Credit Cards – Make the Minimum, or Nah?

Disclaimer: I am not a financial expert, and am sharing based on what I’ve found through my own research and experiences. Your mileage may vary. Find what works for you.

First, you should always try to make at least the minimum payment on your card. You may just being paying interest if you have a high balance, but that’s better than having the late payments marked on your credit report.

Scenario One: For whatever reason, you can’t pay your credit card minimum payment this month (or haven’t in a few months).

If you’ve squeezed every penny from your budget, begged and borrowed, and hustled until you couldn’t hustle anymore trying to get the money to pay it. Call the credit card company and let them know what’s going on. Policy varies from company to company, but they may be able to reduce your minimum for a minute, work out a payment plan, or at least note it in your account so that they don’t call you asking for their money. At least not immediately.

If it’s only this one month you aren’t able to pay, let them know when you can pay it, and try to pay it within 30 days. If you don’t go pass the 30 day mark, you can call and ask for a one-time waiver of the late fee (yes, you’re still going to get charged a late fee if you don’t make the payment, even if you call them ahead of time).

Scenario Two: You are making your minimum payments, but it’s a struggle.

The first thing to do is the same as if you can’t make the minimum payment – call your card issuer and explain the situation. Ask if they can lower your interest rate, or work out a payment plan.

Secondly, if you get any extra money this month (that isn’t going somewhere else), put it on this card, no matter how small. Before you go all Eeyore on me, consider this:

Assuming a credit card balance of $1,367, 12.5% interest rate, and $25 minimum payment, here’s how long it will take you to pay off the card if you don’t charge anything else:

Paying 1 extra dollar a month cuts five months off your repayment time, and 3 dollars a month cuts off 13 months – a whole year of payments!

Baby steps…