When you make payments to your accounts each month, do you make only the credit card minimum payment amount, or do you pay more? How you answer that question to yourself, is a critical personal finance decision that affects how much you ultimately pay for your debts and how your credit worthiness is rated.
About Credit Card Minimum Payment
By definition, the minimum payment amount on your credit card account is the smallest monetary total that you must send in to the card processing company to avoid defaulting on your account agreement.
If you do not send in a payment of at least the smallest designated amount each month, you will probably have to pay an additional late fee.
Continued late payments or defaults may also lead to higher interest rates on your account.
Your credit score will probably suffer as well.
So, to stay in good standing, it is critical to send in payments of at least the smallest amount required.
If you are not sure as to how it impacts your credit history and score, you may want to call your credit card company and ask them specific questions in this regard and also how much total interest you would pay by making only the smallest required payments each month.
How Much Money Should You Send In
So how much should you pay on your credit card account each month? Should you pay the minimum amount, or more?
The short answer is to send in as much as you can afford each month, but certainly you will want to always pay at least the minimum amount due.
Send in more than the monthly minimum payments to shorten the payback time on credit card debt.
Why is this? Because, when you only send in the lowest amount required each month, you will end up paying a lot more money on the debt than the amount of your original credit card purchases.
At a glance:
- Never make your payments late
- Always pay your total card amount due to avoid paying interest charges
- If you can not pay the whole amount, pay as much as you can to minimize interest charges
Keep in mind, the information presented here is one person’s opinion, and is not to be considered financial advice.
If you are concerned about your personal finances, you may want to discuss your questions with your CPA or other finance professional.
Credit Card Minimum Payment Calculator
Want to calculate how long it would take to pay off your credit cards, when only making the minimum payments each month?
- See the page here to plug and play with numbers, to calculate balance payoff time periods utilizing different payment amounts.