Estimated Monthly Savings: $50
We’ve all heard the rumors about credit cards. That it “builds your credit” to keep a balance and pay the minimum each month. While this word has been floating around for quite some time, it’s not true. There are a couple of benefits to paying your card balance, in full, every month.
Credit scores don’t appear out of thin air. They take work and commitment, but what is the right amount of each? Purchasing in small amounts on your credit cards, and maintaining the balance every month by paying in full, will increase yourÂ credit score. It is essential to keep your credit utilizationÂ ratio below 30%. This is the amount you use in correlation to your limit. This applies to each card individually, and again, collectively.
Saving moneyÂ is the dream. No one has ever complained about having extra funds, right? So why would you throw those potential savings down the drain? Paying your credit card in full every month means you are paying less in the long run. Take a look at your interest rate. The unpaid balance on your card at the end of each month, that’s what accrues that percentage of interest. Which means, you end up paying more than you spent. So, paying your balance in full when the bill becomes available, will help you avoid losing those extra dollars.
Credit cards have their perks, as well as their downfalls. It is best to learn what works best for you and your financial schedule and make sure you fully understand the interest rates on each card. This will save you money in the long run, keep you on your issuer’ good side, and make sure everyone has a happy wallet.