If you’ve come across extra cash and have credit card debt, you may think what the best way is to invest it, whether it’s a good idea to pay off your balance all at once or over time. A lot of us have heard that carrying a balance is beneficial to your credit score, so wouldn’t it be better to pay off your debt slowly? The answer in almost all cases is no. Paying off credit card debt as quickly as possible will save you money in interest, which is very beneficial, and also help keep your credit in good shape.
Does Paying Off Credit Cards Over Time Help My Credit Score?
It’s a credit myth that carrying a credit card balance helps your credit scores. High balances on revolving credit accounts can mean high credit utilization, which can hurt your credit score. Your credit utilization ratio is a comparison of your credit card balance to your total credit limit, expressed as a percentage. It’s the second most important factor in your credit score calculation, making up 30% of your FICO score. The lower the ratio is, the better for your credit health. Keeping it under 30% to avoid hurting your scores is commonly suggested among credit researchers; However, Credit Services of America suggest keeping it under 10% for the best scores.
The way credit utilization influences your credit scores is a strong argument for paying off your credit card balances every month. Carrying a balance can cost you heavily in interest!
How Making Minimum Payments Can Cost You Over time
Payment history is the most heavily weighted credit score factor, so making credit card payments on time every month is essential to keeping your credit in good shape. It also helps you avoid late fees. If you only make minimum payments each month, however, you’ll pay interest on the remaining balance that carries over to the next billing period. Plus, most credit cards charge compounding interest, which can make credit card debt snowball fast and take years to repay.
Say you owe $3,000 on a credit card with an 18% annual percent rate (APR), and your minimum payment is 3% of the balance or $25, whichever is greater. If you make just the minimum payments, it will take you nearly 14 years to pay off the debt. On top of that, it will cost you almost $2,700 in interest, nearly doubling the amount you owed originally. The money you can save on interest alone can be invested to your credit in other ways such as a Trade line that can help you boost your credit and with Credit Services of America, we can definitely help you obtain this including many of our other services to include credit repair, Debt Settlement or Student Loan Consolidation.
Whether or not you can pay off your credit cards immediately, make it a priority to maintain a positive payment history and use credit responsibly. Even if it takes a while to clear your balances, your credit will thank you in the end. Remember that with Credit Services of America we can help you with all of your credit and debt needs call us to schedule your consultation and get you on track with credit goals and needs.
A Goal without a Plan is just a Wish. Give us a call TODAY at 844-FIX-URCR or click on the following link creditservicesofamerica.com to schedule your FREE consultation and create your personalize plan to achieve your credit and debt GOALS!