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When you have a zero balance on your credit card, that’s something to celebrate. If there’s no balance on your card, that means you don’t owe the card issuer any money. Read on to see how that zero can be a hero when it comes to your finances.
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What Happens if My Credit Card Balance Is $0?
A good rule of thumb regarding credit cards is to owe as little as possible. That’s because any balance left on your card at the end of a billing cycle is subject to interest, and credit card interest is expensive. According to October 2023 data from the Federal Reserve, the average APR on a credit card account that was assessed interest was 22.77% in August 2023.
If your credit card balance is zero at the end of your billing cycle, you won’t owe any interest. By comparison, let’s say you have a $10,000 balance at the end of your billing cycle; at 22.77% interest, you’ll owe an additional $183.85. And that number will only increase with each billing cycle you carry a balance. So, a zero balance is a good thing for your bottom line.
Read more: See what you’ll pay in interest with our credit card interest calculator.
Should I Close My Credit Card Account if the Balance Is $0?
In general, even if you aren’t actively using your credit card and you have a zero balance, it’s still a good idea to keep the account open. That’s because the credit limit on each card you have counts toward your overall credit utilization ratio. Credit utilization, which is the amount of credit you’re using in relation to the amount of available credit you have, makes up 30% of your credit score and opening and closing cards can have a significant impact on your credit standing for this reason.
Here’s an example of how credit utilization works:
Suppose you only have one credit card, with a maximum credit limit of $10,000, and you charged $5,000 to the card without making any payments. In this case, your utilization is 50% of your total available credit.
Now, imagine you have two credit cards, each with a maximum credit limit of $10,000, and you charged $5,000 to one of the cards. Your utilization in this scenario is 25% of your total available credit.
If you close a credit card that has a zero balance, you have that much less credit available, and it’s likely to have a negative impact on your overall credit utilization.
If your main reason for closing the card is that you no longer want to pay the card’s annual fee, consider a product change. A product change is when you request a different card, or product, from the same bank. In this scenario, you would request to downgrade a card with an annual fee to another card without an annual fee from the same issuer. Not every card is eligible for a product change, and you may not be able to product change from the card you have to the card you want. But if you can convert your existing card to a no annual fee version, you can preserve your credit limit and not impact your credit utilization.
Should I Pay Off My Credit Card After Every Purchase?
It’s a myth that carrying a small balance on your card can help your credit score. If possible, you should pay your bill in full on time, every time. If you find it easier to manage your spending on a card by paying off a purchase each time you use it, there’s nothing wrong with doing so. Others may find it simpler to make one payment at the end of the billing cycle when they get their statement. Both methods are fine, but choosing to pay only part of your bill means you’ll likely be charged interest on your card, which is costly.
Carrying a balance from month to month repeatedly can have a negative impact on your score, as interest can turn a once manageable payment into a debt burden over time. Missing a payment or paying late is also never a good choice, as your payment history makes up 35% of your credit score, and a missed or late payment can drag down your overall score.
How Long Can You Keep a $0 Balance on a Credit Card?
If your balance is zero because you use your card and pay any balance off in full at the end of every billing cycle, you can keep the card indefinitely. But if your account remains inactive for some time with a zero balance, the issuer may cancel your account.
Credit card companies can cancel your card without any advance notice, and there’s no set period of time a card account has to remain inactive for an issuer to close it. A good rule of thumb is to try to make at least a small purchase on the card every few months or have a recurring subscription or bill charged to the card to keep the account active.
Bottom Line
When your credit card balance is zero, that means there is no payment due. Keeping a zero balance is a sign that you’re being responsible with the credit extended to you. As long as you keep utilization low and continue on-time payments with a zero balance, there’s a good chance you’ll see your credit score rise, as well.
Best 0% APR & Low Interest Credit Cards Of 2024
FAQs
If your credit card balance is zero at the end of your billing cycle, you won't owe any interest. By comparison, let's say you have a $10,000 balance at the end of your billing cycle; at 22.77% interest, you'll owe an additional $183.85. And that number will only increase with each billing cycle you carry a balance.
