When you start with a credit card, one of the first things you need to understand is the importance of the minimum payment.
Your credit card terms require you to pay at least the minimum payment on the due date each month. This payment is the lowest amount you can pay on your credit card to prevent fines. Minimum payments are usually calculated as a percentage of the outstanding balance plus any costs that have been added to your balance. That means the higher your credit card balance, the higher your minimum payment.
minimum payment for your credit card is printed on the front of your account statement. Or, if you check your balance online, you will find the minimum due when you log into your account.
Making Your Minimum Payment
The minimum payment must be paid by the cutoff time on the due date. For most credit cards, the cutoff time for your minimum payment is 5:00 PM Some credit card issuers extend the cutoff time later in the day. Contact your credit card company to find the exact cutoff time for your minimum payment.
Your credit card company will give you a few options for making your minimum payment by email, online or other over the phone. If you mail your payment, you can send a check or money order. If you make a payment online, you will be able to enter your bank account and routing number to make an electronic payment. You cannot use another credit or debit card to meet your minimum payment. Make sure you give yourself enough time to make your payment so that your credit card company receives it on time.
What Happens If You Miss Your Minimum Payment
If you miss your monthly minimum payment or you pay less than the minimum, your credit card company may charge you a late payment. Missing the minimum payment can also lose a promotional interest that you have on your balance. After you miss two minimal payments in a row, your credit card company can increase your interest rate to the penalty rate.
After your minimum payment is more than 30 days late, the credit card company will report the late payment to the credit bureaus. This late payment will go on your credit report and continue for seven years. Your credit score can also be affected, especially in the first few months after the late payment is added.
Previous missed payments will increase the current minimum payment due. Not only will you be asked to make the current and missed minimum payments, a late payment will also add the amount that you have to pay to get your account back into good standing. Because the minimum payment increases with every missed payment, it becomes harder and harder to catch up on your payments.
Paying more than the minimum
You can pay more than the minimum. In fact, it is best to pay your balance in full to avoid paying interest on your credit card balance and stay out of credit card debts. When you make the minimum payment, your credit card balance only goes through a small amount. The majority of your minimum payment is applied to the interest on your account.
Paying only the minimum on your credit card is the most expensive way to pay from your credit card balance. It takes the longest and you will find more interest by the time you pay your balance in full. In fact, if you continue to make the minimum payment purchases every month, your balance will grow instead of shrinking. This is one of the fastest ways to get yourself in debt.