While many financial experts warn against carrying a credit card balance, there are a few specific situations where it might actually be beneficial. Credit cards are widely used for everyday spending, and while they offer perks like cashback and rewards, accumulating debt on them is typically not ideal due to high interest rates. However, in three key instances, carrying a balance could be a sensible financial decision.
Zero-Interest Offers Can Be Smart for Big Purchases
One situation where carrying a balance makes sense is when a credit card offers a 0% introductory APR. These promotional periods, available on many credit cards, allow users to make purchases or transfer balances without paying interest for a set time—often up to 12 or 18 months. This can be a practical solution for those needing to finance significant purchases, such as home renovations or large appliances, provided they can pay off the balance before the introductory period ends.
For instance, if someone wants to redo the flooring in their home, a 0% APR card can help finance the project more affordably than taking out a personal loan or paying out of pocket. The key is ensuring the balance is fully paid off before the promotional period ends to avoid interest accumulation.
Credit Cards as Emergency Backup
Another situation where it can be acceptable to carry a balance is during emergencies. Although financial advisors recommend having an emergency fund—typically six months’ worth of expenses—many people may take years to build this financial cushion. When an emergency arises, such as a car breakdown or unexpected medical expenses, and there’s no emergency fund or personal loan option available, a credit card can act as a short-term financial solution.
In this case, a credit card can provide immediate access to funds, giving someone the flexibility to manage an emergency expense they otherwise couldn’t cover. While this isn’t ideal, it is a viable option in situations where there are limited alternatives and immediate action is required.
Using a Balance to Boost Your Credit Score
Lastly, carrying a small balance can actually help improve a person’s credit score. Surprisingly, individuals with perfect credit scores often maintain a modest balance—around 4% of their available credit limit. For example, with a $10,000 credit limit, carrying a $400 balance could contribute to maintaining or boosting a high credit score. This occurs because the credit scoring formula rewards responsible credit use, and keeping a low balance relative to your credit limit can demonstrate financial responsibility.
Although it’s possible to build an excellent credit score without carrying any balance, for those who do, the credit scoring system tends to favor individuals with a small, manageable amount of debt. This small balance shows consistent credit usage and timely payments, both of which are important factors in building a strong credit history.
Understanding the Exceptions
While avoiding credit card debt is a standard rule of thumb, these three exceptions show that carrying a balance isn’t always detrimental. By using credit cards strategically—especially when taking advantage of interest-free offers, managing emergencies, or boosting a credit score—people can maintain their financial health without being overwhelmed by interest charges. However, in all instances, careful planning and discipline are crucial to ensure that any balance carried doesn’t turn into long-term debt.
