Pay Off Your Credit Card Debt Every Month: Top 5 Tips

A sign saying "pay off debt" instructing to pay off debt monthly.

The Importance of Paying Off Credit Card Debt

Navigating the Landscape of Credit Card Usage

Paying off credit card balances is one of the primary goals we at help people achieve. Paying off credit card debt is important for financial freedom. There are important things to know when paying off a credit card balance.

In the realm of personal finance, effectively managing credit card debt stands as a cornerstone of financial health. This article explains why it's important to pay off your credit card debt every month for financial stability.

The ease of using credit cards often masks the potential debt dangers. This part helps us understand the many effects of credit card debt on our financial well-being.

We will discuss the issues with credit cards and also explore the risks associated with having credit card debt.

Additionally, we will examine the benefits of being debt-free. The goal is to help you understand how to manage credit card debt and why it's important for your finances.

1. Should You Pay Off Your Credit Card Debt Every Month?

Analyzing the Benefits of Zero Credit Card Balance

For most people, making that final payment to wipe out a credit card balance is a special event. Many clients we work with spend years grinding toward that final goal.

If you’re using credit cards wisely, you’re paying off your balances in full every single month. It's even better if you can pay off your credit card after everyday spending. Don't wait for for the monthly payments at the end of the month. Doing this helps keep your credit utilization rate low. A low credit utilization rate is good for your credit reports.

Using your credit card responsibly and paying off the full balance every month will result in a good credit score. Additionally, you won't have to pay any fees or interest rates for using the card.

Learning to use credit cards less and paying off everything you owe each month can be tough. Credit card issuers prefer when you have big balances, because they earn more money when you are borrowing money from them. It's up to all of us to avoid the temptation to spend more than we can pay back when the month ends. Remember, the goal is not to spend more on your credit card than what you can afford to pay off. This way, you don't end up owing a lot of money, you pay off your credit card, and you keep an excellent credit score.

2. Credit Counseling: Planning Your Credit Card Payments

How Credit Counseling Can Aid in Debt Management and Repayment Process

Credit counseling offers personalized counseling and assistance. It helps you create a budget and a plan to become debt-free within a specific timeframe.

People seek ways to pay off credit cards with unique tricks, but no tricks are necessary. Time-tested techniques and principles of sound money management are the keys to staying on top of credit card debt.

You can even sign up for a Debt Management Plan (DMP) to significantly increase your chances of success.

DMPs are optional, and they aren’t for everyone, but if you’re a good candidate, a DMP lets you combine all of your monthly credit card payments into one payment that you send to a credit counseling agency. Then the credit counseling agency distributes your payments to your creditors, making sure everyone is paid on time.

DMP helps by reducing monthly payments, lowering interest, waiving fees, bringing the account current, and making other concessions. This makes it easier for you to pay off your credit card balance completely.

A significant advantage of the DMP is that numerous creditors will decrease the necessary monthly minimum payment, reduce, or eliminate interest rate, forgive fees, re-age, or update the account status, and offer other allowances to simplify your process of fully paying off your credit card balance.

There are sacrifices to be made in exchange for these concessions, though. You may not open any new credit or use credit cards at all while on a DMP. Your cards will be cut up and accounts closed when you begin the repayment plan.

But one thing that is crucial to bear in mind is that a DMP is here as long as you need it. If your financial circumstances change and you’re able to manage your finances on your own, you’re always free to leave the DMP, reapply for credit card accounts, and resume your normal payments.

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3. “Should I pay off my credit card in full?” And “Once it’s paid off, should I close the account?”

The Advantages of Complete Monthly Repayments

Paying off a credit card balance will feel like a liberating moment. You’ll probably be tempted to close the account and never look back.

Believe it or not, that’s not usually the best idea.

When people ask, “Should I pay off my credit card in full?”, the answer is yes, of course. Paying off a balance helps you with interest savings and your credit score in several ways. The good payment habits you’ve shown paying off the debt will certainly help your credit history and keep your credit report healthy. 

But after it’s paid off, keep the account open. There are benefits to having an open account with an available credit line. As long as you don’t go out and max out the card again, that available credit limit will really help your credit score. Just make sure you keep the account active by using it every few months so your creditor won’t close it for inactivity.

