What You Need To Know About Minimum Monthly Payments

Written By Mary Beth Eastman
Last updated December 13, 2018

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October 26, 2018

Simple. Thrifty. Living.


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More people are in credit card debt than ever before. In fact, over 50% of the American population is in credit card debt of at least $4,000 and more. Similarly, a growing number of Americans are defaulting on their credit cards due to overwhelming bills and lack of finances and support. With this in mind, it’s simply not enough to pay your minimum monthly payments and move on. In fact, most minimum payments only go towards finance charges and interest fees — not your balance.

Credit card issuers calculate minimum payments based on how much you owe. However, the typical minimum payment is a small calculated amount of your monthly balance. However, this may not reflect new purchases per billing cycle –and your billing cycle has to end in order for new purchases to post to your account. If you owe over $1,000, your minimum will be calculated on your balance.

If you cannot repay your balance in full, you must make minimum payments each month – and on time. This avoids credit problems and keeps your account current, and prevents it from going into default and collections. Similarly, any missed payments must be made at once, which helps avoid additional finance, interest and penalty fees.

The ultimate goal of any card holder is to pay his or her balance in full. This positively affects your credit rating and history, and many even result in more card offers of credit at higher limits. However, if you are only paying the minimum each month, it can take you years to completely pay back what you owe. While you can speak to your card issues about lowering API, interest and other rates – they may or may not facilitate this request. And even if they do, you are still responsible for paying back the balance in full. With this in mind, here are some ways to make the most of your monthly minimum payments:

  • To reduce your overall balance, add a dollar or two to your monthly minimum payment. This will greatly reduce what you owe, while securing more payments towards the balance and not just the interest and finance charges.
  • If you are experiencing financial difficulties, you may be eligible for a lower monthly payment. However, this will increase the amount you will owe over time.
  • Consider transferring your balance to zero APR cards. These are great for large balances, and you will save more money per month to facilitate monthly minimums or larger payments towards your balance.

Minimum payments keep your account active, but essential go towards the bare minimum of your overall balance. This is something to be aware of when paying off your credit card outstanding balances.

If you are stuck in a cycle of only paying the monthly minimum, and your credit score is taking a hit because of it, you can look into both debt relief companies and credit repair services to help you out.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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