One of the biggest credit card misconceptions is that maintaining a balance from month to month will give your credit score a boost.
Up to this point, 46% of Americans mistakenly believe leaving a small balance on their card is better for their credit score than paying off the balance every month, according to recent NerdWallet. study have found.
This is a costly mistake. In fact, any amount of rolling debt will cost you an interest fee. These are usually calculated not based on the amount of debt you carry over to the next disclosure period, but rather based on your average daily balance. Balancing can also lead to disability Balance level.
“Financially, you benefit from trying to pay off as much as you can,” said Paul Siegfried, senior vice president and lead of the credit card business at TransUnion.
Credit experts generally advise borrowers Keep revolving debt below 30% of available credit To reduce the impact of high balances on your credit score.
However, nearly half of credit card holders incur credit card debt from month to month, according to a bank reportjust as the cost of interest charges on these balances increases.
With prices so far higher, these credit card users will end up paying about $20.9 billion more in 2022 than they would otherwise, according to a separate analysis. WalletHub.