Does Paying in Full Hurt Your Credit Score?

I recently had someone ask me if it hurts their credit when they pay their credit card balance in full every month. "But the credit card companies don't make money, so they penalize you by hurting your credit," this person claimed.

First of all, credit cards DO make money even if you pay your credit card balance in full every month. Not only do credit card companies make money by extending consumers credit they also make money as transaction processors for vendors. So when you use your credit card at a restaurant or retail location that establishment has to pay a certain percentage of that transaction to the credit card company. So even if you pay your balance in full the credit card company is still making money.

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Then there's your credit report. Credit card companies can only pass on the facts to the credit reporting agencies. Simply put, you fit into one of two categories: "Pay as Agreed" or "Doesn't Pay as Agreed." Then there are 24 numbers that describe you as a borrower. Each of these represents the number of months a payment went late during the last 2 years. All 0's means you pay on time. Anything else is not good. There is no column that says,"We don't make money on this borrower." So, essentially, you can't be penalized on your credit score if you are "Pay as Agreed" and don't pay late.

In conclusion, keep paying your credit card bill as you told the credit card companies you would: On Time. Don't worry if you are paying in full because it is not affecting your credit negatively. If fact, you are building good credit and will be rewarded for it. Before too long you will see your credit card company increasing the limits on your credit card and sending you 0% APR offers on some of the best credit cards out there (like my favorite, the Blue from American Express Card). If you're still concerned review your credit report every 6 months to a year to keep an eye on your credit score.