Why You Need to Pay More than the Minimum Due ( and How to Manage That)

Written By Mary Beth Eastman
Last updated March 11, 2019

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March 11, 2019

Simple. Thrifty. Living.


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Revolving credit can be a powerful tool to help build wealth. It lets you get lower prices on certain items by paying at the time of purchase. And the best credit card perks can even finance things like an entire annual vacation. However, when you rack up a credit card bill and only make the minimum payment, revolving credit can work against you. Here are a few reasons to pay as much as you can every month.

Even the lowest rate credit card carries an interest rate that is far higher than you would expect on a loan. That means for every dollar you take on credit, you may pay at least $0.13 each year. On a loan, you pay the agreed upon interest as part of the payments, and when you have made the final payment, the loan is finished. With revolving credit, you pay the interest each year on your balance. That can add up quickly.

The other downside of minimum payments is how long it will take to pay off your balance. Even if you make no new charges, at the minimum payment it might take as much as 30 years or more to pay off a moderate balance of $2,000.

To get out from under the cost of credit card balances, you need to pay those cards off as quickly as possible. Here are a few tips to help.

1. Pay Frequently

If you can only afford to make the minimum payment, consider making your payments weekly instead of monthly. While you won’t pay any more out of pocket, the more frequent payments will help reduce your average daily balance, which will ultimately reduce the amount of interest you pay.

2. Budget for a Bigger Payment

If you have a little wiggle room in your budget, throw it at your credit cards. If you make a couple of extra payments each year, it can really help to drop those balances. Even just an extra $20 per month can add up to significant savings.

If you try these tips and they still aren’t enough to unbury you from beneath a mountain of debt, it’s possible that a more serious solution like debt relief could be a better option for you. Before you choose a debt relief company, definitely do your research on the best debt relief companies. You don’t want to take any chances with your finances.

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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