what happens after you pay off a credit card

What Happens After You Pay Off a Credit Card

By Michael Peterson
In December 28, 2019

There’s nothing quite like making your final credit card payment. After months – or maybe even years – of living with the stress and expense of high-interest credit card debt, getting to that zero balance is truly something to celebrate. 

Paying off credit card debt feels amazing. But not only that, it also frees you up to pursue other goals, make other plans, and do more with your hard-earned money. In this blog, we’re sharing some of the awesome things that you can look forward to once you’ve finally kicked your credit card debt to the curb.

1. You can stress less.

We probably don’t have to tell you that debt is crazy-stressful. And paying it off feels, well, awesome. You’ll spend less time worrying about money, and you won’t have to fret about collection calls, late fees, or interest charges. You might even find that you feel happier and sleep better once you’re out of debt. 

2. You can save money.

When you carry a credit card balance from month to month, your lender charges you interest, a fee that is based on a percent of your outstanding balance. Depending on the interest rate and amount you owe, you could be racking up $100+ per month in extra debt. A zero balance means zero fees – and more money in your pocket. 

3. You can start to tackle other debts.

If you’re like most folks, you probably have more than one source of debt. Without that high-interest credit card balance hanging over your head, you can finally make a dent in your student loans or whittle down your car note. 

4. You can pay off your mortgage.

Your home is an investment, and most people don’t have the cash to buy a home outright. Your house payments are as close as you can get to “good” debt. That said, your mortgage is still debt – and the closer you are to paying it off, the better. Now that you’re not paying your credit card lenders, consider paying a little extra on your mortgage. 

5. You can save up for a down payment on a home.

Debt can make it nearly impossible to save for longer-term goals. For many folks struggling to pay down high-interest credit card debt, home ownership can seem out of reach. If you dream of owning a place of your own, start setting funds aside for a down payment. 

save up for a downpayment on your home

6. You can bulk up your emergency fund. 

Most finance experts recommend setting aside three to six months’ worth of living expenses as a safeguard against the unknown, from an unexpected illness or job loss to a high-dollar home or car repair that can’t be postponed. 

7. Your credit score will go up.

One of the most important contributors to your credit score is your ratio of available credit to credit used. In general, the more unused credit you have, the higher your credit score will be. This makes sense if you think about it: A person with a $15,000 credit line and a $0 balance looks a lot more responsible and credit-worthy than a person with a credit $15,000 credit line and a $14,500 balance. 

8. You can learn to use credit responsibly.

There’s nothing wrong with credit cards. After all, credit cards typically provide better fraud protection than, say, debit cards do. And many credit cards offer perks – like cash back or travel rewards – that can work to your advantage. Now that you’ve bounced back from your debt problems, make sure you feel confident in your ability to use credit as part of your budget/money management strategy. Avoid overspending, don’t treat your cards like cash, and pay your balance in full every month.

Ready to put yourself on the path to debt payoff? Need advice about dealing with high interest credit card debt? Contact the friendly folks at DebtGuru.com today. We’re here to help!

Mike is the author of “Reality Millionaire: Proven Tips to Retire Rich” and he has been published in a variety of local and national publications including Entrepreneur Magazine, Deseret Morning News, LDS Living Magazine, and Physicians Money Digest. He holds a B.S. in business administration from the University of Phoenix.

Click "More" for important American Credit Foundation client transition information