Zero Balance Credit Card Good or Bad? – Low Credit Use

The Impacts of Carrying a Zero Balance Credit Card and Low Credit Use

If you’re like many Americans, you have a credit card or two. These are great things to have in case of emergencies. They can also help to boost your FICO and Vantage credit scores. However, many people believe that a zero balance credit card will make their score go up. This is not true, in fact, it can hurt your credit score if you don’t use your card. This article is going to go over why low credit use isn’t good for your credit. We will also talk about why it might cause your credit score to drop. Finally, we will discuss how you can use small monthly balances responsibly to help your credit.

Zero Balance Credit Card and Why Low Credit Use is Bad

What Happens When You Don’t Use Your Credit Card?

Many people get a credit card and don’t use it for fear of going into debt. They believe that if they let it sit at a zero dollar balance every month, they’re protecting themselves. The truth is, they’re not helping themselves very much. It won’t improve your credit score by sitting there doing nothing. In fact not using your card is a bad credit card habit.

Your Lender May Close the Account Due to Low Credit Use

If your card sits for a long enough period, you lender will deem it inactive. If they do this, they might end up closing your account altogether, and without any warning. They’re not making money off your credit line in interest or fees, and your lender is a business. Your lender also pays fees to keep your account open. It’s easier for them to close the account and open an account for someone who will use the card. That way, they’ll make their money back.

Your Credit Score Won’t Improve With a Zero Balance Credit Card

Your credit utilization is the amount of credit you have available to use stacked up against the amount of credit you’re using. For example, if you have a $10,000 and you spend $1,000 a month, your credit utilization ratio is 10 percent. If you have two cards with $5,000 each, your maximum credit line is still $10,000. So, if you spend $1,000, your credit utilization is still at 10 percent. However, assume one of your cards gets closed because you don’t use it. Now your credit utilization jumps to 20 percent. Since you’re still at 20 percent, it won’t matter much either way. But, if you have several cards that close in a short period due to inactivity, your credit score will fall.

How Can You Prevent Zero Balance Credit Card and Low Credit Use From Happening?

If you get a credit card, but you’re afraid of going into debt, start small. You don’t have to charge up large purchases. If you use Netflix, charge it to the card each month and pay it off. It’ll show that you are using your card so that you won’t be in danger of the account closing. This responsible card use can slowly build your credit up. You can also buy things on your credit card and immediately pay them off from your bank account. This will stop you from worrying about remembering to pay the balance each month.

Is It Better to Carry a Zero Dollar Balance All the Time or Just at the End of the Month?

If you take everything we’ve covered so far into account, you want a zero dollar balance at the month’s end. It is beneficial to you to pay off your purchases each month, before the end of the month if possible. By doing this, you’re leaving a trail of good credit card use in your credit history. Lenders will look more favorably on this because you’re a low-risk to lend money to. The only reason you should carry a zero dollar balance all month is if you don’t trust yourself. If that is the case, you’re better off closing the account. You could start with a secured credit card and work your way up to an unsecured one. This would give you time to learn responsible financial habits.

Get a Credit Card with Incentives

If you’re still having trouble making yourself use your credit card, change cards. If you like to travel, the Capital One Venture Rewards Card might suit your lifestyle. It gives you two miles for every dollar you spend. If you find yourself shopping a lot, the Citi Double Cash Card might be something you’re interested in. You can also ask your favorite stores if they have retail credit cards you can apply for. As long as you use these cards responsibly, they’ll help to build your credit.

How Can You Improve Your Financial Picture?

A credit card is an excellent idea to have as a backup source of money if you need it quickly. You can have one card, or you can have multiple cards to choose from. You just have to use them all responsibly.

  • Emergencies. If something happens and you need money to cover an emergency, a single credit card can help. You shouldn’t make a habit of this, but it’s nice to know its there if you need it. If you have a few cards, you won’t have to worry about a vendor accepting the card type you have. Credit cards are wonderful for adding flexibility into your financial picture.
  • Higher Credit Limit. If you open more than one card, you’ll have a higher credit limit. If you use this responsibly, your credit rating will improve. Your credit utilization will go down, and this should push your score up a few points.
  • Multiple Rewards. If you have multiple credit cards, they can all have different rewards. For example, if you like to travel and you have a travel rewards card, use it for work purchases. This works great if you have a long commute to and from your job. For gas, use a gas rewards card for even more opportunities.

Avoid Low Credit Use and a Zero Balance Credit Card

This article talked about why it isn’t a good idea to let your card sit. We offered a few ideas to use your card each month for small purchases. We talked about how you can prevent your card account from being closed as well. Also, we touched on possibly changing your credit card to offer better incentives. Finally, we finished by discussing how you can improve your financial picture with responsible use. Each of these points is designed to help you raise your credit score. If you follow them, you should see an improvement.


CreditFast has reviewed the best credit cards on the market. Some of the credit card offers are from our advertising partners. CreditFast has objectively reviewed the features and benefits of each credit card. We have chosen credit card offers based on our editor’s recommendations.

Monica Kowollik

Director at CreditFast.com
Monica has covered credit card and personal finance news for over 15 years. From an early age, she developed an interest in financial literacy and saving money. Monica hopes to help others to improve their personal finances one article at a time.

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