What is a Good Credit Card Balance?

Illustration of a woman balancing a pyramid of credit cards

Janne Harju / Creative RF / Getty

Your credit card balance is the amount of charges you owe to your credit card issuer. It's the accumulated amount that you've borrowed but haven't repaid. Each purchase, balance transfer, and cash advance you make increases your credit card balance. Fees and interest also increase your credit card balance. On the other hand, payments and returns all reduce your credit card balance. Your credit card balance can even be negative, if you've overpaid your credit card or had a credit applied to your account after you paid your balance in full.

It's important to be mindful of your credit card balance, that you don't let it get out of control and keep it at a reasonable level (or completely paid off).

Why Having a Good Credit Card Balance Matters

Maintaining a good credit card balance is important for your credit score and your overall financial health. A high credit card balance can hurt your credit score, particularly when you're using a large percentage of your credit limit.

A high credit card balance also affects your credit card balance. The higher your credit card balance, the higher your minimum payment. That means you'll have to allocate toward that credit card each month.

Carrying a high credit card balance means less credit available for making purchases. When you carry a high credit card balance, it's important to keep up with your available credit so your credit card isn't denied.

What Balance is Good For Your Credit Score

Each of your credit card balances directly affects your credit score. A good credit card balance is less than 30% of your credit limit. For example, if you have a credit card with a $100 credit limit, your balance should be less than $30. Carrying a zero balance is best of all.

Logistically speaking, it's hard to keep your credit card balance at $0, if you ever plan to use your card. You can, however, make sure your credit report shows a zero balance by paying off your credit card before your account statement closing date. That's the date credit card issuers typically report your credit card details to the credit bureaus.

Credit score aside, a good credit card balance is the one you can afford to repay. Since the best way to control credit card debt is to pay off your balance every month, you should never charge more than your monthly discretionary income. That's the amount of your income available for spending after taxes and expenses have been paid.

Are Your Balances Hurting Your Credit Score?

You can tell whether credit card balances may be affecting your credit score by calculating your credit utilization. This number shows the ratio of your credit card balances to their credit limits.

Start by making a list of all your credit cards. Write down the credit limit and the balance of each credit card (get these details by checking your online account or calling the customer service number on the back of your credit card). Then, for each credit card, divide the credit card balance by the credit limit. Multiply by 100 to convert the answer to a percentage.

Any credit cards with balances over 30% could be affecting your credit score. Work to reduce those balances for a better credit score.

How to Maintain a Good Credit Card Balance

Your credit card balance can get out of control when you spend mindlessly without checking to see if your balance is getting close to the credit limit. Create a habit of continuously checking your credit card balance, at least once a week, to be sure it's not higher than 30% of your credit limit. You can easily do this from your smartphone by downloading your credit card issuer's app or by logging into your account from your mobile internet browser.

As your balance grows larger, you can make a payment to bring your balance down. Or, if you can't afford to pay off a significant chunk of your credit card balance, stop using your credit card for a while until you can reduce your balance to a better level.