4 benefits of paying off credit card debt
If you’ve been wondering why you should pay off credit card debt, consider these reasons.
May 31, 2022 3 min read
No one likes paying bills. But it’s part of using a credit card. And there could actually be some extra benefits to paying off your credit card bill each month.
Here are four potential positives, especially if you’re able to pay off your balance each month:
1. Minimize interest
Interest is the price you pay to borrow money. That’s pretty simple.
And when it comes to credit cards, you can be charged different types of interest depending on how you use your card. For example, swiping your card for a purchase at the grocery store could result in different interest charges than those of a cash advance.
But if you pay off the balance on your card every month, you can typically avoid interest charges on new purchases. Paying your bill on time each month could also help you build and maintain good credit scores. But note that transactions considered cash advances usually accrue interest from the day of the transaction until they are paid off.
2. Improve credit scores
And the lower your credit card balance, the lower your credit utilization. So paying off credit card debt consistently and on time can help your credit scores.
And as your credit scores improve, it can make it easier to qualify for better interest rates and other loans, such as mortgages.
3. Invest in your future
Paying off credit card debt and avoiding interest allows you to have more options with your money. The money you save by avoiding interest could then go elsewhere: You could build an emergency fund or save for retirement.
And the less you have to worry about debt, the more flexibility in your budget you may have. But to work toward a brighter financial future, it helps to use credit cards responsibly and stay within your means whenever possible.
4. Enjoy flexibility in your budget
You might be working to pay off credit card debt instead of putting money toward things you need or want.
Paying off your credit card debt could allow you to enjoy a little bit more wiggle room in your budget. And that means you could, for instance, finally get those car repairs you need or save money for that vacation you’ve been wanting to take.
Learn more about paying off credit card debt
As you can see, there may be big benefits to paying off credit card debt each month. You could save on interest, improve your credit and give yourself more financial options.