The three major credit bureaus also reward you for having a good credit mix. So it’s better if you have different kinds of loans, like personal loans, auto loans, mortgage loans, and revolving debts like credit cards to get the recommended credit score. Closing your credit card account may hurt your mix and lower your score.

By all means, feel free to celebrate when you pay off that big credit card balance; but don’t cut up the credit card into confetti. Keep the account open, and your credit score will thank you.

4. Will paying off my credit card increase my credit score?

Understanding Credit Score Calculations

We talked about how having an available balance helps your score, and how a good credit mix is important, but the truth is, your score might not go up that much when you pay off the balance.

The biggest factor in your Fair Isaac Corporation (FICO®) score is payment history at 35% (and it’s very important to your VantageScores as well). But if you were making timely payments before you paid off the account, then your payment history already looks good as far as your credit score goes.

When we advise you not to close the account, that’s more about preventing your score from going down than making sure it will go up. Your credit mix won’t change if you don’t close the account—which is a good thing, but doesn’t necessarily mean your score will go up.

The one factor where your score will probably improve is credit utilization rate. It’s 30% of your FICO and about 23%* of your VantageScore. And paying off a big balance will surely improve the overall utilization rate, so long as you keep the account open and don’t run up any more long-term debts on the account.

Once you’ve got the account paid off, the most important thing for your score is your payment history. Using credit wisely and remembering to pay off that card after every purchase will be the most effective way to get your score up and keep it up in the long term.

5. The Crucial Next Step: Save.

Strategies for Sustainable Credit Card Practices

Let’s recap: Should you pay off your credit cards every month? Yes. Should I pay off my credit cards in full? Yes. Should I pay off my credit card after every purchase? Yes! All of these things are important, but they are only the first steps on the road to financial freedom. Your next steps after paying off your debts will have a big impact on your personal finances.

We’ve already talked about the importance of keeping the credit card account open and not running up any new debts with it. Once you’ve paid off that credit card balance, the next thing you should focus on is what you do with your regular credit card payments.

One of the tricks to paying off credit card debt is to use the snowball method. You have a fixed payment, as large as you can afford, that goes to credit card debt. Then as you pay off one card, keep the total payment the same and shift that payment to your next highest (or next-most costly) debt. As you pay off debts, that payment will “snowball” and wipe out your remaining debts faster, even if you don’t ever increase the payment amount.

But then, when everything is paid off, keep setting aside that same amount you were sending to the credit card companies, only now you’ll set it aside for your own savings goals.

If you were paying $200 toward that credit card balance every month, you'd be tempted to spend that extra $200 now that the balance is paid off. This is a critical moment for your financial health—you must shift from debt repayment to saving for your goals.

Your first goal should be to establish an emergency savings fund. Three months’ income is the minimum, and nine months’ worth would be better. Everyone needs to save for emergencies or job loss, but one thing to bear in mind is that your emergency fund should prevent the need to go deeply into credit card debt again in the future.

If you have an emergency home or auto repair, the best way to pay for it is out of your emergency fund, not by using a credit card. By saving the money you were sending to credit cards, you’ll be able to establish this fund painlessly over time.

Once you’ve built up your emergency fund, you’ll be positioned to start saving for more fun goals, like vacations or a new car. Once you’re able to set aside extra money for the things you want, you’ll be well on your way to financial freedom.

Paying off credit card balances takes time and diligence, but if you do it and learn to handle your finances better in the process, you’ll be left in a much stronger financial position in the end.

Final Thoughts: Staying Debt-Free and Smart with Money

To wrap up, handling credit cards right means knowing a lot, making good plans, and being careful. We talked about how to use credit cards the smart way, like paying the full amount you owe every month and getting help if you need it to manage your credit card debt.

Knowing about credit scores, interest rates, and how much of your credit you're using is super important. It helps you make better choices, like picking credit cards that are good for you and understanding when to say yes or no to new offers.

Remember, keeping a good credit score isn't just about paying back money. It's about using your credit card smartly. Think about what you need and plan your money goals. It's important to keep learning about money and making smart choices every day to stay on top of your finances.

Remember, help is available. Call us today for financial counseling that will help you create a budget, pay off your credit cards, and become more financially literate.

Article written by
Melinda Opperman
Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined in 2003 and has over two decades of experience in the industry.

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