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When you have a zero balance on your credit card, that’s something to celebrate. If there’s no balance on your card, that means you don’t owe the card issuer any money. Read on to see how that zero can be a hero when it comes to your finances.
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What Happens if My Credit Card Balance Is $0?
A good rule of thumb regarding credit cards is to owe as little as possible. That’s because any balance left on your card at the end of a billing cycle is subject to interest, and credit card interest is expensive. According to October 2023 data from the Federal Reserve, the average APR on a credit card account that was assessed interest was 22.77% in August 2023.
If your credit card balance is zero at the end of your billing cycle, you won’t owe any interest. By comparison, let’s say you have a $10,000 balance at the end of your billing cycle; at 22.77% interest, you’ll owe an additional $183.85. And that number will only increase with each billing cycle you carry a balance. So, a zero balance is a good thing for your bottom line.
Read more: See what you’ll pay in interest with our credit card interest calculator.
Should I Close My Credit Card Account if the Balance Is $0?
In general, even if you aren’t actively using your credit card and you have a zero balance, it’s still a good idea to keep the account open. That’s because the credit limit on each card you have counts toward your overall credit utilization ratio. Credit utilization, which is the amount of credit you’re using in relation to the amount of available credit you have, makes up 30% of your credit score and opening and closing cards can have a significant impact on your credit standing for this reason.
Here’s an example of how credit utilization works:
Suppose you only have one credit card, with a maximum credit limit of $10,000, and you charged $5,000 to the card without making any payments. In this case, your utilization is 50% of your total available credit.
Now, imagine you have two credit cards, each with a maximum credit limit of $10,000, and you charged $5,000 to one of the cards. Your utilization in this scenario is 25% of your total available credit.
If you close a credit card that has a zero balance, you have that much less credit available, and it’s likely to have a negative impact on your overall credit utilization.
If your main reason for closing the card is that you no longer want to pay the card’s annual fee, consider a product change. A product change is when you request a different card, or product, from the same bank. In this scenario, you would request to downgrade a card with an annual fee to another card without an annual fee from the same issuer. Not every card is eligible for a product change, and you may not be able to product change from the card you have to the card you want. But if you can convert your existing card to a no annual fee version, you can preserve your credit limit and not impact your credit utilization.
Should I Pay Off My Credit Card After Every Purchase?
It’s a myth that carrying a small balance on your card can help your credit score. If possible, you should pay your bill in full on time, every time. If you find it easier to manage your spending on a card by paying off a purchase each time you use it, there’s nothing wrong with doing so. Others may find it simpler to make one payment at the end of the billing cycle when they get their statement. Both methods are fine, but choosing to pay only part of your bill means you’ll likely be charged interest on your card, which is costly.
Carrying a balance from month to month repeatedly can have a negative impact on your score, as interest can turn a once manageable payment into a debt burden over time. Missing a payment or paying late is also never a good choice, as your payment history makes up 35% of your credit score, and a missed or late payment can drag down your overall score.
How Long Can You Keep a $0 Balance on a Credit Card?
If your balance is zero because you use your card and pay any balance off in full at the end of every billing cycle, you can keep the card indefinitely. But if your account remains inactive for some time with a zero balance, the issuer may cancel your account.
Credit card companies can cancel your card without any advance notice, and there’s no set period of time a card account has to remain inactive for an issuer to close it. A good rule of thumb is to try to make at least a small purchase on the card every few months or have a recurring subscription or bill charged to the card to keep the account active.
Bottom Line
When your credit card balance is zero, that means there is no payment due. Keeping a zero balance is a sign that you’re being responsible with the credit extended to you. As long as you keep utilization low and continue on-time payments with a zero balance, there’s a good chance you’ll see your credit score rise, as well.
Best 0% APR & Low Interest Credit Cards Of 2024
FAQs
If there's no balance on your card, that means you don't owe the card issuer any money. Read on to see how that zero can be a hero when it comes to your finances.
What happens if you pay a credit card with 0 balance? ›
So the bottom line is if you pay your credit card off every month in full, you should be able to avoid paying interest. And as a general rule, no, credit cards do not charge interest on a credit card that has a zero balance.
