If you want to improve and maintain a good credit score, it's more reasonable to keep your balance at or below 30% of your credit limit. For example, that means your credit card balance should always be below $300 on a credit card with a $1,000 limit.
Outstanding balances on credit cards can even hurt your credit score, and this effect is most drastic once balances exceed about 30% of a card's borrowing limit. Those with the highest credit scores tend to keep credit utilization below 10%.
Since most credit card holders owe money to the credit card issuer most of the time, the normal state of affairs is for the consumer to have a debit equal to her outstanding balance.
Not only are high balances bad for your credit score, but they're also bad for your wallet. The higher your credit card balances, the more you'll pay in finance charges (also known as interest). Those extra charges are paid to the credit card issuer for extending you the convenience of repaying your balance over time.
In addition to your last reported credit card balance, your credit report also includes a high balance. This balance is the highest balance ever reported to the credit bureaus for that credit card account. The high balance remains the same each month unless a higher credit card balance is reported.
It's better to pay off your credit card than to keep a balance. It's best to pay a credit card balance in full because credit card companies charge interest when you don't pay your bill in full every month.
To build good credit and stay out of debt, you should always aim to pay off your credit card bill in full every month. If you want to be really on top of your game, it might seem logical to pay off your balance more often, so your card is never in the red. But hold off.
Normally, you'll have a positive balance – meaning you owe money – during months you use your card. If you fully pay off such balances by the due date each month, you won't be charged any interest. And as long as you pay at least the minimum amount required, your account will stay in good standing.
Credit card debt is a type of revolving debt. You can keep borrowing month after month as long as you repay enough that you never owe more than your credit limit. Credit card accounts can be used indefinitely, unlike installment loan accounts that are closed once the balance is paid off.
In fact, some consumers may even see their credit scores rise as much as 100 points in 30 days. Learn more: Lower your credit utilization rate.
Standards may differ from lender to lender, but there are four core components — the four C's — that lender will evaluate in determining whether they will make a loan: capacity, capital, collateral and credit.
Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high.
A zero balance on credit card accounts does not hurt, but it certainly does not help increase a credit score either.
If your total balance is more than 30% of the total credit limit, you may be in too much debt. Some experts consider it best to keep credit utilization between 1% and 10%, while anything between 11% and 30% is typically considered good.
Ultimately, nothing really happens if you have a negative credit card balance. It doesn't hurt you. But still, you want to check in on your account regularly to make sure you don't wind up with a negative balance.
Overpaying will not increase your credit score more than paying in full. Negative balances show up on a credit report as $0 balances. Having a balance of zero is good for your credit score, but you won't get an extra boost by overpaying. Overpaying will not raise your credit limit.
Conclusion. It is possible to overpay your credit card, but it generally isn't something you should do on purpose. It offers no real benefits and ties up your cash in the credit card issuer's account.
The 15/3 credit card payment hack is a credit optimization strategy that involves making two credit card payments per month. You make one payment 15 days before your statement date and a second one three days before it (hence the name).
The Bottom Line
Here's a rule of thumb for deciding your credit card payments: pay the full balance or as much of the balance as you can afford. If you're trying to pay off several credit cards, pay as much as you can toward one credit card and the minimum on all the others.
You should use your secured credit card at least once per month in order to build credit as quickly as possible. You will build credit even if you don't use the card, yet making at least one purchase every month can accelerate the process, as long as it doesn't lead to missed due dates.
You can use your cards more frequently once you have your debt paid off and know how to avoid new debt. As long as you pay your balance in full and on time each month, there is nothing wrong with using credit cards instead of carrying cash, or in taking advantage of rewards like cash back or frequent flier miles.
Many people would likely say $30,000 is a considerable amount of money. Paying off that much debt may feel overwhelming, but it is possible. With careful planning and calculated actions, you can slowly work toward paying off your debt.
It's not at all uncommon for households to be swimming in more that twice as much credit card debt. But just because a $15,000 balance isn't rare doesn't mean it's a good thing. Credit card debt is seriously expensive. Most credit cards charge between 15% and 29% interest, so paying down that debt should be a priority.
Here's the average debt balances by age group: Gen Z (ages 18 to 23): $9,593. Millennials (ages 24 to 39): $78,396. Gen X (ages 40 to 55): $135,841.