Break the Vicious Minimum Payment Cycle

Minimum payments are usually calculated as a certain percentage, averaging around 1-3% of your credit card balance.  The biggest mistake you can make is to miss a single payment on your credit card because that will trigger the interest rates and you end up burying yourself deeper into debt because instead of simply paying off the principal, you’re stuck paying for the interest.  Making at least the minimum payment will help you avoid more bad debt but why prolong the agony in the first place?  Break the cycle and manage your money wisely.

When Being A Deadbeat Works. Credit card companies make their money off the interest rates they charge you especially when you keep making the minimum payments.  Try to pay more than the minimum amount due – you end up knocking off the debt quickly and save your money from high interest rates.  Even better, make the payment in full and as much as possible avoid carrying balances altogether.

Improve Credit History. You can cost precious points off your credit score when you just keep on meeting the minimum payments.  Your credit score will rise when you pay off your balance faster by making higher payments.

Qualify For That Important Loan. In order to qualify for that mortgage or student loan, you definitely need to be paying off some outstanding debts and making the minimum payments only will not help you there.  Make the higher payments and do your credit history a favor and banks will be more eager to grant you that loan.

Stretch Your Spending Power. You don’t want to pile on one more bad debt on top of another.  You can use your credit card for that more important and necessary purchase if your balance is a lot lower and you’re secure in the fact that you’ll be able to afford the payments.

Start Small and End Big. Start by increasing your minimum payment as much as you can afford at a given time.  For example, if the minimum payment due for your outstanding balance is $30, try adding $5.00 more to that and then start adding even more as you can afford it.  Eventually, you’re motivated to complete the payment and your debt is settled sooner.

When You Can’t Make The Grade. Sometimes, especially these days, you overstretch your budget and you simply can’t meet the deadline for your bills.  Contact your creditor to let them know ahead of time.  Assure them that this is only a one-time deal and let them know when you can make your next payment and make sure you meet that date.  Most of them will assist you by extending your due date, waive the late fees and still report to the credit bureaus that the payment is still in a “current” status.