Making that minimum payment on your credit score is designed for when you hit rock bottom. You essentially just pay the minimum payment so you don’t get penalized on interest rates or anything else. Your credit card company requires you to pay that minimum payment each month to avoid any penalties. Your minimum payment is typically calculated based upon 1& to 3% of what you owe on your credit card. So think about it like this, the more you owe on your credit card the more your minimum payment would be.

If you have a high credit card balance, and you don’t want to cough out the amount of money to pay for it making a minimum payment may seem very tempting. The only downside to that is if you’re an avid user of your credit card, your credit card that can snowball and catch you off-guard. Remember there are many different variables that account for your credit score, and your payment history is one of the biggest. So we’re going to going to as much detail as we can explain the importance of you making your minimum payment.

Making Your Minimum Payment

The minimum payment that you need to make as a percentage of the total amount due on your credit card. You need to pay your minimum payment on the due date of your credit card. All of this can be done online but you need to be mindful of the fact that on the due date of the minimum payment, there is a cut-off time and most times it is around 5 PM.

If you’re only looking to make the minimum payment on your credit card each month, keep in mind that it can cost you more in the long run. The reason we say this is that you may be clearing the minimum payment, but your credit card balance accumulate over time where could actually become a large long time that you won’t be able to pay. You have to factor in any interest payments of accumulated, and the percentage of your minimum payment each month. Doing simple math you can be spending hundreds of dollars each month trying to pay off your credit card and paying thousands of dollars in interest.

Missing Your Minimum

If you miss the minimum payment on your credit card you should be aware that your credit card issuer May charge you a late fee. And if you fail to make the minimum payment, or pay off the credit card balance after two consecutive billing Cycles your credit card picture me actually increase your interest rate which in turn can penalize you in the long run.

Missing the minimum payment may not seem like a big deal, but you have to remember that your credit issuer May report to the credit bureaus is letting them know that you haven’t been keeping up to date with your credit payments. So make sure that you’re on top of your game when you’re paying your minimum payments simply because the accumulation of it over time can be much harder to keep up with.

Paying the Minimum Affect Your Credit?

If you keep me up-to-date with the minimum payments on your credit card, in the short-term it does affect your credit score positively. Although in the long term it does have a negative effect. So for example, if you’re maintaining to pay your minimum balance each month on time it’ll reflect positively due to the fact you’re making sure your payment history is on time. But in the long run, if you’re only maintaining your minimum payment your credit card balance will ultimately grow. And as this happens it negatively affects your credit score. The reason it affects your credit score is based on your credit utilization. The rule of thumb for Credit utilization is making sure that you’re anywhere between 30% and below. Is your credit card bill gross, you’ll eventually approach that 30% credit utilization Mark and if it does surpass that it negatively affects your credit score.

Paying More than the Minimum

Paying more than the minimum on your credit card balance is a great way to alleviate any excess credit that you owe over time. It avoids you from paying it off in lump sum and it allows you to create a structured payment plan so you can stay out of that. just make sure to pay more in proportion to your expenses each month, so that way you’re not in a position where your credit utilization is being suffered due to the fact your credit card bill is increasing more than the amount you’re paying each month.

We understand the concept of credit cards being free money, and it could be tempting to use it all and just paying the minimum balance each month. Although in a perfect world it may seem like the best option, the reality is it could be the worst. Only pay the minimum balance to put you in loads of that where you can be suffering later on when you’re ready to make leaps into those new financial milestones. Have proper discipline of, and make sure that your pay as much as your credit card off each month as you can.