Do you still have to pay if your credit card balance is zero?
Quick insights
- Typically, you won't need to pay any interest charges when you have a balance of zero.
- If you have a zero balance because you never use the credit card, you may still need to pay certain fees.
- The credit card issuer may lower your credit limit or close the account if it's inactive for an extended period of time.
Cardmembers may breathe a sigh of relief when they see a zero balance on their credit card account. In most cases, a zero balance means you won't need to pay the credit card issuer that month. However, if you have a zero balance because you never use the credit card, there are a few practices you may want to follow to keep the account active.
In the article, we'll unpack how a zero balance may impact your credit card account.
Understanding zero balance on a credit card
If you've paid off your monthly balance in full or simply never use your credit card, you may have a zero balance. A zero balance typically means you have no outstanding balance on the card.
In many cases, that means you don't need to make a payment, and you won't incur any late fees or interest charges. Reading your credit card agreement can help you avoid any fees that may apply to your credit card.
Potential fees unrelated to a credit card balance
If you have a zero balance because you never use your credit card, you may be wondering if you still need to pay any fees. Some credit cards have an annual fee, and in most cases, you'll need to pay this fee regardless of whether you use the card to make purchases.
Wondering about inactivity or dormancy fees? Some credit cards used to charge this fee when a card was inactive for an extended period of time, but these fees were eliminated in 2010 by an amendment to the Truth in Lending Act.
How a zero balance may impact your credit score
You may have heard that it benefits your credit score to carry a small balance from month to month. There's no evidence to support this financial advice. According to the Consumer Financial Protection Bureau (CFPB), paying off your credit card balance in full every month is one factor that could potentially help improve your credit score.
The balance on your credit card may impact your credit utilization ratio, which is one of several considerations credit reporting agencies use to assess your credit score. For credit cards, the credit utilization ratio is calculated based on the balance you owe compared to your available credit on your accounts.
If you consistently pay your balance in full, this could be a step toward raising your credit score. But keep in mind that multiple factors impact your score.
Of course, you may not know when your credit score will be determined each month. It's possible your credit utilization ratio may be assessed before you've paid your balance in full. For this reason, some cardmembers may prefer to pay off the balance after each purchase, but this may not be a practical choice for everyone.
How a zero balance impacts a credit card account
If you have a zero balance because you never make any charges to your credit card, you may be wondering how this impacts your account. It's possible the credit card issuer may decrease your credit limit or close your account due to inactivity.
There's no industry standard regarding how long issuers wait before closing an account. Check with your card issuer for specific details.
A closed account could have a negative impact on your credit score. It may:
- Increase your credit utilization ratio
- Reduce the length of your credit history
- Affect your credit mix
If you want to avoid a closed account, you may consider making a small purchase every few months or using the card for a recurring monthly payment.
Additionally, cardmembers may continue to monitor an inactive account to avoid any unauthorized charges.
In summary
When you have a zero balance on a credit card, that usually means you won't need to make a payment that month. Sometimes cardmembers have a zero balance because they no longer use the credit card. There are steps cardmembers can take to help keep the account open and potentially avoid any negative impact on their credit utilization ratio.
