Credit cards offer the lure of buy now pay later, and flourished as some kind of status symbol. There is no longer any shame in living on borrowed money which credit represents, whilst at one time it was unheard of. The stigma only arises when one is declined credit due to being perceived as a poor risk. Banks have pulled off a wonderful trick by making consumers believe that credit is a desirable thing to have. The dangers of credit cards leading to debt have been amply highlighted, yet what is not understood by many users is the wisdom of paying off the balance in full each month.
It is no surprise that the people with credit scores rated as excellent most usually follow the practice of paying their credit cards in full each month. They would never be caught carrying a balance unless it was a on a 0% APR card where they can take advantage of free credit for a period, knowing the funds which will pay the balance back are accruing interest elsewhere.
This astute financial management coupled with high credit ratings allows such consumers to use credit cards which pay them for doing so. The best cash back and rewards credit cards are available to them and by utilizing such cards for all monthly expenditure a reasonable return can be made. Banks may not particularly prefer the customers who never carry a balance as they make nothing from them, but at least they carry little risk and thus make the banks lending portfolio look good.
Those who carry a balance on the other hand are paying interest for the convenience of borrowing, and an astonishing number of people have never realized that only making the minimum payment on their cards is costing them dearly. Without fully realizing how credit cards work many pay the minimum balance believing they are doing the right thing, without understanding just what the actual costs entailed amount to. An item bought for $30 on credit can soon attract compounded interest which puts the real cost of the purchase at closer to $60.
Some consumers are under the misguided impression that they need to carry a partial balance each month to improve their credit score. This is completely incorrect yet the information does not filter down that they are paying interest unnecessarily, and they pay a small amount thinking that they are acting wisely. Even some who give credit card advice compound this mistaken theory which works in the favor of the banks.
The bottom line is that those who do not pay their credit card balances off in full are acting unwisely. If they had no available credit they would have to save and wait for their needs, yet far too many have become trapped in the cycle of using credit cards to get from pay check to pay check. When this happens it is a warning sign that debt is out of control and credit card debt is an expensive one to service.
Maintaining a credit card is recommended as it helps to keep your credit score high if used well, and offers certain benefits and protection. However anyone who carries a balance they are unable to clear in full each month is living beyond their means and paying excessively for the privilege. If you carry a balance look to pay if off in full and start to let your credit card pay you, rather than pay for credit.