Your credit card balance is the amount of the fee you owe to the credit card company based on what you borrowed but didn’t repay. Every purchase, balance transfer and cash advance you make is added to your credit card.
Fees and interest also increase the credit card balance
Payments and refunds reduce your credit card balance. Your credit card balance can even be negative if you have overpaid your credit card or received a credit into your account after paying your full amount.
It is important to keep in mind your credit card balance, not to let it get out of control and keep it at a reasonable level (or $ 0).
Why you have good credit card status
Maintaining a good credit card is important not only for your credit score but also for your overall financial health. A high credit card amount, relative to your credit limit, can damage your credit score. The higher your credit card balance, the higher the minimum payment and the more money you have to allocate to that credit card each month. A high credit card level also means less credit available for purchase.
What balance is good for your credit score
When it comes to credit score, a good credit card balance is less than 30% of your credit limit. For example, if you have a credit card with a credit limit of $ 100, your balance should be less than $ 30. Of course, the best credit card balance is $ 0 because that means you have no credit card debt.
Keeping a $ 0 balance is virtually impossible unless you never use your credit card. However, you can ensure that zero balances are reported to credit bureaus by paying off your credit card before the account closure date.
Credit score aside, a good credit card balance is one that you can afford to repay.
Since the best way to control your credit card debt is to pay off your balance every month, you should never charge more than your monthly discretionary income. This is your income after taxes and expenses.
Are your balances hurt for your credit score?
Make a list of all your credit cards. Write down the credit limit and balance of each credit card. Then, for each credit card, divide the credit card balance by the credit limit. Multiply by 100 to convert the answer to a percentage. Any credit card with a balance greater than 30% can affect your credit score. Work to reduce these positions for better credit score.
How to maintain a good credit balance
Your credit card balance can get out of control when you foolishly spend without checking to see if your balance is approaching your credit limit. Make it a habit to continually check your credit card balance, once a week or more, to make sure it is no higher than 30% of your credit limit. As your balance grows higher, you can make a payment to withdraw your balance. Or, if you can’t afford to pay off a significant portion of your credit card, stop using your credit card until you can reduce your balance to a better level.