What is Minimum Payment?
What is Minimum Payment?
A minimum payment is the smallest amount you're required to pay on your credit card bill each month to keep your account in good standing (not past due). This amount varies and is usually a small percentage of your total balance due. Paying only the minimum can result in more interest over time, because your leftover balance continues to accrue interest. Consider paying more than the minimum payment when you can, to decrease your debt faster
3 things to know about Minimum Payment
- Minimum Payment Can Be Costly: Making just the minimum payment each month can end up costing you a lot more in the long term. That's because you're often just covering the interest and not significantly reducing the actual money you owe (the principal balance). plied. It is important to read your Cardholder Agreement to understand how minimum.
- Paying More Can Help Your Credit Score: Paying more than the minimum payment not only helps reduce your debt quicker but can also improve your credit score. A lower balance means a lower credit utilization rate, which credit scoring models see as a positive. [1]
- Missing Minimum Payments Can Lead to Fees: If you miss a minimum payment, some credit card companies will charge you a late fee. Plus, this could harm your credit score. Making at least the minimum payment on time every month is essential to avoid fees. [2]
Citations
- https://www.myfico.com/credit-education/blog/credit-utilization-be
- https://www.myfico.com/credit-education/faq/negative-reasons/late-payments
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