Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
When you have a zero balance on your credit card, that’s something to celebrate. If there’s no balance on your card, that means you don’t owe the card issuer any money. Read on to see how that zero can be a hero when it comes to your finances.
Find the Best Credit Cards for 2024
No single credit card is the best option for every family, every purchase or every budget. We've picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.
What Happens if My Credit Card Balance Is $0?
A good rule of thumb regarding credit cards is to owe as little as possible. That’s because any balance left on your card at the end of a billing cycle is subject to interest, and credit card interest is expensive. According to October 2023 data from the Federal Reserve, the average APR on a credit card account that was assessed interest was 22.77% in August 2023.
If your credit card balance is zero at the end of your billing cycle, you won’t owe any interest. By comparison, let’s say you have a $10,000 balance at the end of your billing cycle; at 22.77% interest, you’ll owe an additional $183.85. And that number will only increase with each billing cycle you carry a balance. So, a zero balance is a good thing for your bottom line.
Read more: See what you’ll pay in interest with our credit card interest calculator.
Should I Close My Credit Card Account if the Balance Is $0?
In general, even if you aren’t actively using your credit card and you have a zero balance, it’s still a good idea to keep the account open. That’s because the credit limit on each card you have counts toward your overall credit utilization ratio. Credit utilization, which is the amount of credit you’re using in relation to the amount of available credit you have, makes up 30% of your credit score and opening and closing cards can have a significant impact on your credit standing for this reason.
Here’s an example of how credit utilization works:
Suppose you only have one credit card, with a maximum credit limit of $10,000, and you charged $5,000 to the card without making any payments. In this case, your utilization is 50% of your total available credit.
Now, imagine you have two credit cards, each with a maximum credit limit of $10,000, and you charged $5,000 to one of the cards. Your utilization in this scenario is 25% of your total available credit.
If you close a credit card that has a zero balance, you have that much less credit available, and it’s likely to have a negative impact on your overall credit utilization.
If your main reason for closing the card is that you no longer want to pay the card’s annual fee, consider a product change. A product change is when you request a different card, or product, from the same bank. In this scenario, you would request to downgrade a card with an annual fee to another card without an annual fee from the same issuer. Not every card is eligible for a product change, and you may not be able to product change from the card you have to the card you want. But if you can convert your existing card to a no annual fee version, you can preserve your credit limit and not impact your credit utilization.
Should I Pay Off My Credit Card After Every Purchase?
It’s a myth that carrying a small balance on your card can help your credit score. If possible, you should pay your bill in full on time, every time. If you find it easier to manage your spending on a card by paying off a purchase each time you use it, there’s nothing wrong with doing so. Others may find it simpler to make one payment at the end of the billing cycle when they get their statement. Both methods are fine, but choosing to pay only part of your bill means you’ll likely be charged interest on your card, which is costly.
Carrying a balance from month to month repeatedly can have a negative impact on your score, as interest can turn a once manageable payment into a debt burden over time. Missing a payment or paying late is also never a good choice, as your payment history makes up 35% of your credit score, and a missed or late payment can drag down your overall score.
How Long Can You Keep a $0 Balance on a Credit Card?
If your balance is zero because you use your card and pay any balance off in full at the end of every billing cycle, you can keep the card indefinitely. But if your account remains inactive for some time with a zero balance, the issuer may cancel your account.
Credit card companies can cancel your card without any advance notice, and there’s no set period of time a card account has to remain inactive for an issuer to close it. A good rule of thumb is to try to make at least a small purchase on the card every few months or have a recurring subscription or bill charged to the card to keep the account active.
Bottom Line
When your credit card balance is zero, that means there is no payment due. Keeping a zero balance is a sign that you’re being responsible with the credit extended to you. As long as you keep utilization low and continue on-time payments with a zero balance, there’s a good chance you’ll see your credit score rise, as well.
Best 0% APR & Low Interest Credit Cards Of 2024
FAQs
If your credit card balance is zero at the end of your billing cycle, you won't owe any interest. By comparison, let's say you have a $10,000 balance at the end of your billing cycle; at 22.77% interest, you'll owe an additional $183.85. And that number will only increase with each billing cycle you carry a balance.
