paying more for both the balance and your interest rates. Furthermore, it will also harm your credit score if you don’t pay it off in time.
