If You Are In Credit On Your Credit Card Do You Earn Interest?

You might wonder with all the money that credit card companies make on your unpaid balances whether your agreement with the credit card company works both ways. That is, if you have credit on your credit card, could you earn interest? Sounds promising but sorry, you do not earn interest from your credit card company when you have credit left on your credit card.

In Credit

By “In Credit,” we mean, if you have credit that you could still spend on a credit card account. With a regular credit card, this does not mean that you actually have money socked away for you to use. This is a credit account, not a savings account.

Earning Interest

When you have money sitting in a bank, you will usually earn some amount of interest from the bank. If you put the money into savings that are less liquid, like a CD, you may be able to earn even more interest. Compound interest is what makes millionaires out of modest savers if they start soon enough and put money away regularly.

Cash Back Rewards

Just because you cannot earn interest with a credit card does not mean that you cannot make money with your credit card. Some people go to great extremes to maximize their cash back rewards from credit card use.

Improving Your Credit Score

One good thing about having credit available on your credit card is that it will improve your credit score. This is because one of the factors in your credit score is you debt to available credit ratio. Do not open up a ton of new credit cards in an attempt to increase your credit limit. This can backfire and reduce your credit score.

Paying Interest

While you do not get interest from the credit card company because you have credit available on your credit card, look at what happens when you have an outstanding balance on your credit card. The compounding interest can keep adding to your bottom line such that it could take you years to pay off what you owe if you only stick to the minimum payments.

Getting a Debit Card

Here is a way that you can get interest when you have “credit” on your credit card. This can work is you get a credit debit card which is tied to a checking or savings account. This way, any money you keep in your account will help you accrue interest that compounds.

About the Author:
Peter Carville is a freelance article writer who writes for Financial Facts about the current financial news and the credit crunch.
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