Does Paying Off Credit Cards Every Month Improve Your Credit Score?

In the first quarter of 2024, U.S. adults had 543.1 million credit cards, up from 523.2 million at the beginning of 2023. More Americans are also carrying more balances across those credit lines. The Federal Reserve Bank of New York reported in mid-May that U.S. residents now owe a total of $1.12 trillion on credit cards. It’s probably not surprising that the number of people carrying balances on those credit cards is also up from last year, with some 169 million people carrying a credit card balance – meaning they did not pay off what they owed by the end of the grace period.

When it comes to high-interest credit card debt and other monthly financial obligations, pay your bills on time, and strive to pay off your entire balance at the end of each billing cycle.

Why Pay Off Monthly Balances

There are some specific reasons to stick with this proven approach. When you pay off your balances monthly:

• You won’t get stuck paying interest on purchases, which saves you money.
• Your credit utilization should remain low, which improves your credit score.
• A higher credit score means potentially better rates on loans, which can translate into saving thousands of dollars over the life of a loan.
• You’ll likely sleep better at night without the weight of credit card debt hanging over you.

Can’t pay off your balances every month? We get it. With inflation still pushing up the price of nearly everything – and millions of people living paycheck-to-paycheck – not everyone will be able to pay all their credit card balances every month. And that’s OK.

• Pay as much as you can. The key is to pay as much as you can against the balance – and more than the minimum payment. Only making the minimum payment, which is often 2% of the total, can stretch your payments across multiple years. That means if you pay for a nice dinner out with your credit card and then only make the minimum payment, you could be paying for that meal for months.
• Tackle higher interest rate cards first. If you owe money on more than one credit card, it’s important to pay more against the balance of the one with the highest interest rate first. Continue paying the minimum on the other cards, too. Once you have paid off the card with the highest rate, tackle the account with the next highest rate. Keep doing this until all your high-interest credit card debt is paid off.
• Explore promotional offers. Another way to pay off credit cards more quickly is by moving some of your debt to a card with a low-interest introductory rate. Consider checking out the credit card options available at MVCU to see if there are options that suit your needs and could help you save money on interest charges.

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