Rohit Chopra, a member of the Federal Trade Commission, once served as the federal government’s student loan watchdog. Now, he’s preparing to take on a bigger role—the federal government’s watchdog [...]
What is a zero balance?
A zero balance is what shows on a credit card customer’s bill when the outstanding balance has been paid and there were no new charges during the billing cycle.
A cardholder can have a zero balance by paying off her balance in full each month, or by not using the card and therefore, never having a balance to pay. Paying off balances in full keeps the cardholder’s overall debt-to-available-credit ratio low, which can help raise the cardholder’s credit score because lenders like consumers who do not use up all their available credit.
A consumer with a zero balance on her credit card statement each month won’t necessarily see a zero balance on her credit report. If she had a balance the day the credit card company updated her trade line with the credit bureaus, that balance will go on her credit report and impact her credit score.
A credit card that is never used might be canceled eventually by the issuer. However, the issuer can’t charge inactivity or dormancy fees, thanks to the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. If the card has an annual fee, the cardholder will be required to pay it, even if he never uses the card.
Zero balance example
Joan spent $2,500 on her credit card during one billing cycle. When she got her monthly billing statement, she paid off the outstanding balance. This gave her a zero balance.
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