Is it better to keep a balance on your credit card or pay it off?

Is it Better to Keep a Balance on Your Credit Card or Pay it Off?

When it comes to credit cards, there are two main schools of thought: those who believe in keeping a balance on their cards to build credit and those who believe in paying off their balances in full each month to avoid interest charges.

The Case for Keeping a Balance

There are a few reasons why people might choose to keep a balance on their credit cards. First, it can help you build credit. When you have a balance on your card, it shows that you’re using credit responsibly and that you’re able to make payments on time. This can help you improve your credit score, which can make it easier to get approved for loans and other credit products in the future.

Second, keeping a balance on your card can help you earn rewards. Many credit cards offer rewards for spending, such as cash back, points, or miles. If you keep a balance on your card, you’ll be able to earn more rewards.

The Case for Paying Off Your Balance in Full

There are also a few reasons why you might want to pay off your credit card balance in full each month. First, it can save you money on interest charges. Credit card interest rates can be very high, so if you keep a balance on your card, you’ll be paying a lot of interest charges. Paying off your balance in full each month will help you avoid these charges.

Second, paying off your balance in full can help you avoid debt. If you keep a balance on your card, you’ll be more likely to get into debt. This is because it’s easy to lose track of how much you’re spending when you’re not paying off your balance each month. If you pay off your balance in full, you’ll be less likely to get into debt.

So, Which is Better?

Ultimately, the decision of whether to keep a balance on your credit card or pay it off in full is a personal one. There are pros and cons to both methods, so you’ll need to decide what’s best for you.

If you’re trying to build credit, you might want to keep a small balance on your card. But if you’re trying to save money on interest charges and avoid debt, you should pay off your balance in full each month.