Credit card myth: You don't need to maintain a balance to build credit
Credit card myth: You don’t need to maintain a balance to build credit

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There is a common, but totally false belief that you need to maintain a balance on your credit card to build up credit. This myth couldn’t be further from the truth, but experts say they still hear it often from credit card holders.

“That’s the myth I’ve tried to bust my entire career,” says Beverly Harzog, credit card expert and consumer credit analyst for US News & World Report. “Essentially, you believe you have to pay interest to get good credit, but you can get great credit for free. It just takes time and patience, and paying your bills on time.

That’s because your payment history — showing you can pay your bills on time each month, over time — is the most influential factor in your credit score. And keeping your balances low (or ideally no balance at all) also has a positive effect on the second most influential factor, credit utilization rate.

“You don’t have to have a balance to build good credit,” says Anna N’Jie-Konte, CFP and founder of Dare to Dream Financial Planning. “What is needed is to show that you are using the card and paying for it. This is the most basic thing.

Here’s everything you need to know about building your credit score to avoid falling for this common myth, and what to do if you currently have a balance on your credit card.

How Carrying A Balance Affects Your Credit Score

There’s essentially “no benefit” to keeping a balance on your credit card, says Larry SprungCFP and founder of Mitlin Financial.

For starters, carrying a balance is expensive. Each day that you do not pay your statement balance in full after the monthly due date, you will accrue interest on the remaining balance until it is paid. This can lead to a slippery slope to long-term debt, as most credit cards charge very high APRs – ranging from 10% to over 25% – on the balances you carry.

Maintaining a balance can also increase your credit utilization rate. It is the total amount of available credit you are using compared to the total amount of credit you have. If you have a credit limit of $5,000 and carry a balance of $3,000 from month to month, for example, you will have a high utilization rate of 60%. Experts recommend keeping this ratio below 30%, although less than 10% is ideal for credit building. An increase in usage has the potential to lower your credit score because it signals to lenders that you may be experiencing financial difficulties.

Better ways to build credit

Your credit score influences many aspects of your financial life, from buying a car to buying a house or even renting an apartment. That’s why it’s essential to monitor your credit and make sure you’re adopting the habits that can help you build and maintain a strong credit score.

Building credit can take time, but there are several ways to get started – which don’t involve carrying a balance:

  • Pay your balance on time: Payment history is 30% of your credit score, so it is important not to miss any payments. Automating your payments can help you get your credit card bills under control.
  • Keep your utilization rate low: According to experts, a 30% credit utilization ratio is as high as you want it to be, but you should aim to keep it as low as possible.
  • Check your credit regularly: There’s a difference between your credit report and your credit score, but it’s important to take the pulse of both. To visit to access your credit report. To check your credit score, log into your online account with your credit card issuer.
  • Correct errors on your credit file: Federal Reserve Data shows that one in five people have an error in their credit report. Spotting inconsistencies or errors in your credit report early can save you from being caught off guard by a sudden drop in your credit score.
  • Explore credit enhancement programs: Tools like Experian Boost, TransUnion’s eCredable Lift, and FICO’s UltraFICO Score leverage information not typically used in credit-scoring data, such as bank history and utility payments, to help you boost your score. But you will sign up to actively enroll in these programs.

What to do if you are carrying a balance now

If you currently have a balance on a credit card, focus on clearing those debt balances before more interest accrues. Even if you have other debts, tackling credit card debt first can save you more money in the long run, as credit cards tend to bear higher interest than other types. of loans.

One option to consider is transferring your debt to a balance transfer credit card. These cards offer an introductory APR of 0% for a limited period of time – often 12, 15 or 18 months – during which you can make payments directly to your balance without charging more interest. It can help you save money in the long run, but only if you form a plan and commit to paying off your balance during the 0% APR introductory period.

Some of NextAdvisor’s top picks for balance transfers include the U.S. Bank Visa® Platinum Card, Citi Simplicity® Card, and BankAmericard® Credit Card, among others.

You can also take out a personal loan from a bank or credit union to consolidate your debt. Interest rates on these loans are determined by your credit score, income, and debt, so shop around to make sure you’re actually saving money by getting a personal loan with a better interest rate. Keep in mind that there are usually upfront origination fees, which can be as high as 8% of the loan amount.

If you’re looking for free or low-cost debt help, consider working with a nonprofit credit counseling agency. Credit counselors can be a great resource for advice on budgeting and money management, and they can also set you up with a debt management plan (DMP) for a small fee. Accreditation is key, so look for the initials NFCC (the National Credit Counseling Foundation) and FCAA (Financial Counseling Association of America) when looking for a reputable credit counselor.


Your credit score is never set in stone — it can go up or down depending on your credit habits. But carrying a balance on a credit card is not the way to boost your score and can often have the opposite effect or lead to lasting debt.

Pro tip

If you have no credit history or bad credit history, checking your credit report and score is the first step to improving your credit. Having a complete picture of your current credit condition can help you better understand what you need to do differently to improve it.

Instead, the key to maintaining a consistently good credit score is managing your debt responsibly each month. This means paying your credit card bills on time, paying your balances in full, and checking your credit regularly. And if you currently have a balance and are struggling to pay it off, there are debt repayment options to help you out, such as a balance transfer card with a long period of 0% interest, loans debt consolidation or consulting a credit counsellor.


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