3 Reasons to Pay More Than the Minimum on Your Credit Card
November 25, 2024
Each month, your credit card has a minimum due payment amount. However, did you know that paying just the minimum on your credit card each month might be costing you more than you think? The minimum payment is the lowest amount you can pay to remain in good standing and avoid any late or missed payment fees when paid by the due date.
While paying the minimum may seem like a convenient option, there are more benefits to paying off as much as you comfortably can each month, even if you can’t pay the full statement balance. Here are 3 compelling reasons to pay more than your minimum balance due on your credit card.
Small Changes = Big Savings
The more you pay down your balance, the more you can save in interest charges.
For example: if you have a credit card balance of $1,000 at an interest rate of 13% APR, here’s a comparison* showing how much you’ll pay over time.
Payment amount
Time to pay off balance
Total interest paid
$20 (minimum payment amount)
12 years
$815
$40 (double the minimum payment)
3 years
$173
In the above example, by paying a fixed amount that’s higher than the minimum, you’d pay off your balance 9 years sooner and save over $642 in interest!
One of the reasons paying off your balance using just the minimum takes so long and costs so much is that while the minimum due in the first month is $20 (2% of $1,000), this amount decreases each month as your total balance decreases, so you are actually paying off less of the debt each month.
Lower Debt Burden
Paying off your credit card not only keeps your debt in control but also provides peace of mind, freeing up funds for your goals and dreams like buying a car or building up emergency savings to be better prepared for the unexpected.
Credit Score
Using too much of your available credit can have a negative impact on your credit score. When you use less of your available credit, your credit health can increase. Generally, your credit score can improve if you keep your monthly balance below 30% of your total credit limit for each of your credit cards. We recommend aiming for a credit utilization rate of 10% or less of your total available credit to boost your credit score.
Where can I learn more about my minimum payment?
Statements from all credit card issuers include a “Minimum Payment Warning” on the first page of the statement. This shows you:
How long it will take to pay off your balance if you make only minimum payments, and how much total interest you will be charged.
How much you should pay each month to pay off your balance in 3 years, and how much you would save in interest.
This information will change from month to month, depending on how much you use your card, and how much you pay.
How can I pay more than my minimum balance?
When making your RCU credit card payment in digital banking, select the “Other” option to enter a custom payment amount.
*The example is shown for educational purposes. It may not be applicable or accurate with regard to your individual circumstances, which include your interest rate, current balance, and monthly spending.
PPP Forgiveness Application Deadline
Congress passed The Economic Aid Act which changed the deferment period from 6 months post covered period to 10 months post covered period. For example, if your covered period ended June 30, 2021, under the new guidelines the earliest your first loan payment wouldn’t be due until April 2022, and you have until then to request forgiveness. Please use the following calculation to help you identify when your forgiveness will be due:
PPP borrowers may select a covered period anywhere from 8 weeks to 24 weeks.
RCU is automatically calculating your loan due date based on a 24-week covered period, if you intend on using a shorter covered period please inform us immediately as this will impact your due date.
Your correct deadline will be reflected in your online banking account.
If all or part of your PPP loan is not forgiven, your first loan payment will be due the first of the following month after a decision is made by the SBA.
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