Carrying a Balance on Credit Cards

Interest Fees

Credit cards come with interest rates ranging from zero percent to more than 20 percent. You do not have to pay interest if you pay your bill in full every month, but when you carry a balance, the interest comes into play. For example, carrying just a $1,000 balance can cost you $180 per year if you have an 18 percent interest rate.

Best Credit Card

When you have to pay interest on the credit card, it can be hard to get ahead. Some credit cards offer zero percent introductory rates, which can allow you to pay off the balance. These cards do charge a balance transfer fee -- usually this is a percentage of the balance that you're transferring. According to CNN Money, the Discover More card is the best card for balance transfers because the transfer fee cannot exceed $75, as of 2011.

Your Credit Score

According to myFICO.com, the amount of debt that you have accounts for 30 percent of your credit score. Carrying a balance on your credit card increases your debt-to-credit ratio, which can negatively affect your credit score. To improve your credit score, you should carry no balance to bring the ratio down.

Paying It Off

Getting rid of your debt helps you to save money and can improve your credit score. It's advisable to make a plan to pay off all debts. If you're only making the minimum payment on your card and carrying a balance, it can take years to pay off a small amount of debt. For example, Lending Tree reports that if you pay only the minimum balance on a $2,000 debt, it can take you more than 30 years to pay it off. Instead, put as much money toward that balance as you can to pay off the debt sooner.