What happens if my credit card balance is 0? ›
If you have a zero balance on credit accounts, you show you have paid back your borrowed money. A zero balance won't harm or help your credit. To find out how we got here, we have to understand what credit is and the history of credit agencies.
Should I pay my credit card balance to 0? ›
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
Is it good to keep a credit card open with a zero balance? ›
Plan for Big Purchases: If you're planning to make a major purchase, such as a home or a car, in the near future, it's wise to maintain a healthy credit score. In this case, keeping a credit card open with a zero balance can contribute positively to your credit utilization ratio and overall creditworthiness. 4.
When should you cancel a credit card with a $0 balance? ›
The standard advice is to keep unused accounts with zero balances open. The reason is that closing the accounts reduces your available credit, which makes it appear that your utilization rate, or balance-to-limit ratio, has suddenly increased.
What happens if my balance is zero? ›
As the name of the account implies, this is a zero-balance account. Therefore, you don't have to maintain a minimum balance. Consequently, there is no penalty in the case of zero balance.
What does 0 credit balance mean? ›
What Is a Zero Balance Card? The term “zero balance card” refers to a credit card with no outstanding balance of debt. Credit card users can maintain zero balance cards either by paying off their full balances at the end of each billing cycle, or by simply not using their cards.
Should you pay off 0% credit card? ›
A 0% interest rate offer might provide the flexibility you're looking for, but check thoroughly to ensure the credit card is right for your needs. Try to pay off as much of your balance as you can, as soon as you can. If you don't and your 0% offer period ends, you could pay higher interest rates.
Can I use credit card with zero balance? ›
You can still use your credit card even if the balance is zero. Indeed, using your credit card responsibly and paying your bills in full each month can be advantageous for several reasons: They are making Purchases: A credit card with a zero balance functions like any other active credit card.
Is zero credit card debt good? ›
Generally, a zero balance can help your credit score if you're consistently using your credit card and paying off the statement balance, at least, in full every month.
The other risk of leaving a card inactive is the issuer might decide to close the account. If you haven't used a card for a long period, it generally will not hurt your credit score. However, if a lender notices your inactivity and decides to close the account, it can cause your score to slip.
Does canceling a card hurt credit? ›
Key takeaways: Closing a credit card can hurt your scores because it lowers your available credit and can lead to a higher credit utilization, meaning the gap between your spending and the amount of credit you can borrow narrows. Canceling a card can also decrease the average age of your accounts.
Is it bad to keep a credit card open but not use it? ›
In most cases, however, it's best to keep unused credit cards open so you benefit from longer credit history and lower credit utilization (as a result of more available credit). You can use the card for occasional small purchases or recurring payments to keep it active as opposed to using it regularly.
What happens if credit card balance is 0? ›
If your credit card balance is zero at the end of your billing cycle, you won't owe any interest. By comparison, let's say you have a $10,000 balance at the end of your billing cycle; at 22.77% interest, you'll owe an additional $183.85. And that number will only increase with each billing cycle you carry a balance.
Does zero balance hurt credit score? ›
“Having a zero balance helps to lower your overall utilization rate; however, if you leave a card with a zero balance for too long, the issuer may close your account, which would negatively affect your score by reducing your average age of accounts.”
What does it mean if my statement balance is 0? ›
If you completely pay off your statement balance by the due date each month, your balance will be zero. If you carry a balance, you'll have to pay interest on that amount.
Does 0 utilization hurt credit score? ›
While a 0% utilization is certainly better than having a high CUR, it's not as good as something in the single digits. Depending on the scoring model used, some experts recommend aiming to keep your credit utilization rate at 10% (or below) as a healthy goal to get the best credit score.
What happens if your credit card has a zero balance when the return is processed? ›
If you have paid your card down to a zero balance before receiving your refund, you will have a negative balance on your credit account — and any future purchases will be applied to the negative balance first.
Is it good to have many credit cards with zero balance? ›
Keeping a low credit utilization ratio is good, but having too many credit cards with zero balance may negatively impact your credit score. If your credit cards have zero balance for several years due to inactivity, your credit card issuer might stop sending account updates to credit bureaus.
Is it good to have no credit card debt? ›
Having no credit card debt isn't bad for your credit scores, but you do need to maintain open and active credit accounts to have the best scores. By using your credit cards and paying the balances off monthly (so that you carry no debt), you could achieve an excellent credit score.
