Paying only the Minimum Credit Card Balance


For many of us, opening a credit card is our first chance to start building a credit history. We believe that obtaining a credit card and using it responsibly will give us a head start on a long life of positive financial habits. Millions of credit card users are fulfilling their goal of swiping their card and paying it off each month. However, there are others who are struggling to get the money together to pay of the minimum balance. We all have a tight month every once in awhile, and paying the total balance seem so optional, compared to other bills. But what really happens when you pay the minimum balance?


How The Minimum Balance Works: Interest

As you are probably aware, you can swipe your credit card as you please, as long as you do not exceed the credit card limit. As with all debt instruments, the credit issuer gives you the option to pay the bill in its entirety or to pay a small amount to deal with at a later time. Interest will be added to the remainder, which in return will increase the price of your purchases. What is interest exactly? It is what the credit card issuer chargers their cardholders to extend the loan past the finance-free grace period. The lower your interest rate or annual percentage rate (APR), the less debt you will roll over month to month.

How Does The Minimum Balance Affect Me

Aside from the obvious, of having to pay more for your purchases due to the interest rate, there are other negative consequences to paying only the minimum balance.

  • Your Credit Score Will Fall: Making a minimum payment on your credit card is a quick solution for when you are short on cash. But the debt that you rack up over the course of a few months of minimum payments, will really mess up your credit score. 30% of your credit score is determined by how much debt you carry. Accruing charges on your credit card and failing to pay them off is like putting a dent in your credit score every month. Over time, this will add up to a lot of damage.
  • Your Monthly Bills Will Pile Up: As a result of the damage you will be doing to you credit score with minimum payments, other monthly bills will expensive to. These include obligations such as insurance, rent, and loans. Lenders and insurance companies tend to charge people with poor credit more.
  • Credit Card Costs Will Skyrocket: One of the most obvious impacts of minimum payments, is the unpaid balance building up. The average interest rate on a credit card is 15%, it will become very expensive to fail to pay off your balance in full. Additionally a lot of credit card companies charge a fee for exceeding your credit limit. When you are only paying off the minimum balance, this is quite easy to do.

What Should You Do?

Keep track of what you are spending. Make sure that you do not swipe for more than you can comfortably pay off at the end of each month. Credit cards are a great tool for building good credit. However, don’t give in to the temptation to rely on them to cover the balance of a purchase you can not afford. Just because you can spend the amount of your credit limit, does not mean that you should. Remember that your credit card activity is being watched. The credit card company will send the date of your opening to consumer credit bureaus, and every month report your activity. If you charge regularly, keep the balance at $0 and make all payments by the due date.

If you have high credit card balances, deragatory remarks, or even late payments and you just can’t seem to get yourself together enough to increase your overall credit score, there is help.

Nationwide Credit Clearing
2336 N. Damen
First Floor
Chicago, IL 60647

Phone: 773-862-7700
Toll Free: 877-334-3296
Fax: 773-862-7703

Your Credit Score


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