more articles

Avoiding Minimum Payments- Keep Yourself Out of Trouble

You signed up for that shiny new credit card, and things were great. Money had been tight, but all of a sudden, skies looked a bit brighter. You swiped it at the mall. You even paid your phone bill without depleting your checking account. There's just one tiny problem. The bill has just come in, and you didn't realize it would be quite so steep. There is a tiny ray of hope, however. Your minimum payment is only a fraction of that huge figure. The best option if just to pay the bare minimum and worry about the rest later, right?

For those people new to the idea of credit card debt, the “minimum payment” is the amount that you are required to pay every month to avoid being late on payments. If you don't pay the minimum amount before your due date, your account will become delinquent, and you can be reported to the credit bureau.

Although your minimum payment is usually about 2% of your balance, it isn't wise to simply make this payment. Finance charges can become huge, causing your bill to grow and multiply. If you only make your minimum payment each month, it is virtually impossible to make a dent in your balance.

Since finance charges accrue, it's best to pay your balance in full each month. Your minimum payment often does little more than pay a portion of your finance charges each month. This explains why people make their minimum payments month after month and see no change in their balances.

When it comes to credit cards, consumers need to realize that credit cards should be treated no differently than cash. Never purchase more than you can afford. The bills will come back to haunt you all too soon. Paying your balance in full each month will save you lots of money in the long run.

Share This Article

| | | | |