Posted on: Jan. 18, 2017 in Credit, Debt

Credit card companies make money by charging you interest on the money you borrow. They want to get paid, but not too quickly. If you only pay the minimum due, the card issuer stands to make more money than if you pay off the balance in full.


Anyone who has every had a balance on a credit card has likely seen the “Minimum Payment Due” amount listed on their statement. If you have a large balance, or just larger than you can handle, you may be tempted to pay only the minimum. This strategy can keep current on payments and help you avoid late fees, however, it will hurt you in the long run if you routinely only pay this amount.

There are two ways that paying only the minimum can work against you:

  1. Interest will continue to accrue on your unpaid balance. To get a glimpse of how this might affect you, take a look at your statement. There will be a section that tells you how long it will take you to pay off the amount you owe by only paying the minimum payment.
  2. One of the factors used to determine your credit score is your credit utilization. This means the amount of money you borrow compared to your overall limit matters. Strive to use no more than 30% of your limit. If your balance is going up, it’s going to be much harder to hit that 30% mark.

It’s also important to note that if you continue to use the credit card, or any other card for that matter, this situation can worsen.

Paying the minimum is better than paying nothing at all. Avoiding late fees and not defaulting are important. But if you can pay more, anything more, do so. This is the only way you’ll be able to pay down that debt.

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