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Paying Off Credit Card Debt is Great…Until it Isn’t

In “The mistake I made while paying off $15,000 in credit card debt — and how to avoid it,” one consumer outlines how what he thought would be a triumphant moment, turned out to be less so because of what he didn’t know about the way credit works.

The writer explains that in 2021, he paid off $15,000 in credit card debt after nearly a year of working at it. He writes that although he was warned by his mother not to get carried away with credit, he did. What his mother may not have been able to tell him is that having a zero balance on a credit card can also be a problem.

He writes that logically, “I didn’t want to add to my debt while paying it down, so I didn’t use my card until I reached a zero balance. But my bank marked the account “inactive” and terminated my credit line without notice.” After the credit line was terminated, he had less available credit and that altered his debt-to-credit ratio. He became aware of the impact of having less available credit when his credit rating was downgraded to poor.

While you may not know it, the credit cards you choose can impact your credit score for years to come. You may have already been advised not to simply close your oldest line of credit because that can erase years of credit history. You may not have been told that you shouldn’t let a credit card go completely inactive. With some cards, you will need to use the card occasionally to keep it active. Other cards may require more. The article advises: “Don’t use more than 30%. Always use more than 10%. Finding that sweet spot is hard.”

The takeaway is to not let your enthusiasm to get rid of debt come back to haunt you because of insufficient use.