5 Reasons to Pay More Than the Minimum

Being able to pay just a small percentage of your balance is one of the reasons we use credit cards. The minimum payment is a lot easier to make, but at the same time can come at a higher cost. There are multiple reasons you should make more than the minimum payment, but here are just a few…

Save Money

When you make the minimum payment, you end up paying much more in interest. You could be saving hundreds or even thousands in interest charges by raising your monthly payments.

Pay It Off Sooner

When you make the minimum payment, not only do you pay more in interest, it takes to longer to pay it off. With a credit card balance of $5,000 and an APR at 14 it would take you over 20 years to pay it off when you only make the minimum payment.

Improve Your Credit Score

Making more than the minimum payment does not directly increase your credit score. But because your credit score is based off of the difference between how much credit you have available and how much credit you are using, a lower credit balance is going to give you more available credit. This will give you a higher credit score.

Get Ready for a Mortgage

If you plan on making a large credit purchase in the near future, such as a house, you will most likely need to pay off some debt to qualify for a loan. Unless you already have a low balance, paying the minimum is not going to get you there fast enough. Raise your monthly payments and get your debt paid off before applying for a large loan.

Make Room for More

There might be a time when something comes up and you have to make a large purchase with your credit card. If your balance is slowly decreasing due to minimum payments made to your balance, you might have to come up with another way to make your purchase.

Author:

Blayke