Pay off the balance right away, or carry it a little while?
April 10, 2010 2:41 PM Subscribe
Rebuilding my credit and haven't had a credit card for 15 years. Now I got one, and I want to maximize the benefits to my credit score. Is it true that paying it off in full each month is better than carrying a small balance then paying it off?
posted by marble to Work & Money (12 answers total) 4 users marked this as a favorite
In the early 1990s, I got in lots of trouble with credit cards - in way over my head and it ended in tears. Since then, I have learned to live on money I actually already had, and have been using a debit card since 1997. I don't know what my current credit score is, and I haven't gotten my free credit reports in a couple years, but I'm meaning to get that done after I have some time with the new card.
I finally decided to get a credit card again to try to work on rebuilding my credit, and because a little more emergency buffer would be nice. A huge factor as well was making sure I could rent a car (I had a nasty experience last year learning the hard way that many car rental places will not rent to you with a debit card).
Luckily my credit union approved me for the card. It has a small limit, just $500 (that is all I asked for), and a low interest rate, 12.99%. I think that my years of steady employment, the fact that I've been a customer for 13 years, and the fact that I had $1000 in savings when I applied really helped.
I have read various things about how to handle a credit card to maximize the benefit to one's credit score, but I don't remember the answer to this question, and my Google Fu is failing me.
Is it better to pay off the card in full every month, or should you carry a balance (a small one, I assume) so that the credit card companies can see that you are the type of person they can make at least a little money off of?
I faintly remember reading somewhere (but I can't find it now of course) that if you always pay it off, the credit card companies will see you as a bad risk since you are never charged a dime of interest.