Do I have to pay my credit card if the minimum payment is 0? ›
If your credit card statement reflects a zero minimum payment due - even if you have a balance on your card - it is because of recent, positive credit history. A review of your recent credit history and determination to waive your minimum monthly payment allows you to skip your monthly payment for a statement cycle.
How to use a zero balance credit card? ›
Credit card users can maintain zero balance cards either by paying off their full balances at the end of each billing cycle, or by simply not using their cards. In either case, maintaining zero balance cards can benefit credit card users by helping to improve their credit score.
What happens if your credit card has a zero balance when the return is processed? ›
For example, say you have a zero balance on your account after you pay your credit card statement. If your credit card company refunds an item that cost you $23, your refund amount may show up as -$23.
Is it good to have a credit card with zero balance? ›
Keeping a zero balance is a sign that you're being responsible with the credit extended to you. As long as you keep utilization low and continue on-time payments with a zero balance, there's a good chance you'll see your credit score rise, as well.
Should I pay off 0% credit cards? ›
It's never ideal to find yourself with a larger balance than you can handle at the end of a 0 percent intro APR period. The answer to this quandary is to pay your balance down as much as possible before the regular APR kicks in. That way, you'll minimize the interest you get charged.
Do you have to make a minimum payment on a 0% credit card? ›
Even if you're paying no interest, you still need to make at least the minimum payment towards your balance every month.
What is the minimum payment on a $500 credit card? ›
Percentage method: Some credit card issuers calculate the minimum payment as a percentage of your outstanding balance. This percentage typically falls within the range of 1% to 3% but can vary. For example, if your outstanding balance is $500 and the minimum payment percentage is 2%, your minimum payment would be $10.
Which is the best strategy for paying your credit card bill? ›
Pay more than the minimum
If you pay the minimum balance on your credit card, it takes you much longer to pay off your bill. If you pay more than the minimum, you'll pay less in interest overall. Your card company is required to chart this out on your statement, so you can see how it applies to your bill.
To use your card, you need to have available credit to cover your purchases.
Is 0% credit card use good? ›
While a 0% utilization is certainly better than having a high CUR, it's not as good as something in the single digits. Depending on the scoring model used, some experts recommend aiming to keep your credit utilization rate at 10% (or below) as a healthy goal to get the best credit score.
Can I use my credit card with no available balance? ›
You can use a credit card whenever there's enough credit available to complete a purchase. Your available credit decreases by the amount of any purchase you make and increases by the amount of any payment.
What happens if credit card balance is 0? ›
If you have a zero balance on credit accounts, you show you have paid back your borrowed money. A zero balance won't harm or help your credit.
What happens if you have a zero balance on your credit card and get a refund? ›
If you have paid your card down to a zero balance before receiving your refund, you will have a negative balance on your credit account — and any future purchases will be applied to the negative balance first.
What happens when you don t pay your credit card balance in full by the due date? ›
But generally, if you don't pay your credit card bill, you can expect that your credit scores will suffer, you'll incur charges such as late fees and a higher penalty interest rate, and your account may be closed. And the longer it takes for you to pay that bill, the worse the effects may be.
Does paying credit card to zero affect credit score? ›
An active card can help your credit, but a zero balance is best for your score. June 6, 2024, at 12:06 p.m. Not paying your credit card balance in full will negatively impact your credit score and force you to pay interest.
What happens if you return something on a credit card with 0 balance? ›
If you have paid your card down to a zero balance before receiving your refund, you will have a negative balance on your credit account — and any future purchases will be applied to the negative balance first.
Does a 0 credit card hurt your credit? ›
Carrying high balances on a 0 percent intro APR card might cause short-term damage to your credit score — but carrying those balances after the introductory APR expires creates a long-term problem. Once your zero-interest period ends, any unpaid balances will begin to accrue interest at the regular interest rate.
Why is my credit card balance 0 when I paid? ›
Definition of credit card balance
You can think of it as the amount of money owed back to the credit card issuer. If you don't owe a balance, it will appear as zero.
