what is a zero balance card 
the term zero balance card refers to a credit card with no outstanding balance of debt credit card users can maintain zero balance cards either by paying off their full balances at the end of each billing cycle or by simply not using their cards in either case maintaining zero balance cards can benefit credit card users by helping to improve their credit score understanding zero balance cardsmany credit card users rely on their credit cards to finance everyday transactions such as groceries gasoline or various discretionary purchases according to a survey by clever roughly 53 of borrowers pay off their full outstanding balances each month 1this method of using credit cards can be very beneficial to the user since it allows them to enjoy benefits such as cash back incentives and rewards programs without actually incurring any interest on the debts since credit card companies typically calculate their customers outstanding debts at the end of each month these customers credit cards would show an outstanding balance of zero making them zero balance cards but what about the roughly 47 of customers who do not pay off their credit card balances each month 1 these credit card users will show a steady balance of outstanding debt from one month to the next the size of which will be recorded on their credit report if the outstanding balance becomes too large relative to their credit limit then this may have a negative effect on the borrower s credit score on the other hand maintaining a relatively low balance of debt relative to their credit limit can help improve a borrower s credit score if you re having trouble maintaining an outstanding balance of zero on your current card due to a high interest rate you might be worth considering a balance transfer to a better card real world example of a zero balance cardin the past some credit card companies would charge their customers inactivity fees if they failed to make regular purchases using their credit cards this practice was made illegal through the passage of the credit card act in 2009 although credit card companies are still permitted to charge annual fees on their cards 2assuming a zero balance card does not have an annual fee keeping the account open can benefit the cardholder by helping to decrease their overall level of credit utilization for example suppose you are the holder of three credit cards one is a zero balance card with a credit limit of 5 000 the second has a 1 000 balance with a credit limit of 4 000 and the third has a 2 000 balance with a credit limit of 3 000 in total your combined credit limit is 12 000 and your combined balance is 3 000 giving you an overall utilization ratio of 25 from this example we can plainly see that keeping the zero balance card is helpful in reducing your overall ratio after all if you closed the card your combined balance would still be 3 000 but your credit limit would drop to only 7 000 as a result your new utilization ratio would rise to over 40 