When you’re taking a long, hard look at your finances, it can be tempting to just make the minimum payments on your credit card debt and call it a day. What is the minimum payment, you ask? Well, it’s a calculation of your current balance plus one perfect interest on the principal balance. Credit card companies rely on the fact that you’re going to make minimum payments and not pay in full each month, so one of the best things you can do for your finances is to pay more than the minimum payment every month.
When you pay more than the minimum, even if it’s just $10 or $15 each month, you’ll be progressively chipping away at the principal interest, which means you’ll make more progress toward actually paying off the debt. Sometimes the minimum payment is $25 or less each month, and this can look pretty attractive to someone who is paying off student loans or wants to worry about their credit card debt later. When you only make your minimum payments, you’re never actually contributing toward paying off the debt.
Paying the minimum amount over time can also lead to paying more in interest over the life of the credit card. It can take even longer to pay off debt, or have a negative effect on your credit score. Carefully monitor your credit cards and make sure not to miss payments, as that can mean you’ll have to pay late fees, too. Paying the minimum toward your credit card can seem like a good idea, but it’ll keep your debt in stasis, never quite propelling you toward the ultimate goal—being debt-free.