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Is it Better to Carry a Balance on My Credit Cards or Pay Them Off Each Month?

Credit card debt is one of the most commonly reported reasons why individuals file for bankruptcy. Credit cards make it easy for users to lose track of how much they spend, causing them to accrue large debt balances. One reason for this is that credit cards can make an individual feel like he or she has more disposable income than he or she actually has. Another reason is that many people harbor misconceptions about credit cards and debt, sometimes misunderstanding critical information until they are taught the truth about credit and debt as part of their required credit counseling for filing for bankruptcy.

A common misconception about credit cards is that carrying a balance on a card increases the user's credit score. Technically, “carrying a balance” refers to any point in time that the user has unpaid charges on his or her account. Colloquially, the term is used to describe the practice of paying off less than the amount billed each month, thereby “carrying” unpaid charges into the next billing cycle.

Carrying a High Balance to Raise your Credit Score is a Fallacy


Why You Should Pay Your Credit Card in Full Every Month

There are a lot of myths and facts out there about credit, debt, and how to effectively manage your credit score. One of these is the myth that maintaining a balance on a credit card can help you raise your score faster than paying off the card each month. This simply is not true. If you have a credit card, you should make it a priority to pay its balance in full every month. Not paying off your credit card can start you on a slippery slope to high levels of debt, which can require bankruptcy to manage if they spiral out of control.

Maintaining a Balance on Your Card will Not Help Your Credit Score

If I Leave the Country, Will My Personal Debt Follow Me?

When you are drowning in a seemingly bottomless well of debt, the thought of leaving the United States to start over somewhere else can be tempting.

If you move abroad in an effort to leave your credit card debt behind, you generally can avoid having to repay it. This is not because you are immune to lawsuits from your creditors while abroad, but because taking legal action to recover the money from you when you are out of the country is often more complicated an expensive for the creditor than it would be to simply not take action. This does not mean there are no potential repercussions for jetsetting your away out of debt – the debt still exists, and it can cause financial difficulties for you in the future. If you truly cannot repay your debts on your own, bankruptcy is a far more effective debt management tool than leaving the country.

If Your Creditor Files a Lawsuit Before You Leave, You Could be Required to Repay the Debt


Your credit score is the three-digit number between 300 and 850 that provides a quick guide to your likelihood of repaying money that you borrow. There are three credit reporting agencies in the United States, which record your borrowing and payment actions to each calculate a score for you. These agencies are Experian, Equifax, and TransUnion. You are entitled to a free credit report from each of these agencies once every 12 months.

When you apply for a loan, the creditor uses your credit score to determine whether you are qualified for the loan and if so, the interest rate you are qualified to receive. Making your payments on time, utilizing less than a quarter of your total available credit, and a payment history free of wage garnishments, foreclosures, and liens all raise your score. Filing for bankruptcy, closing credit cards that have balances, and applying for multiple cards at once can all lower your score. Below are a few other important events that can impact your credit score.

Defaulting on a Loan


The allure of fast cash directly deposited into your bank account within 24 hours may sound appealing but as The New York Times recently reported, consumers should be extremely cautious when it comes to the pitfalls of signing on the electronic dotted line.

The article, citing data from the 2014 four part series, Payday Lending in America, facilitated by The PEW Charitable Trusts, a research organization dedicated to taking an analytical approach to improve public policy through advancements and dedication to civic life, found that the practice of payday loan advances were extremely detrimental and dangerous to the indebted American consumer.

Borrowing from one of these lenders may be found even more damaging to one's credit and bank account than if one opted to consult with an experienced bankruptcy attorney and petitioned for debt protection under Chapter 7 or Chapter 13 bankruptcy. Furthermore, Pew's report highly recommends the adoption of firmer regulatory guidelines by the Consumer Financial Protection Bureau to combat the complaints generated by unsuspecting consumers.

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