topic Re: Minimum Payment in Credit Cards

Minimum Payment

YoungJay18 — Fri, 26 Oct 2012 10:25:54 GMT

every time i pay my credit card i see that it asks me if i want to pay Minimum Payment since im new to credit cards i never really bothered to learn what it is if i do pay the Minimum Payment for what ever reason is it bad for your credit score or anything like that

Re: Minimum Payment

Anonymous — Fri, 26 Oct 2012 11:12:19 GMT

If you pay the minimum payment you will pay interest on your purchaes starting from the beginning of that billing cycle until you've gone through a whole cycle after you've paid you account in full.

Re: Minimum Payment

YoungJay18 — Fri, 26 Oct 2012 11:14:28 GMT

so for example lets say my balance is $600 i wil have to pay the $600 plus the lets say $40 intrest ??

and basically it is very bad for my credit

Re: Minimum Payment

bettercreditguy1 — Fri, 26 Oct 2012 11:21:47 GMT

And hard on your wallet!

Re: Minimum Payment

adavis425 — Fri, 26 Oct 2012 12:59:02 GMT

@YoungJay18 wrote:
so for example lets say my balance is $600 i wil have to pay the $600 plus the lets say $40 intrest ??

and basically it is very bad for my credit

I don't believe that paying the minmum is necessarily bad for your credit. Not paying at all or not paying on time is bad for your credit. Some people pay only the minimum every month with no issues while others (myself included) PIF each month. Paying the minimum simply means you pay more and, let's face it, who wants to do that? There are times however when you can only pay the minimum and it is nice to have that flexibility. As long you pay AT LEAST the minimum, you and your credit will be fine.

Re: Minimum Payment

youngandcreditwrthy — Fri, 26 Oct 2012 13:34:57 GMT

I use the "minimum payment" option as an emergency option...

It is not bad for your score necessarily, unless you have a crap ton of debt/maxed out cards and you are only making the min pmt on them.

The min pmt is like a payment you want to make no matter what!!!!!! It keeps your credit in goodstanding.

Also, the min pmt is typically what lenders base your debt to income on... They just want to make sure you can afford the minimum payment before theu extend you credit.
Also, the higher the interest rate, the higher the minimum payment....

Hope this helps :-)

Re: Minimum Payment

Anonymous — Fri, 26 Oct 2012 14:40:52 GMT

Yep. Minimum payment is the absolute lowest payment they're asking for to keep your account in good standing. You can draw out your payments as long as you'd like, but you're on the losing end as they're making a killing off you with interest charges. If you absoutely have to carry a balance, pay MORE than the minimum if you can. If you can't afford that, at least make the minimum until you can PIF.

Re: Minimum Payment

YoungJay18 — Wed, 31 Oct 2012 00:47:22 GMT

if i do make the minimum payment does my credit reset like will i start over with my whole 500 credit line or not ??

Re: Minimum Payment

Anonymous — Wed, 31 Oct 2012 00:55:17 GMT

Making the minimum payment does not have a direct negative impact on your scores at all.

What it does do like others have said is put you in a position to pay interest on those balances and your UTIL is impacted.

Personally, when I have to settle for a minimum only payment on any account I add the interest on top of it.

Example: Minimum payment is $25 - interest on that account this month is $11 - I pay at least $36 (if not a little more).

As long as you make at least the minimum payment the account is in good standing and will report as such.

Re: Minimum Payment

GoldenloveNY — Wed, 31 Oct 2012 01:04:55 GMT

The Min. Payment is the just the amount the credit company is asking to maintain your account in good balance. This isn't so bad if you just open a credit card and you recieved a "no apr promotion" for a specific time period. You can pay the min. payment and will not be charge interest. I generally will avoid this if you are not in a promotion period in any of your credit cards. I say pay MORE than the minimum payment (if you can't pay in full) to quickly resolve your debt and avoid the unneccessary interest charges. I know the sitution can be different for some, but try to pay more if you can.

I also can't help but wonder how a credit company percieved one who have a balance lingering in their account for a long period of time, paying only the min. amount.

Re: Minimum Payment

YoungJay18 — Wed, 31 Oct 2012 01:04:44 GMT

so if the minmume is 25 and i pay lets say 70 thats good

Re: Minimum Payment

GoldenloveNY — Wed, 31 Oct 2012 01:06:52 GMT

@YoungJay18 wrote:
so if the minmume is 25 and i pay lets say 70 thats good

Yes. Try to pay as much as you can. Avoid those interest charges. But if you can only pay the min. amount, then so be it. Don't beat yourself over it.

