Carrying a credit card balance is considered one of the biggest money “no-nos” – a balance could be the slippery slope that leads to serious credit card debt. But could there be benefits to carrying a small balance?
Believe it or not, carrying a little bit of a credit card balance can actually be a good thing – and if you’re the kind of person who always pays off your credit card debt in full each month, you could be missing out on some awesome rewards.
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Utilizing Some Credit Can Be Good for Building and Maintaining Your Credit Score
There’s a lot of misunderstanding about whether or not carrying a balance is good for your credit. First, it’s important to know exactly what it means to “carry a balance.” Most people understand it to mean “utilizing some credit at some point during the month,” according to financial blog, NerdWallet.
Basically, if you have any unpaid charges at the end of the month, it means you’re “carrying a balance.” Though paying off your debt is good, if you’re trying not to carry a balance by never using your cards, it actually could damage your credit score, especially if your issuer decides to cancel it.
In order to build and maintain a good credit score, you need your issuer to know that you’re responsible with their money – and you do this by utilizing some credit and paying your bill on time.
It’s all about achieving the perfect balance when it comes to credit utilization; too much isn’t good, but too little isn’t good either. According to NerdWallet, one rule of thumb is you should never use more than 30 percent of your available credit during the month.
Get Rewarded for Using Credit to Finance Major Purchases
If you’re responsible with your credit cards, you can actually benefit from some pretty awesome rewards, especially on purchases you’re already planning on buying.
Most credit cards today offer some kind of reward. From cash back bonuses to airline miles to hotel rewards, every dollar you spend on a credit card can generate some perks. And if you use your credit card smartly, you can really reap the benefits by carrying a small balance and earning more rewards.
For instance, if you know you’re going to be spending money on a big-ticket item like a new TV or laptop, it might be better to use a credit card. Some cards offer 0 percent introductory APR for a certain number of months after you open the card. So, by putting the major purchase on a credit card, you’ll not only keep cash in your pocket, but you’ll also have time to pay off your purchase without interest. And you’ll possibly even meet the introductory spend award, meaning you’ll actually make money on this purchase.
Which Credit Card is Best?
So, now that you know keeping a balance can be beneficial, you’re probably wondering which credit card is best? The bottom line is you’ll want to choose a card that offers a 0 percent introductory purchase and balance transfer APR, or a card that offers one or more of the following: cash back on money spent, a sign-up bonus, and/or reward points such as points that can be transferred to frequent flyer points.
You want your credit card to work for you, offering you financial benefits that make it worthwhile to both use the card and carry a small balance. The rewards should be substantial, and the interest should be small or nonexistent, to really be beneficial.
Where to Find the Best Credit Card Offers
While piling up credit card debt isn’t smart, it doesn’t mean that credit cards are bad. In fact, if you’re a responsible cardholder they can actually be beneficial – even if you want to carry a balance from time to time. There are many credit cards out there that offer amazing financing, cashback, and rewards. In order to find them, you just need to search online.
Having a credit card balance isn’t necessarily a bad thing, especially if you practice financial discipline by keeping within your budget and paying off your statement on time. It’s all about being smart. If you’re responsible with your credit card, there are ways you can have your card work for you – instead of the other way around.
In order to best compare your credit card options, search online for cards with low interest rates, impressive rewards options, and qualifications that suit you.