As a credit card user, you might have seen the phrase ‘minimum payment due’ on your monthly credit card statement. It’s a common misconception that making the minimum payment is all that’s required to avoid late payment charges and maintain a good credit score. Unfortunately, this is not entirely true. In this article, we’ll delve into why credit card ‘minimum payment due’ does not help and what late payment charges entail.
Let’s start with the basics: what is the minimum payment due? The minimum payment due is the smallest amount you need to pay on your credit card statement to avoid late payment fees and maintain your account in good standing. Typically, it’s a small percentage of your total balance, ranging from 1% to 3%. Although paying minimum on credit card due may seem like a good idea to keep your account in good standing, it can have serious long-term consequences for your finances.
First, let’s look at how paying only the minimum payment due can impact your finances. When you make only the minimum payment, you’re essentially delaying the payment of the remaining balance. The unpaid balance attracts interest charges, which can compound and increase your overall debt. In other words, you’ll end up paying more in interest charges over the long run, making it harder to pay off your debt.
Secondly, making only the minimum payment due can also hurt your credit score. Your credit score is calculated based on several factors, including payment history. Paying only the minimum payment can result in a ‘late payment’ on your credit report if you fail to pay the balance in full by the due date. A late payment can have a significant impact on your credit score, making it harder to get approved for loans, credit cards, and other financial products in the future.
Now, let’s talk about credit card late payment charges. Late payment charges are fees that credit card issuers charge when you fail to make a payment by the due date. The amount of late payment charges varies depending on the credit card issuer, but it’s usually a percentage of the outstanding balance. For instance, if your balance is $1,000, and your late payment charge is 5%, you’ll have to pay $50 in late payment charges.
Credit card late payment charges can add up quickly, making it even harder to pay off your balance. If you’re consistently making only the minimum payment, you’ll likely face late payment charges every month, which can be a significant drain on your finances. Moreover, if you miss payments for an extended period, your credit card issuer may impose a penalty interest rate, which can increase your overall debt even more.
To avoid late payment charges and the negative impact on your credit score, it’s essential to make your credit card payments in full and on time. If you’re struggling to make payments, consider reaching out to your credit card issuer to discuss alternative payment options, such as a payment plan or hardship program.
Also Read: What is a Convenience fee? Understanding Payment Processing Fees
In conclusion, paying only the minimum payment due on your credit card statement is not a good idea. It can result in higher interest charges, hurt your credit score, and lead to significant financial stress. To avoid late payment charges and maintain a good credit score, it’s important to pay your credit card balance in full and on time. Don’t let credit card debt spiral out of control; take control of your finances today.