Is it bad to have a zero balance on your credit card? ›
Lenders want to know both how reliable and profitable you are. If you have a zero balance on credit accounts, you show you have paid back your borrowed money. A zero balance won't harm or help your credit.
Should I pay my credit card balance to 0? ›
Bottom line
If you have a credit card balance, it's typically best to pay it off in full if you can. Carrying a balance can lead to expensive interest charges and growing debt.
When should you cancel a credit card with a $0 balance? ›
In general, it's better to leave your credit cards open with a zero balance instead of canceling them. This is true even if they aren't being used as open credit cards allow you to maintain a lower overall credit utilization ratio and will allow your credit history to stay on your report for longer.
Is it good if my statement balance is 0? ›
Generally, a zero balance can help your credit score if you're consistently using your credit card and paying off the statement balance, at least, in full every month. Lenders see somebody who is using their credit cards responsibly, which means actually charging things to it and then paying for those purchases.
What to do with zero balance credit cards? ›
Credit card users can maintain zero balance cards either by paying off their full balances at the end of each billing cycle, or by simply not using their cards. In either case, maintaining zero balance cards can benefit credit card users by helping to improve their credit score.
Is zero credit worse than bad credit? ›
Having no credit is better than having bad credit, though both can hold you back. Bad credit shows potential lenders a negative track record of managing credit. Meanwhile, no credit means lenders can't tell how you'll handle repaying debts because you don't have much experience.
What does a zero credit balance mean? ›
What is a Zero Balance? The amount owed on a credit card account when it has been paid in full. The payment made completely wipes out the amount owed, sending the account balance to zero.
Why is my credit card balance 0 when I paid? ›
Why is there no available credit after I posted payment on my credit card? According to the Office of the Comptroller of the Currency, issuers can decide when to replenish an account's available credit. Even if you pay off your balance by the due date, it might take a few days before that credit is available again.
How to pay off $10,000 credit card debt? ›
Read on for five ways to pay off $10,000 in credit card debt and work toward a fresh financial start.
- Debt consolidation loan. ...
- 0% balance transfer credit card. ...
- Make a budget. ...
- Use a debt repayment method. ...
- Negotiate credit card debt.
Sometimes, it's better to just not use the card — so you can maintain credit stability, keep old accounts open and keep your credit utilization ratio as low as possible. Plus, an extra line of credit with no balance can prove useful in emergencies. Ultimately, the decision is up to you.
Is it better to have a credit card and not use it or cancel it? ›
Canceling a credit card will cause a direct hit to your credit score, so more often than not, you'll want to keep the account open. Correctly managing an open, rarely-used account may require some extra attention, but the added effort will help your credit in the long run.
How do I get rid of a credit card without hurting my credit? ›
Consider downgrading the card to a no-annual-fee version if possible. Pay off any remaining balance before closing the card. If you can't do this, consider transferring the balance to a low interest rate credit card, or talking with your card issuer about a payment plan. Redeem your rewards.
How many credit cards are too many? ›
Owning more than two or three credit cards can become unmanageable for many people. However, your credit needs and financial situation are unique, so there's no hard and fast rule about how many credit cards are too many. The important thing is to make sure that you use your credit cards responsibly.
Will my credit score go up if I pay off my credit card in full? ›
Paying off credit card debt is smart, whether you zero out your balance every month or are finally done paying down debt after months or years. And as you might expect, it will affect your credit score. Whether you are chipping away at a balance or eliminating it with one big payment, your score will likely go up.
Is it bad to max out a credit card and pay it off immediately? ›
Absolutely, while it's possible to max out your Credit Card and subsequently pay off the balance, it's generally ill-advised. Maxing out your card can lead to a high Credit Utilization Ratio, which may negatively impact your Credit Score.
Does paying off a credit card increase credit score? ›
Paying off your credit card balance every month is one of the factors that can help you improve your scores. Companies use several factors to calculate your credit scores. One factor they look at is how much credit you are using compared to how much you have available.
Do credit card companies like when you pay in full? ›
While the term “deadbeat” generally carries a negative connotation, when it comes to the credit card industry, you should consider it a compliment. Card issuers refer to customers as deadbeats if they pay off their balance in full each month, avoiding interest charges and fees on their accounts.
