If you have a credit card, you’ll probably have noticed the minimum payment mentioned on your monthly statement. Some people only ever pay the minimum, but that is never a good idea.
The best way to use a credit card is to get one that provides points, perks, or other advantages when you spend on it. Then, when the bill comes in, clear it in full so you don’t pay any interest on it. If you end up with a balance that stays on the card, you end up paying interest – and that can be costly.
Here are three great reasons why you should always pay more than your monthly minimum payment on your credit card(s) – even if only by a small amount.
The balance will be cleared faster
The more you pay off each month, the closer you will get to clearing the overall balance. Pay off as much as you reasonably can, even if it means sacrificing a few treats to do so. You’ll be glad you did, as it puts you in better control of your finances. Paying only the minimum each month means you may only pay off the interest, since this is cleared first. Your actual balance may hardly be touched.r each month makes a difference, and not just because you’ll be closer to clearing the balance. Read on to find out more.
You’ll pay less in interest
You will always pay the same rate of interest, no matter what your balance is. But the lower your balance is, the less this amounts to. Let’s say you’re paying 15% annual interest on a balance of £1,500. That amounts to £225. But if you were to work at halving your balance, the interest charged annually would drop to just half of that.
The more you can pay off each month, the less you’ll pay in interest both now and in future months. And that in turn makes it easier to clear the balance.
You’ll improve your credit score
If you are close to your credit limit, or you are not displaying the ability to clear or at least properly manage your debts each month, it will harm your credit score. That could make it harder to get credit in the future, as well as getting other financial products such as mortgages.
So, the better you manage your credit card balance – especially when you work hard to clear it altogether – the healthier your credit score will be. This will have many positive knock-on effects – and it will make you feel better about being in control of your money, too.
You can see it pays to know more about your credit card balance(s), so you can better tackle any outstanding debt you have on there. Taking control is very powerful, and it can inspire you to tackle your finances in other areas if need be, too. Now, isn’t that a powerful way to start your day?