Should I Pay Off My Credit Card Debt in Full or Over Time?

Quick Answer

Paying off your credit card debt in full each month is an excellent way to save money and build credit. For best results, aim to pay your balance in full each month or as often as possible.

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When it comes to using your credit cards responsibly, it pays to separate fact from fiction. While it's true that credit cards can be valuable tools to help you build and maintain your credit, it's a common misconception that carrying a balance from month to month boosts your credit.

In reality, carrying a balance isn't necessary to build your credit; it's better to pay your credit card in full each month to maintain a low credit utilization ratio and save money in interest charges. Here's what you need to know about paying off your credit card in full, along with strategies to help you pay off credit card debt over time.

Should I Pay Off My Credit Card in Full?

Whenever possible, paying off your credit card in full will help you save money and protect your credit score. Paying your entire debt by the due date spares you from interest charges on your balance.

Paying off your credit card debt in full also helps keep a lower credit utilization ratio, which measures the amount of your available revolving credit you're using. Remember, your credit utilization ratio makes up 30% of your FICO® Score , and the lower your credit utilization ratio, the better it is for your credit scores. Those with the highest credit scores tend to keep their credit utilization ratio in the low single digits.

When paying your bills, refer to your credit card statement to find your statement balance and the card's total balance. These two figures are similar, but differ in key ways:

  • Your statement balance is the amount you owe on your credit card at the close of your last billing cycle. It won't reflect purchases made after the close of your credit card's statement period. Paying the full statement balance by your card's due date every month will allow you to avoid interest charges.
  • The current balance of your credit card is an up-to-date calculation of your current debt.

If you're unsure how much to pay, contact your card issuer and request a calculation of the total amount you owe to pay off your credit card.

While it's best to pay off your credit cards each month, it's not always financially feasible. If possible, aim to pay more than the minimum payment to minimize interest charges and prevent potential financial strain.

How Making Minimum Payments Can Cost You

Making only minimum payments on your credit card may drastically extend the time it takes to zero out your balance while increasing your overall costs considerably.

Remember, you pay interest on any credit card balance that carries over from month to month. If you're only making the minimum payment each month, interest charges can add up quickly. Credit card issuers charge an average annual percentage rate (APR) of about 22% as of May 2023, and that interest compounds daily. That means interest is added to your principal balance, with subsequent interest charges calculated based on your new, higher balance. Interest charges will continue to accrue in this manner until the balance is paid off, which causes your balance to grow even if you stop using your card to make new purchases.

The more you can pay toward your credit card balance, the sooner you'll pay it off and the less you'll pay in interest. For example, say you owe $3,000 on a credit card with an 18% APR, and your minimum payment is 3% of the balance, or $90. If you make just the minimum payments, it will take you nearly four years (47 months) to pay off the debt and result in an additional $1,190.16 in interest charges. If you can afford to increase your payment amount to $150 per month, you could roughly cut your repayment time in half (24 months) and similarly reduce the interest charges to $593.48.

Credit Card Payoff Calculator

The information provided is for educational purposes only and should not be construed as financial advice. Experian cannot guarantee the accuracy of the results provided. Your lender may charge other fees which have not been factored in this calculation. These results, based on the information provided by you, represent an estimate and you should consult your own financial advisor regarding your particular needs.

How to Pay Off Credit Card Debt

U.S. consumers carry an average credit card balance of $6,365, up 11.7% year over year, according to Experian. That's not an amount most cardholders can pay off quickly—let alone all at once.

With a little planning and the right strategy, however, you may pay off your credit card debt sooner than you think. Here are some strategies to make it happen:

Debt Avalanche Method

The debt avalanche method of paying down credit card debt can help you save money on interest. After making minimum payments on all of your credit cards, put some extra money toward the card with the highest APR. Once it's paid off, move to the card with the next highest APR, and so on. This method will allow you to decrease the total amount you'll pay by reducing the interest you accrue.

Debt Snowball Method

The debt snowball method may motivate you to stick to your payoff plan by building momentum through quick wins. This payoff strategy prioritizes putting extra money toward the credit card with the lowest balance while making minimum payments on the rest of your cards. After that card is paid off, apply the extra funds to the card with the next lowest balance, and repeat the process until you eliminate all of your credit card debt.

With the snowball method, you will pay more in interest in the long run, but you'll see progress paying off cards sooner, which can encourage you to keep going.

Debt Consolidation Loan

A debt consolidation loan is a type of personal loan you can use to pay off credit card debt and comes with distinct benefits.

For starters, a consolidation loan can streamline your credit card debt into one account with one payment, making your credit cards easier to manage. Additionally, debt consolidation loans differ from credit cards in that they are installment loans with a predetermined repayment timeline and a set payoff date you can circle on your calendar. Finally, debt consolidation loans typically offer lower rates than credit cards, but your rate may vary depending on your credit, income and other factors.

To gauge your odds of loan approval and what rate you may receive, consider prequalifying for a loan—or multiple—before applying. Prequalification allows you to compare several personal loan offers with only a soft credit check, which doesn't impact your credit score.

Balance Transfer Credit Card

If you have strong credit, applying for a balance transfer credit card is another option to consolidate debt that may save you money. These cards usually come with a low or 0% introductory APR for up to 21 months. During this time, you can make substantial progress toward paying off your credit card debt by making interest-free payments. However, you'll usually pay a balance transfer fee, typically 3% or 5% of the transfer amount. Also, any balance that remains after the introductory period expires will be subject to the credit card's standard rate.

Credit Counseling

If your credit is below average, a debt consolidation loan or balance transfer card may not be a viable option, especially if you're struggling with your current payments. In this case, consider talking to a nonprofit credit counselor who can review your situation and suggest tactics to help you manage your money better and reduce your debt.

Credit counseling agencies may also suggest getting on a debt management plan, especially if your credit card debt is considerable. With a debt management plan, a credit counselor negotiates on your behalf with your creditors for reduced repayment plans, often with lower interest rates and waived fees. You then make a single monthly payment to the counseling agency, which disburses the funds to your creditors.

The Bottom Line

Using your credit card and paying off your balance each month is a great way to save money and build credit, but it's not the only method to build and maintain a strong credit score. Making on-time payments, keeping your debt balances low and maintaining a good mix of credit types are also good habits that may help your credit.

It's also important to only apply for the credit you need and to check your credit reports regularly for inaccuracies and fraudulent information. When you monitor your credit with Experian, you'll get an updated credit report every 30 days and receive real-time alerts when key changes are detected on your credit report.