Yes, credit card companies do like it when you pay in full each month. In fact, they consider it a sign of creditworthiness and active use of your credit card. Carrying a balance month-to-month increases your debt through interest charges and can hurt your credit score if your balance is over 30% of your credit limit.
So, it is better to pay off your credit card each month than to keep a balance. Payment history is a significant component of credit scores, and paying in full can lead lenders to believe that you are financially responsible.
Why It Is Better to Pay Your Credit Card Balance in Full
- If you pay your bill in full each month, you won’t be charged any interest. However, if you don’t pay in full one month, you’ll lose your grace period, and your purchases will begin accruing daily interest right away.
- You don’t need to carry a balance for a credit card to help your credit score. What matters most for credit building is meeting due dates and keeping credit utilization below 30%.
- Carrying a balance makes it harder to keep your credit utilization low, since your everyday spending will be added on top of the amount you’re carrying from month to month.
Some people think you need to carry a balance in order to see positive information on your credit report, but that’s simply not true. You don’t even need to use your credit card to build credit. Simply keeping an account open and in good standing is enough to affect your score for the better.
This answer was first published on 09/13/22. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.
