The Dangers Of Paying Off Just The Minimum Balance

Paying the bare minimum of your credit card bill will lead to sky-rocketing interests when accumulated over time.

Make sure you always pay more than just the minimum repayment amount each month on your credit card statement

Paying off solely the minimum payment on a credit card balance is often the method that seems to be the easiest. Minimum balance payments can now usually be set up to be paid by direct debit, and rather than digging into your other finances to pay more off, why not leave it just ticking over?

Featured Low Interest Credit Card

The St.George Vertigo offers a low interest rate on purchases and your existing credit card balances, and lets you save money on credit card interest repayments while still allowing you to spend on your credit card.

• $55 annual fee
• 13.24% p.a. on purchases
• 0.99% p.a. for 12 months on balance transfers
• Cash Advance Rate of 21.49% p.a.
• 55 days interest free
• Minimum Income Requirement of $15,000 p.a.

Read the St George Vertigo terms and conditions.

The minimum balance payment will not significantly reduce your overall balance, and paying off a credit card in this way will take an exceptionally long time, thus costing you a lot in interest in the long run.

No Penalties for Higher Payments

Certain people have become so used to just paying the minimum credit card payment, and seeing it on their statements, that they are accustomed to thinking that this is the only way a credit card can be paid off even if they have other funds available. This is not the case at all, and any credit card can be paid off as quickly as you wish if you have the money without penalty.

Compound Interest

Because of the way that compound interest works over time, with each month the interest on the interest adds up. If you pay off a card balance only with minimum balance payments, although it is possible eventually the total amount of interest paid will be phenomenal if you consider it as a total figure and not a monthly amount.

Maximum Payments

It is always going to be best to try and pay off the greatest credit card payment amount possible each month, although other than the minimum payment on the due date, wait until all other outgoings have been dealt with so as not to incur other charges before paying more. It is a good habit to get into to see what you have left in your account on the day before salary is paid in, and use this figure to reduce your credit card balance.

Even if you are unsure about if you might need that money for some other item, don’t hesitate to pay it into your credit card account. You can always withdraw it or spend it with the card later if you need to, and the benefits may be significant. One way to really affect your card is to pay the absolute maximum you think you can each month.

Any bills you have that can be paid directly by credit card payment (utility bills and the like) can be made this way, allowing you to use that amount to pay your credit card off. The added bonus of this system is that if you have a reward points system, increased transactions will give you increased rewards.

Image source: Steven Snodgrass

Check out today's featured offers:

Westpac Low Rate	Citibank Clear Platinum	Qantas AMEX Discovery	ANZ Platinum
0% p.a. for 6 months on purchases & balance transfers	2.9% p.a. for 12 months on balance transfers	$0 annual fee Up to 10,000 Bonus QFF Points	0% p.a. for 6 months on purchases & balance transfers

Subscribe to our newsletter and get "The Ultimate Guide to Balance Transfers"

Popular Credit Card Offers

			Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
	Westpac Low Rate Card - 0% Offer	A credit card with a low rate offer on both balance transfers and purchases, plus a low annual fee.	0% for 6 months (reverts to 13.49% )	0% for 6 months	$45	21.49%
	Citibank Clear Platinum Card	Competitive interest rate on purchases and balance transfers offer.	11.99%	2.9% for 12 months	$99	21.74%
	St George Vertigo	Take advantage of this great offer from St.George with a low rate on purchases and a low balance transfer offer.	13.24%	0.99% for 12 months	$55	21.49%
	ANZ Platinum Credit Card	An introductory interest rate offer on balance transfers and purchases, plus a $0 first year annual fee.	0% for 6 months (reverts to 19.24% )	0% for 6 months	$0 annual fee for the first year( $87 thereafter)	20.99%