Should I Pay Off My Credit Card Now Or Later?

If everyone lived in a perfect world, no one would have any credit card debt. Everyone would pay it off right away and never carry a balance from one month to the next. If you always have a balance on your credit card, this means that you have accumulated interest on the things you have bought. Continue reading to find out whether it is a good idea to pay off your credit card balance right away.

Paying off Credit Card Debt Now vs. Later

Credit Card Utilization

When you carry credit card debt from one month to the next, you end up being scored for your credit card utilization. For example, if you have a credit card with a $5,000 limit and use $2,500 to buy something, your credit utilization ratio stands at 50 percent. This will negatively impact your credit score. The ideal goal for everyone should be not to use any more than 30 percent of their credit limit. Doing so will positively impact your credit score.

Should you carry a balance from month to month? The answer really is no. Doing so, again, will affect your credit score. It is always recommended that you pay your balance in full when it is due. What if you carry a balance over to the next month? It just depends on the amount of the balance you are carrying over. If you are carrying over a balance that is lower than 30 percent of your limit, you have nothing to worry about.

To pay off or not to pay off?

If you can show the credit card company that you can afford to pay your credit card balance off every month, this shows that you are spending responsibly. This basically means that you are not depending on your credit cards to substitute for your regular income. This is a good sign that your financial health is in good condition.

Others may tend to keep a balance from month to month to show that they are actively spending their credit cards. However, this is not really useful for you. If you pay attention to the time of the month your credit card company discloses your account information to the credit bureaus, you can use this to your advantage. Most of the time, credit card companies report your account information when your billing cycle ends for the month, whenever that may be.

If you think about it, you could carry a balance that is rather compact on the date the company reports. You could then pay the balance off in full the following day to demonstrate that you are actively using your card. This is also a great way to steer clear of interest charges.

Final Thoughts

It is never a good idea to carry a balance larger than 30 percent of your limit every month. If you have found that you are in a cycle of credit card debt, you can apply for a loan from Symple Lending, or an alternative, to pay off your credit card debt. If you keep your balance low, your score will thank you.