How Much Credit Card Balance Should I Carry? A Complete Guide

Credit cards can be an excellent financial tool when used responsibly. However, carrying a balance on your cards can quickly lead to debt, interest charges, and damage to your credit score. So how much credit card balance should you carry month-to-month? Let’s break it down in this complete guide.

What is Credit Card Utilization?

Your credit utilization ratio compares how much credit you’re using versus your total available credit limit across all cards. For example if your total credit limit is $10000 and you’re carrying a $2,000 balance, your utilization is 20%.

Credit experts generally recommend keeping this ratio below 30%. The lower you can keep your utilization, the better it is for your credit score. Ideally you should aim for less than 10% if possible.

Why is Credit Utilization Important?

Credit utilization makes up about 30% of your credit score calculation. high utilization signals higher risk to lenders. It suggests you’re overreliant on credit and may struggle to make payments.

On the other hand, low utilization indicates you’re only using a small portion of your available credit. This demonstrates responsible credit management.

How Much Credit Card Balance is Too Much?

As a rule of thumb:

• Less than 30% utilization is good
• Less than 10% is ideal
• More than 50% is a warning sign

Obviously, everyone’s financial situation is different. An occasional spike over 30% isn’t disastrous if you pay it down quickly. But consistently carrying high balances will hurt your credit.

Tips to Keep Utilization Low

Here are some tips to keep your credit card balances and utilization in check:

• Make payments frequently – Don’t wait for the statement date. Pay down balances multiple times per month.
• Ask for credit limit increases – Higher limits mean lower utilization.
• Split expenses between multiple cards – This prevents maxing out one card.
• Pay in full each month – This avoids interest and keeps balances low.
• Track spending diligently – Know where your money is going. Trim excess spending.
• Have a plan – If carrying a balance, have a set monthly payoff goal.

How Much Balance is Normal?

Here’s a quick guide on healthy balance ranges:

• $0 – No balance, paid in full. Ideal for credit score.
• <10% – Very small revolving balance. Excellent for credit.
• 10-29% – Moderate balance. Try to pay down when possible.
• 30-49% – Approaching high utilization. Prioritize paying this down.
• 50%+ – High balance. Work aggressively to reduce this.

Of course, you need to take income and budget into account. $1,000 balance on a $2,000 limit card is different than $1,000 on a $10,000 limit card.

The key is keeping balances and utilization low relative to your limits. Slowly work on increasing limits while reducing or eliminating balances.

When to Carry a Small Balance

It’s smart to avoid carrying balances when you can. But occasionally, it makes sense to maintain a small balance. Reasons might include:

• Taking advantage of a 0% APR introductory offer
• Managing cash flow for a large purchase
• Building credit history with new card
• Earning rewards on spending

In these cases, be sure to have a plan to pay off the balance before interest hits. Don’t just let it linger and grow.

In Summary

Ideally, you should try to pay credit card balances in full every month. But if you do carry debt, try to keep utilization below 30% and pay it down as quickly as possible. Aggressively minimizing balances will benefit your credit score over the long run.

Be disciplined about tracking expenses, making payments often, and budgeting. With smart planning and habits, you can leverage the convenience of credit cards while avoiding the pitfalls of high interest debt.