Does Paying Off Credit Cards Every Month Improve Your Credit Score? 

Do one thing: If you aren’t able to pay off your credit card balances in full every month, don’t panic. The key is to pay as much as you can, above the minimum payment if possible, to chip away at your debt consistently.

The Short Answer

Yes. Paying off your credit cards every month can improve your credit score. And just as important, it can save you money and reduce financial stress. But first, let’s look at the bigger picture:

Credit Card Debt is Rising

America’s collective credit card debt keeps making national headlines, with the Federal Reserve Bank of New York reporting in mid-May that U.S. residents now owe a total of $1.12 trillion on credit cards. There’s more. 

• Adults in the U.S. also have more credit cards tucked in their wallets than they did last year.
• More balances are being carried across those credit lines.
• 169 million people carried a credit card balance – meaning they did not pay off what they owed by the end of the grace period.

That’s why it’s so important – when it comes to high-interest credit card debt and other monthly financial obligations – to not only pay your bills on time, every time, but to strive to pay off your entire balance at the end of each billing cycle.

Why Paying in Full Helps Your Score

There are two specific credit factors to consider when you pay off your balances monthly:

1. On-Time Payments

• Paying the minimum due on time builds a positive payment history
• Paying balances in full every month does this too – without interest cost.
• Carrying a balance does not improve your score. And paying interest doesn’t help.

2. Credit Utilization

• Utilization is a calculation that looks at how much of your available credit you’re using. If you’re under 30%, that’s great; under 10% is even better.
• Paying off balances every month keeps utilization low, which generally means a higher score.

Can’t Pay Off Your Balances Every Month? 

We get it. With inflation still pushing up the price of nearly everything – and millions of people living paycheck-to-paycheck – not everyone will be able to pay all of their credit card balances every month. And that’s OK. For the largest impact, do the following:

Pay as much as you can and more, if possible

The key is to pay as much as you can against the balance – and more than the minimum payment.

• Only paying the minimum balance, which is often 2% of the total, can stretch your payments across multiple years. That means if you pay for a nice dinner out with your credit card and then only make the minimum payment, you could be paying for that meal for months. 

How to Tackle Credit Card Debt Faster 

If you owe money on more than one credit card, and you’re carrying a balance every month, here’s a plan to help you get on track:

1. Pay Down High-Interest First. It’s important to do the following:
   • Pay more against the balance of the one with the highest interest rate first.
   • Continue paying the minimum on the other cards, too.
   • Once you have paid off the card with the highest rate, tackle the account with the next highest rate.
   • Keep doing this until all of your high-interest credit card debt is paid off. 
2. Look for promotional offers. Another way to pay off credit cards more quickly is by moving debt to a card with a zero or low-interest introductory rate. If you get mail or email from credit card issuers that say you are pre-approved (or preselected) for a new card with a better rate, look into the offer.
3. Increase Income. If you have the time, energy, and flexibility, look into picking up side work to help knock down your debt even faster. There are literally dozens of online options for jobs that you can do from home. To see what’s out there:
   • Go to the app store on your smartphone.
   • Type in the keywords ‘make more money’ then scroll through the results.
   • Once you find something that suits you, do some digging by going online to see what others are saying about the company.

The Bottom Line

Paying off your cards every month has the following benefits:

• Boosts credit utilization
• Improves score
• Saves interest costs
• Reduces financial stress

However, if you aren’t able to pay off cards monthly, pay as much as you can. Do this consistently, month in and month out. Progress matters.

These small improvements can help you build your score and give you financial confidence and peace of mind.

With reporting by Casandra Andrews