This post comes from Christine DiGangi at partner site Credit.com.
A few weeks ago, an acquaintance asked me about my job, and upon hearing that I write about budgets and credit cards (and such), she had something she wanted to share. She doesn’t like to pay her credit card bills on time, she told me, because it makes her nervous to see her bank balance dip so low afterward.
People tell me random tidbits about their finances all the time, and I know she’s not alone in doing things with her money she knows she shouldn’t. Others are misinformed about things that will help or hurt their credit or overall financial health, which is probably a much bigger problem than people who go out of their way to justify poor habits.
Inspired by this interaction, I asked several people who work in personal finance to share the strange excuses they’ve heard from people when explaining why they can’t or won’t pay their bills on time.
Fear of a low balance
There are millions of Americans who legitimately can’t afford their bills, but there’s a difference between not having enough money in your bank account and not wanting to see the balance get smaller after you’ve paid a bill. You may have to pay a fee if your account balance drops below a certain level, and you should avoid that if you can, but skipping a bill could be much more costly. Late fees will add up, and if you forget to make a payment, your credit score will suffer. (You can see how late payments are affecting your credit scores for free on Credit.com.)
No one likes seeing their bank accounts shrink, but if you’re tracking your spending, keeping to a budget and monitoring your accounts for unauthorized activity, you shouldn’t have to worry about account fluctuations. That’s just how the cycle of getting paid and paying bills works.
The myth of the credit-building balance
This is one most credit experts have heard: Carrying a balance on your credit card will help you build credit.
When using a credit card, the two best things you can do for your credit are pay your bill on time and use a small portion of your available credit (generally less than 30% of your limit, but an even lower credit utilization rate is better). Whether you carry a balance from month to month has no direct impact on your credit score.
However, if you’re carrying a balance and continue to add to it, either with new purchases or with the interest the balance accrues, you could hurt your credit utilization rate and end up hurting your credit. If you can, it’s a good idea to pay your balance on time and in full every month.