Credit cards are a major part of most American financial life. They offer the convenience of not having to carry large amounts of cash, the ability to pay for goods and services online, and the opportunity to extend payments over time.
Despite the positives associated with using a credit card, they do have a downside. For some people, they can cause overspending. If the bill is not paid monthly, a high-interest charge is added to each payment. This can cause many people to become entangled in high-cost debt servicing.
Needless to say, paying off your credit card bill in full each month is a prudent measure to take. Here are some of the reasons.
Avoid Paying Interest
When you pay off your credit card balance each month, you avoid paying interest to the credit card company. Credit card interest rates tend to be quite high and can add up to large payments that you don’t really want.
Keep Your Credit Score High
Credit bureaus notice if you pay off your charges in full each month. They reward this behavior by giving you a higher credit rating than if you carry a balance forward. Having a high credit rating is associated with personal financial health.
Increase Your Credit Limit
If your pay off your balance every month, your credit card company notices this as well. You may qualify for a higher credit limit, which can come in quite handy if major purchases are coming up. On the other hand, if you don’t regularly pay your balance in full, they are less likely to grant you a higher credit limit.
What To Do If You Have Too Much Credit Card & Other Debt
If you have high credit card debt that you are trying to get rid of, don’t just make the minimum monthly payment. Instead, pay off as much as you can each month to whittle the debt down.
Consider applying for a debt consolidation loan if your overall debt comes from multiple accounts. This may enable you to make one monthly payment at a lower interest rate, enabling you to get out of your debt more quickly. Symple Lending offers debt consolidation solutions.
Summary Use Credit Wisely
Having a credit card or two as part of your personal financial toolkit can be a great thing unless you get entrapped in a cycle of taking on too much debt. As always, planning out your purchases and controlling impulsive spending is a major key to staying on track.