What's Happening
1 hour ago

Is Spirit Airlines Worth the Gamble Amid Bankruptcy Fears?

foolfool.com
1 hour ago

Is Nu Holdings Stock a Buy Before Nov. 13?

foolfool.com
1 hour ago

SoFi Stock Sinks Despite Upbeat Outlook. Should Investors Buy the Dip?

foolfool.com
2 hours ago

3 No-Brainer Warren Buffett Stocks to Buy Right Now

foolfool.com
2 hours ago

Is UPS Stock a Buy?

foolfool.com
2 hours ago

Should You Buy Nvidia Stock Before Nov. 20? The Evidence Is Piling Up, and Here's What It Suggests.

foolfool.com
2 hours ago

Don't Forget About These 2 Required Minimum Distribution (RMD) Rule Changes for 2024

foolfool.com
2 hours ago

Should You Ignore Chevron and Buy This Magnificent High-Yield Energy Stock Instead?

foolfool.com
2 hours ago

1 Wall Street Analyst Thinks The Trade Desk Stock Is Going to $150. Is It a Buy?

foolfool.com
3 hours ago

1 Little-Known Social Security Rule Could Boost Your Monthly Check Up to 26.7%, Even if You're Already Collecting Benefits

foolfool.com
3 hours ago

1 Little-Known Social Security Rule Could Boost Your Monthly Check Up to 26.7%, Even if You’re Already Collecting Benefits

retireretire.ly
3 hours ago

Trump Vs. Harris: A Nail-Biting Pre-Election Showdown

benzingabenzinga.com
3 hours ago

Kim Jong Un's Sister: Ukraine And South Korea Are 'Bad Dogs' Bred By US

benzingabenzinga.com
3 hours ago

Trump's Provocative Rhetoric Fuels Gender Dynamics

benzingabenzinga.com
4 hours ago

Is Nvidia a Buy?

foolfool.com
4 hours ago

Don't Ever Use This Word Around Mark Cuban: 'You Sound Stupid ... Because You're Trying To Sound Smart'

benzingabenzinga.com
4 hours ago

Will ASML Be a Trillion-Dollar Stock by 2030?

foolfool.com
4 hours ago

Elon Musk's Mother Does Harris Impression During TV Appearance

benzingabenzinga.com
4 hours ago

Where Will C3.ai Stock Be in 5 Years?

foolfool.com
5 hours ago

Scaramucci Says Trump 'Should Be Taken Into Custody' Over Alleged Threat Against Liz Cheney

benzingabenzinga.com

3 Lesser-Known Benefits of Paying Off Your Credit Cards

A man looking stressed while going through his bills next to his open laptop.

Image source: Getty Images

The problem with carrying a credit card balance is that the longer you do, the more money you waste on interest. So the sooner you pay off your credit cards, the more money you can save.

That’s a pretty obvious benefit of paying off your credit cards as quickly as you can. But here are some less obvious perks that come with shedding credit card debt sooner.

1. You can boost your credit score

Your credit score is calculated based on multiple factors. These include whether you pay your debts on time and how long you’ve had loans in your name or credit card accounts open.

But one major factor that goes into calculating your credit score is your credit utilization ratio. That ratio measures the amount of revolving credit you’re using at once. And the lower that ratio is, the more your credit score can improve.

It makes sense to pay off your credit cards for this reason alone. If you’re able to bring your balances down, it’ll result in a lower credit utilization ratio. That, in turn, could give your credit score a nice lift, making it easier to get approved for new loans or credit cards when you apply. Also, the higher your credit score, the lower your interest rate is likely to be on your next loan.

2. You can increase your chances of getting approved for a mortgage

Mortgages are large loans, so lenders tend to set pretty strict standards for approving candidates. In addition to a decent credit score (620 is generally the minimum for a conventional home loan), to qualify for a mortgage, you need to have a reasonable debt-to-income ratio, or DTI. This measures the amount of debt you’re on the hook for each month relative to your income.

A DTI of 36% or less (meaning, you spend 36% of your income or less on debts) is usually ideal to qualify for a home loan through the best mortgage lenders. But many will accept a DTI of up to 43%.

Your credit card balances count toward your DTI. By reducing them, you also reduce your DTI, making it more likely that you’ll be approved to borrow for a home.

3. You can start investing

The less money you have to pay your credit card issuers in the form of interest, the more money you’ll have available to invest. So that’s another reason to shed your credit card debt sooner.

Say you’re able to pay off your balances in a year rather than three years, thereby saving your $2,000 in interest in the process. If you invest that $2,000 at a 10% return (which is in line with the S&P 500’s average performance) over 20 years, you could grow it into almost $13,500.

A good way to pay off credit card debt

Paying off credit card debt isn’t easy. But one tactic to consider is getting a side job temporarily and using your extra earnings to chip away at your balances.

At the same time, though, it pays to consolidate your balances so they’re easier to manage. And consolidating might also leave you with a lower interest rate to pay on your debt overall.

One option for consolidating credit card debt is to do a balance transfer. If you move your debts over to a single credit card with a 0% introductory interest rate, you get a break from racking up interest for a period of time. Click here for a list of the best balance transfer credit cards.

Another option is to take out a personal loan, use the proceeds to pay off your credit cards, and then repay that loan in monthly installments. You may lock in a much lower interest rate on a personal loan than what your credit cards are charging you, especially if you have good credit. Plus, your payments will also be locked in. Click here for a list of the best personal loan lenders.

The obvious upside of paying off your credit cards is not having to spend as much money on interest. But the benefits go way beyond that. So it pays to do what you can to shed your credit card debt as quickly as possible.

Alert: highest cash back card we’ve seen now has 0% intro APR into 2026

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

Related Posts

Retirement accounts like 401(k)s and IRAs offer valuable tax breaks, but they also come with a lot of rules. These rules apply not only to

You might not realize it, but your Social Security check isn’t set in stone once you claim benefits. On top of the annual COLA, which

Image source: The Motley Fool/Upsplash Most credit cards make it expensive to borrow money. On credit cards that are charged interest, the average rate is

Image source: Upsplash/The Motley Fool Mortgage rates are lower today than they were a year ago. Last October, the average 30-year loan rate was over