Q&A Video – Will Not Paying The Full Balance Of A 0% Interest Credit Card Hurt My Credit Score?

John Ulzheimer

John Ulzheimer | Q&A Videos

Nov 07, 2014 | Updated Feb 17, 2015

0% interest credit cards can be very useful for transferring large balances or making large purchases without having to pay any interest.  Even though you won’t be accruing interest, you’ll still be affecting your debt-to-utilization ratio. Learn the details and how your account balance affects your credit in our video with credit expert John Ulzheimer.


Hello. My name is John Ulzheimer and I am a credit expert who contributes to the Credit Card Insider blog. Today’s question is this: If I have a zero-interest credit card and I do not pay the balance in full each month, will it hurt my credit score? Excellent question.

Zero-interest credit cards are very popular these days They are a great way to transfer a balance from an interest accruing credit card account to a zero-interest credit card account which will generally buy you some time so that you can aggressively attack the balance and try to pay off your credit card debt. Now, credit card debt tends to be the most expensive debt that we carry. The average interest rate on a credit card is somewhere around fifteen percent can be as high as almost 30 percent. So zero-interest cards are generally a pretty good deal. And the grace period, meaning the period of time where you’re paying zero interest, generally ranges somewhere between 6 and 12 months. That’s the good news.

The bad news is this: the answer to the question is yes. You can hurt your credit scores if you do not pay that balance off in full each month, and here’s why. There is a measurement in all credit-scoring systems, whether it be FICO or Vantage Score, that measures the balance on your credit cards relative to the credit limits on your credit cards. So, hypothetically, if you open a zero interest credit card that has a ten thousand dollar credit limit, and you transfer balances in from other credit cards, and say you transfer in five thousand dollars, seventy five hundred dollars, let’s say you transfer in a full ten thousand dollars. Then what you have just done is you’ve just placed a heavily leveraged credit card on your credit reports, and the ratio’s going to vary depending on what the balance is relative to the limit. So if you transferred five thousand dollars on to a ten thousand dollar card, you’re going to be fifty percent utilized. If you transferred seventy five hundred dollars you’re going to be 75 percent utilized. If you transferred ten thousand dollars then you’re going to be 100 percent utilized.

That ratio, that utilization percentage, is very important in your credit score. The higher that percentage, generally speaking, the fewer points you’re going to earn in debt-related categories of credit scoring systems, therefore the lower your credit score is going to be. So by simply leaving the balance stagnant, and unpaid, Then you risk causing damage your credit score that’s going to persist for however long it takes you to start paying that balance down. Now, even if you are making a payment every single month, but it’s a modest payment, either 50 bucks, a hundred bucks, then it’s very unlikely that you’re going to be paying it down enough to cause a positive change in that utilization percentage and actually increase your score. So, it’s in your best interest to attack the balance as quickly as possible not only because of your credit score, but also because the grace period of the zero-interest is going to eventually expire, and if you don’t have it paid off in full by the expiration of the grace period, there’s a chance that you may have to pay interest retroactive all the way back to the day that you opened the card and started transferring balances onto the card.

So while zero-interest cards are a great way to buy yourself some time so that you can get out of expensive credit card debt, the do you have some dangers and there are some risks with using them if you don’t use them properly and try to get out of that debt as quickly as possible.

To learn more about this topic or anything else having to do with credit cards, please visit the Credit Card Insider blog at CreditCardInsider.com. Thanks for your time, have a great day.

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