Dear Clever Credit,
I have a cash back credit card, but I tend to keep a balance on it. My friend and I were talking about our finances, and she got upset with me for keeping a balance on my card! Is it really that bad? I see how much I earn in cash back every month, so it’s no big deal, right?
Signed,
Confused in Cash Back
Dear Confused,
Keeping a monthly balance can definitely seem like no big deal if you you’re still seeing cash back pop up in your account every month. But how much are you actually earning? A balance complicates rewards earning since interest eats away at anything you get back. According to Experian, the average American carried $6,768 in credit card debt in 2025. So let’s say you have a flat-rate cash back card like the Wells Fargo Active Cash® Card, which earns 2% cash back on every purchase. But you have a balance of $6,000.
Even with the card’s lowest ongoing annual percentage rate of 18.49% and paying only the minimum amount due — usually 1% to 4% of your outstanding balance, so let’s go with $180 a month — you would pay nearly $2,500 in interest. And it would take you four years to pay it all off.
This means the rewards you might have earned with your cash back credit card are completely pointless.
[Read: Cash Back Credit Cards]
Let’s say your monthly grocery bill is $500 (which is an annual spend of $6,000). If you put that monthly expense on a cash back credit card that earns 2% cash back, that’s $120 earned at the end of one year. But based on our math above, how much was your interest in that one year? About $620.
Even if you earn the highest cash back amount in the groceries category — let’s say 6% — you still only earn $360 at the end of the year (with an annual spend of $6,000). Which means all the cash back you earned goes right back to your interest.
[Read: Best Balance Transfer Cards]
A rewards credit card only works if you don’t keep a balance on it. Otherwise, every dollar, point and mile you earn could be worth a lot less than you think.
If this is the situation you find yourself in, my advice would be to open a balance transfer credit card. Plenty of them offer a lengthy introductory APR period — some close to two years — allowing you to wipe the slate clean on your cash back credit card.
But do not use your cash back card while you’re paying off that balance. Only once it’s paid in full should you start using your rewards card again. And this time, pay the balance in full every month so you can really earn those cash back rewards.
Highlights
- Personal finance journalist and media spokesperson.
- Bylines in U.S. News & World Report, CreditCards.com, Bankrate and more.
“Treat your credit card like your debit card. Only use it when you know you have the cash to back up your purchase(s), otherwise you could easily fall into debt.”
2026 Money Goal
“My financial goal this year is to build up my emergency fund. I have a high-yield savings account that I deposit monthly into, and I’d like to up my deposits for a bigger financial cushion.”
Experience
Adriana Ocañas is the consumer credit cards analyst for U.S. News & World Report. With more than six years of experience in finance journalism, Ocañas offers advice on all things credit cards. Whether they’re searching for the right card or seeking ways to improve their credit score, consumers can count on her insights to guide them on their credit journey.
Media
Ocañas has been featured in multiple media outlets, including social series and radio. She has appeared on Money Radio, The Female Quotient, iHeartRadio and more.
Most recently, Ocañas presented at CardCon, an annual conference dedicated to credit cards and consumer credit media. She attended as a guest speaker, discussing how credit invisible consumers fall through the cracks and ways financial journalists and institutions could aid them.
Career
Before joining U.S. News, Ocañas served as the lead editor for Money Scoop, a personal finance newsletter by Morning Brew. Her work there reached hundreds of thousands of subscribers on a weekly basis.
Prior to Morning Brew, Ocañas was an editor with Bankrate and CreditCards.com. While there, she co-created To Her Credit, a financial blog dedicated to financial issues that negatively affect women.
Ocañas is passionate about credit education and an advocate for financial literacy. You can visit her online portfolio to learn more about her and read her work.
Life and Education
Ocañas grew up in South Texas, where she graduated from The University of Texas-Rio Grande Valley with a bachelor’s degree in English and psychology. During her time at university, she interned at her college newspaper and magazine publications.
She currently lives in Seattle, where she takes full advantage of the gloomy weather and writes on her balcony with a warm cup of coffee always nearby.
