How to Make a Minimal Payment to Your Credit Card Company
Even if you have a checking account that has a fixed minimum payment amount, you may find yourself paying extra each month. Experts recommend that you pay off the account balance in full at the end of the month, but occasionally, that might not be feasible. Sometimes, it is necessary to just make the minimum payment to avoid incurring any late fee or other financial penalties. In these cases, it is still better to make the minimum payment than to not make the minimum payment.
One reason you should always make the minimum payment is to avoid paying off too much debt too quickly. If you have a credit card with a high rate of interest, you will most likely be paying off this debt in a relatively short period of time. While you might not experience a large debt reduction right away, it will take some time to pay off this debt.
Credit card issuers are not interested in seeing you continue to owe a lot of money on your credit card. In fact, they would rather have you not make any minimum payments at all. The reason that credit card issuers prefer that you keep paying off at least 90% of your balance is because it reduces their risk. When you owe less than you earn, they have less risk, which means they can charge you less interest and fees. It also reduces their potential losses when you default.
To make things worse, if you stop making payments, you will incur more interest charges. When you are paying off the minimum, you are only reducing the amount of interest you will be paying. In reality, you may even end up paying more in the long run because you will have a higher balance to cover when you do go delinquent and fall behind on your payments. However, experts recommend making at least your minimum payment on an average balance, so you will be paying down the principal faster and not be incurring interest charges.
There are many benefits to paying your minimum payments on an average balance plus new interest charges. For example, it takes longer to get your credit card issuer to reduce your balance plus fees. The longer it takes, the less likely it is that your issuer will lower your balance. Also, by paying off your balance plus new interest charges on an average balance plus your minimum payment, you can save yourself a lot of money.
Another benefit of paying your minimum payment is that it can also help you avoid fees. For example, when you are at least 90% of your minimum payment on time, you may be eligible for a fee waiver. In most cases, your credit card issuer will waive at least some of these fees, although you may have to pay additional fees for certain services. Some examples include late payment fees, over-limit fees, and reconnection fees.
If you find that you are unable to make all of your minimum payments, there are some options available to you. One option is to call your credit card issuer to see if you can negotiate a better payoff amount. For some lenders, this will result in an immediate reduction in the interest rates and late charges on your account. If this option does not work out, you may want to try consolidation or other options. Consolidation allows you to transfer your debt to one company or another and then pays it all off at once. Some of the different options include:
If you want to do more to improve your credit card debt payoff, consider working with a professional credit card debt counselor. These individuals are specially trained to negotiate with your credit card companies. They often have the ability to lower your interest rates and even get them to eliminate late fees and other penalties. By working with a good standing counselor, you can be on your way to a much lower monthly payment and eventually the ability to pay off your credit card debt in a much shorter period of time.