Should You Carry A Balance to Establish Credit?

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carry a balance

We’ve all been on the receiving end of financial advice, whether it’s from a parent, a friend or a colleague, but what happens when that advice isn’t exactly the best? What happens when it’s just plain wrong?

I’ve been collecting a list of not-so-great (okay bad, really bad) financial advice that other personal finance enthusiasts have heard the past couple of years. Some of it comes with the best intentions, but I think it’s important to set the record straight.

Even Bloggers Get Bad Advice


Erin from Journey to Saving gave me an example of one such piece of advice about why she should carry a balance on her credit cards that her friend gave her. Now, again, I’m sure that it came with best intentions, but it just goes to show that some money myths can be especially pervasive over time.

This one myth in particular is the old idea that carrying a balance – however small – on your credit card is a good thing to do to improve your credit score. The (flawed) idea is based on the notion that carrying a balance shows you’re actually using the card.

Erin’s friend isn’t the only one to think this. In fact, there was a Huffington Post article about the same topic just two years ago. In that article, experts stated that “you get no reward from keeping even a small balance on your card.”

In fact, when it comes to carrying balances, really the opposite is true. If you have a balance, it could affect your credit score negatively.

My friend Carrie Smith put together a great slideshow that explains how credit scores are determined. In it, she says you should only use 30 percent or less of your total credit availability. Any more than that means lenders will not look kindly on your history. At the same time, she explains that, “carrying a balance doesn’t mean you’re a high risk borrower.”

What Really Matters About Your Credit Score


What’s really most important when it comes to your credit score isn’t your balance. It’s actually your payment history, which makes up a whopping 35 percent of your score. A late payment will hurt you far more than will the decision to carry a balance, so while the total number on your card balance is important, what’s far more important is that you’re actually paying it on time every time.

Luckily, Erin said she never carried a balance of more than $100, and once she realized this advice was not accurate, she started paying it off. She also made a great point that  “it’s not wise to leave a balance, especially when you’re just starting out! That’s because your credit limit will be paltry, and it won’t take much to max it out. If my limit was only $750, leaving a balance of $100 or less every month looked pretty bad (as opposed to someone with established credit that has a limit of $25,000).” So, take into account how much credit you actually have before you decide to leave a balance at all.

As many of you know, we advocate paying off cards in full every month here at Frugal Rules. I personally had $6,000 worth of credit card debt three years ago, and I started paying it off by getting my first writing job online. I paid off the balance using side hustle money in 18 months, and then I loved writing online so much, I decided to make it my full time job. 🙂

If you are struggling with credit card debt, don’t believe some of the myths surrounding credit history and balances. Do your research, use trusted sources, and by all means ask us for help if you need guidance or support in your journey to keep your credit score high and your credit card balance empty.


What’s the worst piece of financial advice you’ve ever received? What are some ideas you once held about credit cards that you don’t anymore? Do you carry a balance on your credit cards?

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Catherine Alford is the go to personal finance expert for parents who want to better their finances and take on a more active financial role in their families.


  • Worst financial advice?

    Probably all of my uber-conservative relatives who think that stockpiling gold and ammunition is a valid retirement strategy.

    I’ve got nothing against gold or ammunition. Just don’t think that it makes up a very large portion of any math-based retirement plan 🙂

  • The problem with most financial advice is that it’s not personalized – I hear advice saying that it’s good to use a credit card but pay the balance off each month – and absolutely cringe. I had racked the kind of credit card debt that people can hardly believe. Once it was gone I tried to use a credit card to get in the rewards game….and immediately started overspending. Telling me to use credit cards is horrible advice because I lack the self control to use them correctly. The best advice to me would be simply to make my payments to my financial commitments each month (mortgage, car payments, etc), leave the plastic behind locked glass, and let my credit score take care of itself.

  • I tend to think that the little games we have to play to get an excellent credit score aren’t really worth it. I’m happy that my credit score is in the good range (around 750). I have received all kinds of bad financial advice over the years. Fortunately, I did not listen to all of it.

  • You should only carry a balance if you want to waste your money on interest payments 🙂 Carrying a balance does very little good. Credit is very misunderstood.

  • Kim says:

    I don’t think I’ve ever been told to carry a balance on my credit cards, but I have been told by more than one person that whole life insurance is a good investment. My parents even think so and bought a policy for our daughter. I just nod and thank them.

  • Amy says:

    Sigh, yes, I do carry a balance – but I’m working on it! And I’ve never once thought it was a good thing…

  • Unfortunately I do carry quite a balance on most of my cards, but I’m working on it! Once it’s gone I plan to maybe use one credit card with great rewards like miles or something for day to day expenses like groceries and gas, but definitely only for things I can pay of each month.

  • Jenna says:

    I like the idea of this post! I think I’ve mostly received good advice.

    I do hear friends and family say all kinds of rationalizations that don’t make any sense to do what their heart wants to do. With some like “Don’t throw away money on rent,” it depends on the person’s individual situation. With some like, “I’m going to cash out of my 401K so I can make my monthly payments,” I cringe.

  • I’ve read so, so, so much bad financial advice since I’ve become a blogger I can’t even BEGIN to tell you which is the worst. Maybe it was the guy who said you should put your emergency fund in gold. Really.

  • dojo says:

    Hmm.. the worst would be that it’s impossible to make money as an honest businessman, so I shouldn’t bother start my own business. Fortunately, after wasting years not taking my ‘gig’ seriously, I finally decided to give it a try. Oh, well, looks like there’s money to be made even if you’re not willing to prostitute, steal or kill someone 😀

  • That’s definitely one of the more popular myths about credit and credit cards. And the worst part is so many people want to believe it to ease any guilt or concern that they have with carrying a balance. Right now I think the most dangerous myths I come across are the “everyone has debt so it must be okay” and lots of confusion around long-term care and what the government pays. It scares me because so many people believe bad information and are in for a world of hurt when reality strikes.

  • I am very thankful I was *pretty* skeptical of the advice, so I never took it very far. I didn’t feel comfortable charging so much. Being that I got my first credit card at 18, I also had no clue how interest worked, but I wasn’t too happy to see I owed extra on top of the amount I had charged. It’s so important to educate yourself and ask questions before signing up for something.

    Thanks for featuring my little story. =)

  • Do overpayments on a weekly basis! This is more than paying your credit bills on time. It lets you pay your debt sooner than later and have a good mindset to be debt free the soonest as possible. I have balance on credit cards. I don’t fully use my limit and pay it on time.

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