There’s a general belief about carrying balance on a credit card which should be reconsidered. As you probably know, a lot of people claim that this is a bad thing, but they actually may be a bit wrong.
Usually, a credit card charges an interest rate of about 15%, yearly, on balances, while some of them reach even 29%, in case penalty interest is applied.
However, considering that short-term interest rates are very close to zero, paying a high-interest rate is a very big mistake!
According to K5 News, a recent study conducted by the Federal Reserve revealed that more than three out of five credit card accounts had a balance that was carried over for at least one month to the next, back in 2015, the period for which such data is available.
It’s not that bad, despite what others are saying
What if we told you that you can actually carry a balance on your credit card and use that credit responsibly?
A lot of cardholders are now taking advantage of the intense competition in the credit card industry and score 0% intro APRs on everything they purchase, as well as balance transfers for 18 months or more.
And we’re not done, since cash-back credit cards, which are actually targeting big spenders who don’t carry balances, are also trying to enter the 0% intro APR game.
0% APR works like a magnet
Considering this, the fact that a lot of people would carry a balance when the APR is 0% (if this would be possible) doesn’t come as a surprise. Usually, cardholders use 0% intro APRs, just to break up expensive items intro 18 months of monthly payments. And in the end, they won’t pay anything in interest on the balance when they pay everything by the end of the promotional period.
Finally, let’s not forget about those who use balance-transfer promotions just help them pay off credit card debt. Specifically, back in 2015, more than 58 million credit cards were opened in the United States, this being the highest number since 2008. Most likely, a lot of them received 0% intro APRs, just as a bonus of opening the account.