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Minimum Payments: Helpful or Harmful

By: Michael Millington

Having the ability to make payments on your credit accounts can help to reduce the amount of debt you have. Just the act of making a payment can be seen as an act of good faith in the eyes of a creditor. In an attempt to make paying a credit bill easier, many credit providers give an option to make a minimum payment on the account to satisfy their monthly payment requirement. However, making minimum payments is not always the best way to go when you want to eliminate your debt. Here are some pros and cons in regards to making minimum payments on your credit accounts.


When Minimum Payments Work

Don’t think that minimum payments are completely terrible. They do serve the purpose they were meant to serve. In the event that you don’t have the ability to make a greater payment, a minimum payment will help to keep you from missing a payment for that month. A great way to make sure you never miss a payment on your credit account is to put the monthly minimum payment amount into your budget. Accounting for that amount will keep your credit bill in mind monthly. It will also allow you to see how much more you can add from your extra income if you can.

For those who are not looking to eliminate their debts, making minimum payments can help to achieve their unique goals. Managing debt can work towards maintaining or increasing your credit rating. Making your payments every month and on time will have a positive effect on your credit. This can allow you to monitor your credit health without pouring money into your credit accounts each month. In this sense, minimum payments can be much more useful if used correctly.

Most people tend to veer away from making minimum payments because it does not lend to the account holder’s ability to pay off the account balance sooner. When dealing with debt, the main thought is to get rid of it as soon as possible. Debt, however, can be used to help build (or rebuild) your credit depending on how you use it. When managing debt instead of eliminating it, you have the unique ability to make debt work for your betterment.


When Minimum Payments Do Harm

Making a minimum payment on an account can help to avoid missing a payment for a credit provider. The down side to making a minimum payment is the addition of interest to the remaining balance. Credit cards come with interest rates that add an extra fee to your existing balance if you carry one from month to month. This will add extra cost towards carrying a balance while only making minimum payments.

If you’re looking to rid yourself of debt, minimum payments on a credit account (especially one with a high balance) would end up with your paying a sizeable amount of money in interest rates alone. Also, the amount of time it would take to completely pay off a debt with minimum payments would be gargantuan. If you pay off any amount of your credit debt and you end up using it again, it will quickly turn into a cycle of never-ending payments and cost. You might end up making most of your payment towards the interest instead of your primary debt.

While making payments on your accounts will reflect positively on your credit report, there is a detriment involved with making minimum payments. Having a large balance due on your account will count towards your total debt used. Your overall amount of available credit will affect your credit rating almost as much as your ability to make payments on time. If you continue to keep your utilized credit above the recommended 30%, your FICO score can suffer because of it.


The Verdict on Minimum Payments

In the end, the decision on when minimum payments should be made is up to you. Although making payments of some sort is necessary to avoid missed payments, interest being added to the principle amount, and potentially having your credit account go into default, making minimum payments is not much of a consolation. There’s a fine line between the ability to make a minimum payment and not satisfying the minimum payment requirement.

Making minimum payments will not help you lower your debt quickly, but they can be helpful when managing debt and working on your credit. Harboring a large amount of debt also does not lend itself towards making minimum payments either, as it won’t allow you bring your debt amount to the recommended level to maintain a decent credit rating. Making larger payments on your credit debts can help to achieve your goal of debt elimination much faster and with less interest being added on to hinder your progress.

There are some instances when you might not be able to make more than a minimum payment. If this is the case then it is not the end of the world. Just remember that with most credit accounts, you do not have to adhere to paying only on the designated payday. Depending on your creditor you may be able to make advanced payments ahead of the date you normally pay. Use this to add extra payments in between bill payments to help make minimum payments a bit more effective.


Minimum payments are meant to help people have a base amount to satisfy a monthly bill payment towards a credit account. However, some cannot even make a minimum payment due to the sheer amount of debt they carry. Even worse, making minimum payments might not have the desired effect of actually lowering your overall debt thanks to interest rates. That’s where Guardian Debt Relief comes in. We can help you settle these debts for less and help you rid yourself of these obligations in a short period of time. Take advantage of our free consultation call and speak to one of our debt relief specialists. Take the first step towards eliminating your debt and contact Guardian Debt Relief today.

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