What is a Good Credit Card Balance?

Illustration of a woman balancing a pyramid of credit cards
••• © Illustration by Janne Harju / Creative RF / Getty

Your credit card balance is the amount of charges you owe to your credit card issuer based on what you've borrowed but haven't repaid. Each purchase, balance transfer, and cash advance you make increasaes your credit card balance. Fees and interest also increase your credit card balance. Payments and returns 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 at $0).

Why Having a Good Credit Card Balance Matters

Keeping a good credit card balance is important not only for your credit score, but for your overall financial health as well. A high credit card balance, relative to your credit limit, can hurt your credit score. The higher your credit card balance, the higher your minimum payment and the more money you have to allocate toward that credit card each month. A high credit card balance also means less credit available for making purchases.

What Balance is Good For Your Credit Score

When it comes to 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. Of course, the best credit card balance is $0 because that means you don’t have any credit card debt. Keeping a $0 balance is virtually impossible unless you never use your credit card. You can, however, ensure a zero balance is reported to the credit bureaus by paying off your credit card before your account statement closing date.

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 calculate your credit utilization to tell whether your balances may be affecting your credit score. 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 approaching your credit limit. Create a habit of continuously checking your credit card balance, once a week or so, to be sure it's not higher than 30% of your credit limit. 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 while until you can reduce your balance to a better level.