Is Carrying Forward Your Credit Card Balance a Good Idea?

Credit cards are highly common these days. In fact, you can often find people carrying and managing multiple credit cards. However, proper management also comprises of repayment of the credit card balance in the right manner.

Sometimes, individuals repay the minimum amount payable and leave the rest to be paid later. This is usually not a good choice, as it comes with several drawbacks, especially in the long run. Also, keeping credit card outstanding might be chosen when you are sure that you will able to repay the amount within a span of a few months. If the tenure is going to be a long one, you might require taking a personal loan or converting the outstanding into EMI to repay it.

Let us explore all possibilities of carrying forward your credit card balance.

Why Carrying Forward Your Credit Card Balance May Prove to Be A Bad Choice?

If we look at it in a general way, being in debt is never a good option. Moreover, with credit cards, the outstanding amount will only increase with time, and so will the interest that's charged on it. This way, if you were paying a certain sum today to repay the whole outstanding, it will be much less than what you will be paying after months, since by then, a lot of interest would have been added to it.

This may be referred to as falling into a trap.

Impact of Credit Card Balance on your Credit Score

Credit score, creditworthiness, etc. are some of the terms we're talking about. If you have not heard them before, you may know that it's about maintaining a good level of creditworthiness that benefits you in several ways. A higher credit score means that you have good creditworthiness, because you've been making repayments fully and timely, creating the least possibility of making any defaults with payments.

Credit Utilization Ratio or CUR is yet another term, and it should remain below 30% of your total available credit to express higher creditworthiness.

Now, credit card balance, when you keep on carrying forward, can impact these values. Increasing the CUR or lowering your credit score can be signs that may pose problems later on when you try getting a loan, or a credit card next time.

You may also like "Will Your Credit Score Soon Influence Your Insurance Rates?"

Paying Via Personal Loan

As discussed, sometimes, due to an emergency, one has to keep the credit card balance outstanding.

In such circumstances, what's suggested is that you may choose to carry forward an amount if you can pay it within 3 months' time. You can also explore low-cost balance transfer options of up to 6 months. However, note that these options do not come at zero cost. There are some additional charges you need to pay.

However, if the tenure is going to be a long one, either convert the outstanding balance into EMI or prefer taking a personal loan instead.

Paying through EMIs also comes with processing fee and interest charges.

So, should you consider taking a personal loan?

If you're lacking funds to make the repayment, and the EMI option also doesn't fit well, then there is no choice left but to go with a personal loan. While doing so, check the processing fee and interest charges that will be levied. You need to understand the payment terms and see if you will be able to manage the repayment through the loan.

The choice of tenure and the EMI amount is based on your cash flows. It should be such that you are able to make the repayments easily. In case you are choosing the auto-debit option, make sure there are enough funds in the particular account.

What Do We Conclude?

The best possibility is paying your credit card balance in full well before the due date. However, if you are short of money to make the complete repayment, you should go with the option to carry forward the amount, but then also formulate your plan of repayment – within 3/6 months, or EMI or personal loan in case the tenure's going to be long.

Know that paying off credit card balance brings benefits such as a low CUR, ability to avoid interest charges and even a lower debt-to-income ratio (DTI). You can maintain good credit card habits by keeping your budget in mind, using rewards in the most beneficial way, keeping the card active, and, if carry forwarding, have a plan to repay the same.

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