In the age of cash-less stores and online-only shops, having a credit card is more essential than ever. That said, the ease and accessibility of using credit (including through your smart watch which makes it easier than ever to pay with your credit card) can easily lead to stifling credit card debt. While credit card companies only ask for a small amount of your total debt each month as a minimum payment, paying only the minimum required amount can be a trap, ensuring you remain in debt for longer.
Frequently asked questions
Your credit card minimum payment will vary based on the balance you owe on the card. The minimum monthly payment is generally 3% of the total amount owed, or a $10 – $25 fee plus interest and possible fees (whichever amount is greater). If you’ve elected for paper or electronic monthly statements from your credit card provider, the minimum payment will be displayed on the top portion of your statement. While the minimum monthly payment is all you need to pay to avoid paying penalties, only paying the minimum amount due each month will drastically prolong the time it will take to clear your debt, as the monthly interest will keep accumulating.
Your monthly credit card minimum payments may increase for a number of reasons. If you’ve been spending more, your balance will be higher and the monthly percentage of the balance owed will then increase. As you keep a balance on your credit card, you are adding on interest charges every month. Over time, this can add up to a substantial amount, which will increase your overall balance and your minimum monthly payment. Your minimum credit card payment may also increase if you’ve incurred late charges, so be sure to pay close attention to your statement due date each month.
In certain circumstances, you can defer your minimum credit card payments, often for a short amount of time. Especially during COVID-19, many providers have made it easier to defer your monthly credit card payments, usually for up to 3 months. However, interest will still accrue during this period, and your minimum payment amount may increase after the deferment period. While deferring your credit card payments may seem like an easy solution, be sure to talk to your credit provider to understand the possible ramifications of your choice.