When you start using credit cards, one of the first things you should understand is the importance of the minimum payment.
Your credit card terms require you to pay at least the minimum amount at maturity each month. This payment is the lowest amount you can pay on your credit card to avoid penalties. Minimum payments are usually calculated as a percentage of the outstanding amount plus fees that have been added to the balance. That means the higher your credit card balance, the higher your minimum payment will be.
Your minimum payment credit card is printed on the front of your statement. Or, if you check your account balance online, you will see the minimum due when you log into your account.
Making Your Minimum Payment
The minimum payment must be paid by the cut-off time on the due date. For most credit cards, the limit for your minimum payment is 5:00 am. Some credit card companies extend the cutoff time later in the day. Check with your credit card issuer to find the exact time limit for your minimum payment.
Your credit card issuer will give you a few options to make your minimum payment by mail, online or any other phone. When you send your payment, you can send a check or money order. When making a payment online, you can enter your checking account and routing number to make an electronic payment. You cannot use another credit or debit card to make your minimum payment. Make sure you give yourself enough time to make your payment so your credit card issuer gets it on time.
What if you miss your minimum payment
If you miss your minimum monthly payment or you pay less than the minimum, your credit card company may charge you a late fee. the minimum payment may also be missing will lose any promotional interest rate that you have on your scales. After you miss two minimum payments in a row, your credit card issuer can raise 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 will remain for seven years. Your credit score could also be affected, especially in the first few months after the late payment is added.
Missed payments will increase the current minimum payment due. Not only will the current and missed minimum payments be required, a late fee will also be added to the amount you have to pay to get your account back in good standing. As the minimum payment increases with every missed payment, it becomes increasingly difficult to catch up on your payments.
Pay more than the minimum
You can pay more than the minimum. In fact, it is best to pay the full balance on your credit card balance to avoid paying interest and staying out of credit card debt. When you make the minimum payment, your credit card balance only goes down by a small amount. The majority of the minimum amount will be credited to the interest on your account.
Paying the minimum on your credit card is the most expensive way to pay off your credit card balance. It takes the longest and you will be more interested by the time you pay your balance back. In fact, if you continue to make the minimum payment and continue to make purchases every month, the balance will grow instead of shrinking. This is one of the fastest ways to get into debt.