How to Use Your Credit Card Balance to Your Advantage

Your credit card balance is most likely the source of many frustrations. You worry about the amount of money you are wasting each month on high interest charges. However, if you do it correctly, carrying a credit card balance can actually help you. Here are a few things to consider before you try to get rid of the credit card just yet.

Build Credit

The biggest way that a credit card balance can help you is to build your credit. Building credit is something that everyone needs to do. If you plan on buying a home or a car in the future, you will most likely need to have good credit. If you have poor credit, you will pay more than you need to in interest charges or simply be declined. Therefore, if you want to move up in life and own your own things, you will have to build credit. Many young people try to do all of this before they have any credit history, and as a result they are not approved for the loans that they need. If you want to avoid this problem, using a credit card can help you build the credit you need.

How a Balance Can Help

In your quest to build credit, you will have to use your credit card along the way. If you get a card and never use it to buy anything, you will not be able to get the credit rating that you need. Putting a balance on your credit card will enable the credit card companies to report something to the credit bureau. If you put a balance on the card, it shows that you are learning how to use credit that has been given to you.

When you put a balance on your card, you will not want to max out the card. If you do, pay off some of the balance before your next statement. The balance on your card should be about 30% of the available credit line or less. This is the magic number that the credit bureaus use to assess how you are doing with your credit cards. If you always max out the cards and leave them that way, it is a warning sign to them that you can not handle the credit that has been given to you.

Many people get in the habit of maxing out their credit cards as soon as they get them. To them, it feels like the available balance is burning a hole in their pocket and they have to spend it. If you do this, it will likely negatively affect your credit rating for the future. Pay down your balance each month to a lower level to help your credit rating immensely.


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