Your Credit Card Has Zero Balance: Now What?

Paying off debt and getting your credit card down to a zero balance can be a huge feat. But if you’re not careful, it can be too easy for you to get right back into the same predicament.

Set a New Goal

If you don’t have one already, setting up an emergency fund should be your first financial goal, Liz Davidson, founder and CEO of Financial Finesse, says. In her experience working with clients, the people who have saved enough money to cover three to six months of expenses are less likely to end up in debt again. “The biggest things that trigger us to go back into debt are those unexpected expenses,” she says. “An emergency fund is an automatic failsafe.”

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Once your emergency fund is squared away, you can look to long-term goals like retirement. Take full advantage of your employer’s matching 401(k) contributions or fully fund a health savings account if you have the option. (A health saving account, or HSA, unlike a flexible spending account, carries over each year and can be used in retirement. “More often than not, we are too conservative and under-fund” our HSAs, Davidson says.)

Find Your Triggers

Once you’ve gotten your credit cards down to a zero balance, ask yourself how you got into debt in the first place. How do you approach your finances? How do people and experiences influence your attitude about money? For instance, do you give in to your friends’ pressure to spend on expensive dinners, trips or shopping sprees, or do you hit the mall whenever you’re bored or feeling down? Identifying these patterns and ways of thinking and then taking steps to change your behavior will help keep you out of debt.

If your love of shopping is more about finding the perfect pair of shoes and less about owning something new, perhaps offering to help a friend to shop for that job interview or upcoming wedding would give you the same sense of joy — without the expense.

Isolating your triggers might require an outside opinion, and working with a coach or a counselor can help change negative financial behaviors, says Davidson. Finding a financial coach is cheaper and easier than it used to be, and some workplaces now offer financial education programs, she says. If your company doesn’t offer these services, the National Foundation for Credit Counseling can help connect you with a credit counselor. If you can’t afford a counselor, Davidson recommends teaming with a friend or family member and holding each other accountable for your spending each month.

Track Your Expenses

Keeping track of your spending patterns will help you stay out of debt, says Kevin Gallegos, credit and debt expert and vice president of Phoenix operations at Freedom Financial Network. Apps like You Need A Budget (YNAB) and GoodBudget can help you do this without the hassle.

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Once you’ve tracked your spending for a few months, Gallegos recommends taking a hard look at where you can cut back. “Most people are surprised to find how much they spend each day on small items,” he says.

Don’t Close Those Zero Balance Accounts

While it might be tempting to close your credit card accounts once you’ve gotten them down to a zero balance, experts agree that it’s not a good idea. “The longer you hold a card, the more valuable it is in your credit card score determination,” Gallegos says.

If you’re trying to curb impulse spending, then make your credit cards less accessible by putting them in a safe, giving them to someone you trust or placing them in a bowl of water and literally freezing them. “The time it takes to thaw out your credit card may deter your impulse spending,” Gallegos says.

Otherwise, don’t be afraid to use your cards. Credit agencies rely on past payment history to gauge how borrowers will do in the future, Gallegos says. Try to charge just a few small purchases each month, he says, and pay your balance in full and on time. One way to do this is to budget how much you will charge each month and set up autopay to pay off your balance.

Check In on Your Credit

Even if you have autopay set to pay your entire balance, Matthew Coan, founder of Casavvy.com says, you should look at your statement each month to make sure there aren’t any mistakes.

Don’t forget to check your credit score, too, especially while you’re still paying off debt, says Gallegos. Federal law mandates that you have access to a free credit report from each of the three national reporting agencies (Experian, Equifax and TransUnion) once a year.

If you see any errors, follow the directions on the agency’s website to report them. Under the terms of the Fair Credit Reporting Act, the credit bureau must investigate any disputed items and remove them from the credit report if they cannot be verified, Gallegos says.