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Debunking credit card myths: Does carrying a balance help my credit score?

Jan. 11, 2021
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3 min read
Young woman reviewing personal finances with digital tablet and paperwork on sofa
Debunking credit card myths: Does carrying a balance help my credit score?
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Editor’s note: This post has been updated with new information.

We talk about travel credit cards quite a bit here at TPG. Applying for and utilizing these cards strategically can unlock incredible travel experiences like premium class flights or luxurious hotel rooms. However, there are a number of misconceptions out there when it comes to credit cards, so we’re debunking some of these myths in a series of posts.

Myth: Carrying a balance helps my credit score

When a credit card issuer is considering whether to approve your application for credit, your credit score is a critical component in the decision. This number is a reflection of how well you can manage any type of credit that has been extended to you, including things like mortgages and home equity loans.

A common misconception out there is that issuers want to see you carrying balances from month to month, as it shows that you are using your cards and could handle new lines of credit. While it's true that issuers like to see that you use your card each month, you don't have to hold a balance (which racks up interest) to accomplish this. This myth unfortunately leads some cardholders to not pay their statements in full so as to leave some balance on each account.

woman and baby with laptop and credit card
Photo by Cavan Images / Getty Images

This thinking follows some flawed logic, as it assumes that issuers can only see balances past your statement due date. In reality, credit card companies report your statement balances to the major credit bureaus every month. So even if you pay those off each month, the credit bureaus will have a record of you using your card.

For example, I have auto-pay set up my accounts. Every month, I automatically pay the full statement balance on the payment due date. However, because the statement balance is still being reported to the credit bureaus each month, card issuers still see that I am using the card without carrying any balance over to the next month. There’s simply no need to leave any of my balance unpaid.

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Remember that not paying your statement balance in full can result in interest charges that can negate the value of any points or miles you’re earning on the card.

Related: Ten commandments for rewards credit cards

Bottom line

Understanding the factors that make up your credit score can be a bit challenging, but it’s critical to avoid making silly mistakes. In the case of today’s myth, simple confusion around how your balances are reported to the credit bureaus may cause cardholders to not pay balances in full each month, thinking that such activity can improve their score.

In reality, it probably won’t impact your score significantly but will result in unnecessary interest charges. As always, we strongly recommend that you pay your balance in full every month, and hopefully this post has helped at least some of you recognize that carrying balances won’t improve your score!

Additional reporting by Madison Blancaflor.

Featured image by Getty Images/Hero Images

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Apply for American Express® Gold Card
at American Express's secure site
Terms & restrictions apply. See rates & fees
Best for dining at restaurants

American Express® Gold Card

TPG Editor‘s Rating
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Go to review

Rewards Rate

4XEarn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
4XEarn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
3XEarn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
2XEarn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
1XEarn 1X Membership Rewards® point per dollar spent on all other eligible purchases.

  • Intro Offer

    As High As 100,000 points. Find Out Your Offer.

  • Annual Fee

    $325

  • Recommended Credit

    Excellent to Good

Why We Chose It

There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)

Pros

  • 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
  • 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
  • Packed with credits foodies will enjoy
  • Solid welcome bonus

Cons

  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber and other dining credits
  • You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
  • Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
  • Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
  • Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
  • Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
  • Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
  • $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
  • $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
  • $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
  • $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
  • Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
  • No Foreign Transaction Fees.
  • Annual Fee is $325.
  • Terms Apply.