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Why You should Pay MORE than the Minimum

By George Hauser
Published: Thursday, December 3rd, 2009

One of the reasons why many consumers prefer having revolving credit in the form of credit cards despite credit score tips that tell them to have installment credit is that they can have the convenience of paying only a small percentage of their balance each month. If you have financial trouble when it comes to paying your dues in full, this comes in conveniently. 

For those who are repairing their bad credit, credit score tips advice consumers to make the minimum payments on the credit card accounts. This way they won’t have any trouble with the amount of debts accumulating. However, making the minimum payment all the time could also do you credit report and your financial status in general harm. Here are the reasons why. 

You spend more

When you pay the minimum every month, you are actually spending more. This is because your creditors will see it as an opportunity to increase your monthly credit card payments by adding finance charges. You can save more if you pay more than the minimum. That means that what credit score tips say to prepare for your payments is completely useful. 

You pay longer

If you continually pay the minimum, you are also prolonging the paying period. One of the credit score tips tells consumers to pay off their dues as soon as they can. This is to avoid the costs of increased interests the creditors can implement any time they want to. You can get stuck in your debt for the longest time if you only pay the minimum each month. 

Your credit score could suffer

One of the things that affect your credit score is the amount of money you owe. If you have high balances, your credit score can drop. That’s why credit score tips always tell you to keep your balances low. And you can do this if you pay more than the minimum until you have paid off the amount you borrowed. The sooner you decrease your balances, the sooner you’ll find improvements on your credit score. 

You might not qualify for a loan

When you are deciding to get a mortgage or lease a car, one of the requirements is to be clean of dues or at least come close to it. Paying the minimum does not only make your balance stay on your account for the longest time, it can also prevent you from getting the loan you need. You should raise your payments and clear your accounts as best you can because paying the minimum will not get you there fast enough. In other words, to get your loan application approved, you should pay you credit card balance as soon as possible. 

You might not be able to use your credit card anymore

Well, you can still use your credit card to charge items. But if you have a huge balance and on your credit card and it is decreasing in a very slow rate due to the minimum payments you make, you should consider other means of purchasing things. You don’t want to max out your credit card or go over the credit limit. Your current balance will leave you stuck with no other options.

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