Financial Resource

Each month when you receive your credit card bill, your creditor suggests the amount that you should pay on your credit card. By simply paying this minimum payment, you are in danger of paying the credit card company much more than you owe.

The minimum payment on your credit card account is based on how much you owe. In past days, it wasn’t even required to cover the amount of interest incurred on the account. Today, however, the formula includes any fees, applicable finance charges, and a small fraction of the balance, such as 1%. By simply making this minimum payment each month, you will remain in good standing with your credit card company and will certainly make them happy since this will maximize the amount of interest you will end up paying. Not only will you end up paying a lot, you will be doing so over a very long period of time. While it is possible to pay off a credit card by meeting the minimum payments each month, the amount of time that it takes to do so may be unbearable.

If you find yourself not being able to pay more than the minimum payment, there may be an option available for you to lower you interest rate, which would increase the productivity of your monthly payments, dramatically decreasing the time it will take you to pay off your debt and the amount of money required to do so. A credit counselor can talk to you about ways to lower your interest rates.

If you have been late paying your bill or have missed a payment, your problem with the credit card minimum payment will be of a different nature. Most likely, you will have a hard time paying the minimum payment because it includes all the fees that you have incurred such as those for late payments, missed payments, or exceeding the credit limit. These can add up month after month until you pay them. Essentially, not paying the fees from last month will require you to pay those fees and more this month. As this happens month after month, you will find yourself in default and your debt ending up with collection agencies that won’t stop bugging you.

If you find yourself falling behind on your payments, talk to a credit counselor. The sooner you seek help, the more benefit can be had by seeking credit counseling. By agreeing to talk to a credit counselor, you may find out that your situation is not as hopeless as you had previously thought.

The credit card company loves it when you simply pay your minimum payments month after month, but don’t let that fool you. They may even notice your pattern of doing so and use that as an excuse to raise your interest rates. Instead, find a way to where you aggressively repay your debt by paying more than the minimum required.

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