If you pay the credit card minimum payment, you won't have to pay a late fee. But you'll still have to pay interest on the balance you didn't pay. And credit card interest rates run high: According to August 2024 data from the Federal Reserve, the national average credit card APR was 21.76%.
Making only the minimum payment on your credit card can impact your credit score. While it may not immediately hurt your score, consistently paying only the minimum amount due can negatively affect your credit utilisation rate and potentially lower your credit score over time.
Paying only the minimum repayment amount each month means you'll usually incur interest over time. This will significantly increase your costs, and will extend the time it takes to pay off your total. Most credit cards come with an interest free period on purchases.
Paying only the minimum means you're carrying balance and charged interest, increasing the total cost of your debt. Making timely minimum payments helps avoid late fees and damage to your credit score, but it's best to pay more than the minimum to reduce your debt faster and save on interest.
If you choose to pay your Outstanding Balance in full on or before the Payment Due Date, no finance charge will be imposed. However, if you choose to pay only the Minimum Payment or any amount less than the Outstanding Balance on or before the Payment Due Date, you will be treated as borrower or a “revolver”.
Let's say your credit card balance is ₹20,000, and your interest rate is 18% p.a. (1.5% per month). If you only pay a ₹800 minimum each month, it will take you 32 months to repay the debt. Further, you'll pay ₹5,411 in interest!
Fees and charges will incur from the date that each transaction is charged to your account until such amount is paid off. If you only pay the minimum payment, or less than that, by the due date, we will charge you fees, charges and taxes.
"When you pay only the minimum amount due, you can avoid late payment charges, but the remaining unpaid balance starts attracting finance charges, which can go up to 42% p.a. Moreover, when there is unpaid balance in your account, all new purchases become ineligible for the interest-free period, which means they will ...
Percentage method: Some credit card issuers calculate the minimum payment as a percentage of your outstanding balance. This percentage typically falls within the range of 1% to 3% but can vary. For example, if your outstanding balance is $500 and the minimum payment percentage is 2%, your minimum payment would be $10.
If you're only making the minimum payment for a long period of time, that interest can add up and make it harder to pay off your balance. If this results in you eventually being unable to make a minimum payment, then that can likely hurt your score.
The credit limit is the total amount of credit available to you on the card, and it will only reset if you pay off the entire balance or if your credit card issuer increases your credit limit. Making a minimum payment on your credit card balance will only satisfy the minimum payment requirement for that billing cycle.
Use the debt snowball method
In order to use this method, list all of your credit card debts from lowest balance to highest balance. Now start concentrating on wiping out the credit card with the lowest balance while still making the minimum payments on the other cards. The point of this strategy is to build momentum.
The exact amount you pay doesn't factor into the payment history portion of your credit score. It's simply noted that you've made a payment on time. Although there's no direct connection, only paying the minimum amount due can increase your debt over time, which can put a strain on your finances.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
Suppose a credit card has a $5,000 balance with an APR of 16% and a $100 minimum payment requirement. With minimum payments only, you'll pay off the debt in about 6 years and 11 months. If you pay an extra $50 each month with the minimum payment, the time can be shortened by about three years.
Interest charges add up: Typically, credit companies will charge you high interest rates on unpaid balances. If you only pay the minimum each month, the interest charges can snowball. The additional interest and any other fees are added on to your balance and can increase a lot over time.
Payment history — whether you pay on time or late — is the most important factor of your credit score making up a whopping 35% of your score. That's more than any one of the other four main factors, which range from 10% to 30%.
Longer repayment term: If you habitually keep on paying only the minimum amount due on your credit card, you will take a very long period of time to repay the entire amount. This, in turn, would turn out to be an unwanted financial burden for you.
A: Paying only the minimum amount due leads to prolonged debt due to accumulated interest and a higher credit utilisation ratio and can result in paying significantly more over time due to interest and fees.
This means that a credit card company has a ten-year period within which to file a case against the cardholder to collect unpaid debts. Once the prescriptive period lapses, the creditor may no longer legally compel the debtor to pay through court action.
Yes, if you pay the minimum payment on your credit card statement, you could still get charged interest. By paying the minimum you keep your account in good standing but you do not avoid accruing interest. The exception to this is if you have a card with a 0% introductory APR, which usually is for a set period of time.
When you make a partial payment, your Credit Card issuer will calculate the remaining balance and carry it to the next billing cycle. They won't impose any additional fees for making a partial payment.
Extended debt repayment: By only making minimum payments, cardholders prolong the time it takes to pay off their balances in full. This results in a longer repayment period and may lead to a cycle of revolving debt.