If you are new in the credit card market one salient thing to understand is a card minimum payment and how important it is.
What is a Credit Card Minimum Payment?
Credit minimum payment is the least minimum payment you’re required to pay by the due date each month as stated by your credit card terms. This is the lowest payment amount you can pay on your credit card to avoid penalties. They are typically calculated as a percentage of your outstanding balance plus any fees that have been added to your balance. This implies that the higher your credit card balance, the higher your minimum payment will be.
Your credit card’s minimum payment is inscribed on the front of your billing statement. Or if you check your balance online, you get the minimum due as you log into your account.
How to Make Card Minimum Payment
The Credit minimum payment must be paid by the cutoff time on the payment due date. For most credit cards, the cutoff time for your minimum payment stands at 5 p.m. Most credit card issuers do extend the cutoff time for your minimum payment to later in the day. Just check with your credit card issuer to find the exact cutoff time for your minimum payment.
A few options can be given by your issuer for making your minimum payment by mail, online, or over the phone. If your payment is mailed, you can send a check or money order. If the payment is made online, you’ll be able to enter your checking account and routing number to make an electronic payment. Note, you can’t use another credit card or debit card to make your minimum payment. Ensure you give yourself ample time to make your payment to ensure your credit card issuer gets it on time.
What Happens If You Miss Your Card Minimum Payment?
Missing your monthly minimum payment or paying less than the minimum means your credit card issuer can charge you a late fee. Missing a payment can also forfeit any promotional interest rate you have on your balance. Once you miss two minimum payments consecutively, your credit card issuer may raise your interest rate to the penalty rate.
After your minimum payment is more than 30 days late, the card issuer reports the late payment to the credit bureaus. This late payment goes to your credit report and stays for seven years. This may impact negatively on your credit score, especially in the first few months after the late payment is added.
Minimum payments previously missed will raise the current minimum payment due. You will not only be required to make the current and missed minimum payments due, but also a late fee will be added to the amount you need to pay to get your account back in order.
Paying More Than The Minimum
Yes, you can pay more than the minimum which is the safest way to balance in full to avoid paying interest on your credit card balance and stay out of credit card debt. When you make the minimum payment, your credit card balance only reduces by the small amount. The majority of your minimum payment gets applied to the interest on your account.
Note, paying only the minimum on your credit card is the most expensive way of paying off your credit card balance. It also takes the longest, and you’ll also be required to pay more interest by the time you completely repay your balance.