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Posted by Tiffany Gaskin

What Happens If I Make Minimum Payments On My Credit Card?

What Happens If I Make Minimum Payments On My Credit Card?

Paying a minimal amount on your credit card bill is easy to follow but can become a stumbling block in the future. A credit card bill gives you three chances on how to pay your bill:

  • the minimum payment, 

  • the current payment, and 

  • the statement’s balance. 

The minimum payment is the least amount to be paid each month to keep the card running. The current balance deals with your recent bills and charges, while the statement balance is the total amount of bills on your credit card. 

Experts suggest you pay the statement balance in full monthly if possible. However, in cases where you cannot pay the statement balance, the minimum payment must remain current to avoid charges or fees due to late payment. This article entails what happens if you make minimum payments on my credit card.

What is the minimum payment on a credit card?

A minimum payment is a minimum monthly amount to maintain an accounting standard. Ensuring you pay the minimal amount each billing season will keep you away from extra late charges, derogatory marks, or penalty APR. In addition, paying a minimal amount each month is an excellent way to have a good credit score history. Your credit card issuer charges interest on any outstanding credit card balance after making the payment.


Paying your debt will take a longer time

The minimum required payment is usually $25 or 1 to 2 percent of the balance every month, plus extra charges, and interest. As earlier stated, making the minimum payment is a way to avoid late charges, but your progress on clearing your bill will be slow. For instance, if you remit twice the minimum amount for a month, you have already reduced your repayment period by half. You can check your credit card Minimum Payment Warning, a table showing the total debt and the years required for repayment if you use a monthly minimum payment. But using the minimal amount will only shorten the period leading to more payment.

You’ll accumulate huge interest charges

Only people with the 0% APR card can escape the interest charges. Generally, the interest on credit card bills increases alongside your balance. Minimal payment will only settle last month’s claim, and you’ll fall behind if you keep purchasing with the card. The minimum payment will only maintain your speed on the treadmill. You’ll keep paying and never finish setting the debt.

If you wish to know the interest charge on your credit card, multiply your average balance by the answer you get from dividing your annual percentage by 12. That is, if you have a 21% APR card, the interest rate on such a card is usually 1.75% or 21% divided by 12, then multiplied by the balance on the card. So, for example, if your credit is $10,000, your debt could amount to $175 extra interest for the subsequent month if you pay the minimum amount. But you can reduce next month’s debt by paying against the balance.

Your credit scores could suffer

Your credit utilization ratio reduces according to your credit balance. Your credit card utilization ratio greatly impacts your credit score, and a high balance can damage it. The effect reduces your eligibility for loans and credit card terms. It can further affect your qualification for a job or renting an apartment, as employers usually review the credit card before accepting applicants. If you have high credit card debt, focus on reducing it, or if you’re hung up on cash, ensure you pay your credit card debt as soon as you get your monthly check. Or if you can apply for an extra shift at work to make extra cash to cover the debt. Experts advise individuals to use less than 30% of their credit limit to remain on the err side. 



Tiffany Gaskin
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