There are pros and cons to both choices, as each can affect your overall finances and credit score.

Advantages of paying the entire balance at once include not paying interest fees, not maxing out on your credit card’s limit and the decrease of your credit utilization ratio. The credit utilization ratio is how much you owe compared to your credit limit. The lower the ratio, the better your credit score.

Unfortunately, paying off your entire balance means not having money for other purchases. If you are low on cash or have any major expenses coming up, paying your entire balance might not be the best idea.

What are the advantages of paying only the minimum credit card balance? It allows you to focus on paying your current finances and bills. If you’re short on cash, you only have to pay a small amount of the balance.

When you don’t pay off your total credit card bill, interest costs as high as 25% or more (depending on your credit card’s policy) will be added to your balance. This will likely take more time to repay depending on the minimum amount and the total balance.

As noted, there are multiple advantages and disadvantages towards paying only the minimum or the entirety of a credit card balance. In the end, it is your job to decide which option is more ideal for you, given your situation at the time.

Written by Solomon Lowenstein, Financial Wellness for College Students Peer Educator, University of Illinois Extension, Fall 2016. Reviewed by Kathy Sweedler, University of Illinois Extension.

For more financial education content, follow us on Instagram, Facebook, or Twitter.