“Probably the thing I hear the most from folks is the misconception that one should carry a balance on credit cards, that only paying the minimum payment is a good thing to do in terms of one’s credit history,” says Kerri Cook, a counselor at the Financial Resource Center. Although it is important to use your credit cards regularly so that timely payment activity gets recorded on your credit report, Cook says many people mistakenly interpret that to mean that they have to revolve a balance from month to month for this usage to count on their credit score.
“In fact,” she says, “the goal is to not carry a balance and be as close to a zero balance as possible.”
While carrying a balance doesn’t hurt your credit, it can be an expensive mistake, because it costs you money every month in the form of interest on those borrowed dollars. If you carry a balance of greater than 30% of your credit limit on any one card, your utilization ratio may be too high and your credit could suffer.