Credit Card Health Check – Carrying a Balance Edition

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In our first edition of our “Credit Card Health Check” series, we covered how to live financially healthy with credit cards.

While it is important to have an overall understanding of the health of your credit cards, it is also important to understand how different behaviors and habits play a role in our financial health. One of the most important questions to consider when checking the health of your credit card accounts is are you carrying a balance from month to month?

Getting a credit card and charging items that you are able to pay off each month or within a few months is a great way to help build and maintain your credit report and score. But, we know too well that “life” happens. The unexpected occurs and we end up charging more and carrying larger balances with no plan in place to pay down the added debt. If you find yourself carrying a balance from month to month or only paying the monthly minimums, it is important to understand the effect of these actions on your credit report and how they factor into your overall financial health.

Annual Percentage Rates (APR)

When carrying a balance it’s important to review the current rates being charged. There are a number of factors that can come into play with the rate applied to your credit card account:

  1. Introductory zero percent rates are sometimes offered for a period of time when opening a new account. It is good practice to verify the rate that will actually be applied to your account once the introductory period is over, especially if you’re going to be carrying a balance on the account
  2. Variable Rates may also come into play when you carry a credit card balance. Creditors can offer variable rates that rise and fall based on certain economic factors, so it’s important to keep track of these changes.
  3. Late payments can also factor in the rate you are being offered. Making a late payment can not only cause a negative impact on our scores, but may cause your interest rate to increase and your credit limit to decrease.

Utilization Rate

Take a look at the type of credit cards you have and the credit limits available. Retail store and gas cards are usually approved with lower credit limits. Carrying a balance on credit cards with lower limits can cause you to have a high utilization rate on them. Account balances make up 30% of your credit score, so high utilization rates can actually begin to negatively impact your credit.

Keeping your balances about 40% or lower of your maximum credit limit will have a better impact on your score. Staying aware of your balances and maintaining them at 40% or below will help keep your credit in a more favorable position.

Payoff Plan

Once you have evaluated your credit card balances, ask yourself- “Do I have a plan to reduce or pay off my credit card balances?” Life events can contribute to more frequent credit card usage, and often times we do not think about a repayment plan. The ability to make more than the minimum payment is something to consider when thinking of a repayment plan. We shared some of the different ways to tackle debt in a recent post. If you find yourself only able to make the minimum payment, this is a sign for you to review your monthly spending plan to see what changes could be made to help you pay more than the required monthly payment.


If you would like some assistance with the health of your credit cards, please contact one of our credit counselors for personalized coaching. You can reach out to the credit counseling team to set up an appointment here at [email protected] and one of our counselors will reach out to you and set up your appointment.

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