The Truth About Evil Minimum Payments


Every credit card holder knows the exact meaning of the term minimum payments. A plethora of credit cards don't need cardholders to fully pay off their balances at the end of their billing cycle every month, but cardholders do require to pay the minimum amount of the total billing amount. Expert credit card debt counselors state that it can be somewhere between 2% to 3% of the remaining balance, or it can be a minimum of $25 or $30, depending upon whichever is higher.

Technically, paying the minimum amount helps you keep your account in good status, but there are also some negative consequences related to this decision. Here are the top 4 reasons why minimum payments are considered devilish and must be avoided.

They Hold You in the Sea of Debt


Though minimum payments might keep your credit card bills on the low side, it is vital for you to think about the big picture. You have to understand that minimum payments don't benefit your bottom line, but your credit card company.

The truth is that minimum payments are a tricky treat designed to bind you as a slave to your credit card debt. The idea behind this treat is to keep you stand longer on your balance so that your creditors can make more money off you. This thing is important to know for those who only tend to pay minimums every month, as this will carry their balances for years to come. 

It may come to you as a shock, but this is exactly the reason why the minimum payment schedule was designed. Due to the fact that the creditors are taking a percentage of your monthly balance, the required minimum payment falls. This generates two things — persuades you to pay less in order to make you keep your balance longer, and it also traps you into thinking that you are actually paying off your debt progressively. To tackle this, you can make a reliable plan and stick to your budget, or you can also opt for the professional help for credit card debt reduction solutions. 

Your Purchases being More Expensive


Credit cards can be of immense convenience, but they are expensive, and unfortunately, if you carry your balance every month and only make the minimum payment, then you end up costing much more for every single purchase which you made using the card. And upon leaving a balance on the card, the grace period fades away and you right away begin accruing interest the instant you make your purchase. Grace periods are only active if there is no balance on your card.

Ruin Your Credit Score


Most of the people believe that as long as they are paying the minimum payments on time, their credit score is protected. But little they know that how other factors impact credit scoring.

Paying the minimum may continuously have a negative impact on your credit score, and it doesn't exactly help it, either. A credit card with high balance can result in a higher credit utilization ratio. The credit utilization is considered to be the second biggest factor when it comes to making up your credit score. In case your credit card balances surpass 30% of your available credit, your credit score will definitely take a hit.

So how can you lower your credit utilization ratio while improving your credit score? Well, you can achieve this by pushing more payment in your minimums each month. If you double or even triple your minimum payment, it will chip away at the amount you owe and trim down your interest amount drastically.

Minimum Payments Can Swell


Another problem to counter when talking about minimum payments is that they are not fixed. Credit cards are considered to be a rotating kind of credit account. This means if your balance rises, so does the amount you owe. Maybe your minimum payments are manageable today, but if you don’t take effective steps to pay off the credit card debt while continuing to charge to your account, your minimum payments can reach the state where they’ll be uncontrollable.

If you're facing troublesome days with your budget only to gather the minimum payments, then it is highly recommended to take a deep breath and make a debt management plan. Otherwise, No matter what you do, there will no way out from this cycle of debt for generations.

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