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January 13, 2014 | money-management

Are Your Credit Card Balances Under Control?


Are You Paying the Minimum Amount Due?

If you’re like the majority of Americans, you may be carrying some credit card debt. Sure, it seems like a manageable amount, and maybe you even have a 3-year or 5-year plan to pay it off. However, if you’re carrying a credit card balance from month to month, you could be paying as much as 18% APR on that balance every month. And if you’re only paying the minimum amount due on your credit card bill, you could actually be digging yourself into an even deeper hole.

Do Your Combined Balances Exceed 30% of Your Combined Limits?

As a general rule of thumb, try not to allow your total credit card balances to exceed 30% of your cumulative credit card limits. In other words, if you have 3 credit cards each with a $10,000 limit (i.e. $30,000 total limit), the total balance of those 3 cards should not exceed $9,000. If it does, your credit score may begin to suffer, and your interest rates may start increasing. Check out our Amplify Your Credit Score infographic that covers credit card basics.

Gain Rewards Without Carrying Balances Month to Month

In order to take full advantage of credit card rewards and offers without paying interest on a balance, only charge as much per month to your credit card as you’ll be able to pay off within 30 days. If you pay your balance in full without carrying it over to the next billing cycle, you can avoid paying finance charges while still racking up airline miles and other rewards.