Stop Carrying A Balance On Your Credit Card

Recently at work someone was talking about how their credit card number was stolen and fraudulent charges were made to it. After some back and forth with Capital One all of the charges were reversed, but then they noticed that the interest charge for carrying a balance popped up. They were frustrated because they had to contact them again to remove that charge. Not a huge deal and once again everything worked out but still an extra hassle to go through. But then someone made a comment of “Aren’t you making a small interest payment every month than? I carry a balance on my credit card to improve my credit score.” A few people (including me) spoke up to let them know you don’t have to do this. You’re basically flushing money down the drain!

I’ve also read this myth across the internet that you need to carry a balance to have the credit card companies report to the credit bureaus. If you don’t have a balance on your credit card it wont build your credit score. These rumors always seem to originate from a friend or a “friend of a friend” and then spiral out of control and get presented as the truth. Both of these are just rumors and they are patently false. The important part with credit cards and your credit score is keeping your utilization down. You don’t need to pay ANY interest to have a good credit score. You might not be the bank’s favorite customer, but they will still make them money for the fees from your card transactions.

The best strategy you can have for building credit is paying off is using your credit card, keeping your utilization low, and paying your balance in full every month. Make sure pay this off before the due date and you will avoid paying any extra interest. Your credit card essentially becomes a debit card that offers extra protections to you and possibly even gives you rewards.

Even if you look at Bank Of America’s site, the bank that everyone loves to hate, they agree that you do not need to carry a balance to build a credit history. Making full payments every month will help build your credit history without carrying a balance and paying interest. The interest you pay to a bank is not even reported to the credit bureaus, only 30 days past due/late payments and your total credit utilization.

The only thing that is being reported to credit bureaus is your statement balance each time your bill comes in. This same amount is what the credit bureaus will see along with your total amount of credit available on that credit card. If you are using any of the sites that offer some sort of look at your credit report, these are really the only things you will see on them! They don’t show how much interest you are paying because it’s not tracked.

So please stop wasting your hard-earned money by paying interest on your credit card balances, it’s not necessary at all. Your credit score will improve with a long history of on-time payments and responsible credit card use. If you aren’t planning on taking out a loan in the near future, there is actually no need to even obsess over your credit score. It is good practice to check for fraudulent activity and check everything out once in a while, though. If you were told this rumor by a friend, let them know that it is not true so that we can reverse this myth into truth.

photo credit: Bankcard via photopin (license)


  1. Wow…I have to admit that until I read this post I believed this myth. The only reason why my cards are at zero balance is because I want to be debt free. Thank you so much for the education and killing this myth for me.

    1. Yeah – I’ve heard and read this many times before. The only important part is that your credit card company is reporting usage to the credit bureaus. The balance reported will be there even if you in full each month! The on time payments are what are really growing your credit score. Glad I could help you out 🙂

  2. Carrying a balance on a credit card is always the easy approach to handling finances and one doesn’t realize the true cost being incurred when doing so. As you mentioned it’s essentially flushing money down the drain but sometimes when people are on a truly fixed income it can be tough to pay down that debt and a downward spiral is entered to the benefit of the cc companies of course. Thanks for sharing.

    1. Yep, I cant definitely understand the downward spiral idea. Maybe the first month you are only paying $15 in interest and your minimum payments aren’t too bad. What’s another $5 a month? Then you reach the point where you can’t pay it off and all of a sudden the credit card is maxed out. This is not a pattern you want to end up in.

  3. There really should be more basic finance taught in public schools(and in homes). This is such a basic principle, yet so many people don’t abide by it. I got burned by carrying a balance on credit cards when I when in my early 20’s, but never again. Good write-up, I hate debt as much as you do. It makes life less enjoyable.

    1. I agree, education would go a long way. I think putting it in the perspective of how much you lose to interest of how much of your income it takes a way would really open the eyes of a lot of people. If we could prevent just a few more people from going into unnecessary debt that would be huge progress.

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