How Credit Card Minimum Payment Works.
Credit Card Minimum Payment is the lowest amount of money you can pay on your bill each month to keep your account in good stead with your credit card issuer. Paying your minimum payment on time is always advisable to avoid late payment fees, improve repayment records as well as build a good credit report.
While paying your credit card minimum payment might sound good at least it proves to the issuer that you are committed to keeping your account running, it does not improve your credit score nor does it reduce the debts on your card.
How credit card minimum payment is calculated varies depending on the issuer. Also, your minimum payment is determined by how much you owe including other fees.
The credit card minimum payment is usually between 1%-3% of what you owe (including late fees or interest) or $5 -$25 whichever is higher. For instance, if you are owing $500, you will have to pay $5. If you are owing $200, you will have to pay $5 because 1% of $200 is just $2 which is way below the minimum.
If you choose to continue to pay the minimum payment on your credit card, you will be doing your creditor a huge favor because the interest will continue to increase and it will take years to pay off your entire balance.
For Instance, For example, if you have a $10,,000 balance on a credit card charging 19.99% interest, your minimum monthly payment will probably be $300. If you make only the minimum payment on your credit card monthly, it will take you more than eight years to pay off the balance, and during that time you’ll most likely pay about half of the principal in interest to your creditor.
How to get credit card minimum payment
It is usually attached as a PDF file to your monthly credit card statement sent to your mail. However, if you operate your account online, it will be readily available in your account portal.
Consequences for late credit card minimum payment
If you fail to pay the minimum payment on your time before the due date, your creditor will be in the position to take drastic actions against you which will definitely affect your credit history and score.
- You might be reported to the a credit bureau
- Increase in interest rate
- Your credit card might be blacklisted