Re: Minimum Payment

YoungJay18 — Wed, 31 Oct 2012 01:07:25 GMT

ok do you happen to know if my credit will reset even with the mimum payment cause i could really use it due to the hurricane and all that

Re: Minimum Payment

GoldenloveNY — Wed, 31 Oct 2012 01:11:50 GMT

@YoungJay18 wrote:
ok do you happen to know if my credit will reset even with the mimum payment cause i could really use it due to the hurricane and all that

If you use all the credit in your card, and only pay the min. amount when it is due, then only that amount will be available for use. So let's say you have $1,000 credit limit in one card. You used the full amount, and the credit card company tells you when the min. payment is due. Let's say that min. payment is $25. You pay that amount. The only thing left for use would be $25, minus any interest they will charge for leaving a balance.

Re: Minimum Payment

beb86 — Wed, 31 Oct 2012 01:17:08 GMT

@YoungJay18 wrote:
ok do you happen to know if my credit will reset even with the mimum payment cause i could really use it due to the hurricane and all that

What do you mean by "reset" your credit... I have all my cards on auto payment which for me pays the MIN if I forget... but I will also pay extra where I can.

Re: Minimum Payment

YoungJay18 — Wed, 31 Oct 2012 01:18:16 GMT

like if i have a 750 balance and 25 is min if i pay the 25 will i get a 750 credit line again for the next month but continue to carry the balance

Re: Minimum Payment

distantarray — Wed, 31 Oct 2012 01:18:20 GMT

I don't think people explained how minimum payment and how APR works. APR = Annual Percentage Rate

Let's say you had a $600 bill at 29% apr

29% is a lot but remember it's ANNUAL. as in 12 months

So you take 29% / 12 = 2.42% monthly

If you charged $600 on the account and paid the minimum which pretty much covers the minimum interest rate and like 1 to 5% of principle You would pay $14.52 in interest rates which is not bad on borrowed money, friends would usually charge you more if they're bastards lol!

They used to have minimum payments only to cover your finance charges but laws changed and they have to bring down principle a fraction of a % keeping you in debt over 20 years to pay off a balance. Now with 1% principle with minimum payments you'll be in debt for 100 months, but if you have a bank requiring a minimum of 5% towards principle you'll be in debt for 20 months.

remember too many people have a misconception that APR is monthly, it's annually. Now with things like car payments high interest rates can be terrible, cause people with bad credit can get 20% interest on their cars

so for a $10,000 car 20% interest is $2,000 so a 5 year loan you'll end up paying $10,000 JUST in interest making a total paid of $20,000 for a $10,000 car. Personally I think people are crazy if they ever even thinkn about going this route.

Re: Minimum Payment

GoldenloveNY — Wed, 31 Oct 2012 01:19:33 GMT

I am assuming the poster meant that the avaiable credit will be "reset" to the credit limit given if one pays only the min. payment.

Re: Minimum Payment

GoldenloveNY — Wed, 31 Oct 2012 01:21:05 GMT

@distantarray wrote:
I don't think people explained how minimum payment and how APR works. APR = Annual Percentage Rate

Let's say you had a $600 bill at 29% apr

29% is a lot but remember it's ANNUAL. as in 12 months

So you take 29% / 12 = 2.42% monthly

If you charged $600 on the account and paid the minimum which pretty much covers the minimum interest rate and like 1 to 5% of principle You would pay $14.52 in interest rates which is not bad on borrowed money, friends would usually charge you more if they're bastards lol!

They used to have minimum payments only to cover your finance charges but laws changed and they have to bring down principle a fraction of a % keeping you in debt over 20 years to pay off a balance. Now with 1% principle with minimum payments you'll be in debt for 100 months, but if you have a bank requiring a minimum of 5% towards principle you'll be in debt for 20 months.

remember too many people have a misconception that APR is monthly, it's annually. Now with things like car payments high interest rates can be terrible, cause people with bad credit can get 20% interest on their cars

so for a $10,000 car 20% interest is $2,000 so a 5 year loan you'll end up paying $10,000 JUST in interest making a total paid of $20,000 for a $10,000 car. Personally I think people are crazy if they ever even thinkn about going this route.+

+1. I couldn't have said it better myself....

Re: Minimum Payment

distantarray — Wed, 31 Oct 2012 01:21:07 GMT

@YoungJay18 wrote:
like if i have a 750 balance and 25 is min if i pay the 25 will i get a 750 credit line again for the next month but continue to carry the balance

wow I'm glad you came to the boards to ask.... If you have a credit limit of $750 and you spent $750 if you do the minimum payment of $25 your look at $725 balance

(if no interest rates are accessed, remember most credit card companies do not charge interest for a grace period Amex gives you 25 days before interest is charged.)

So you would only have a balance of $25 usable credit.