Paying the Minimum Amount on Your Credit Cards Just Won’t Work, and Here’s Why

If you’ve amassed significant credit card debt, you may be tempted to only pay the minimum amount of your monthly bill – particularly if you are struggling financially. However, if your goal is to resolve your outstanding debts within a reasonable time frame, here is why paying the minimum is doing you more harm than good.

Paying the minimum only pays the interest, not the principle.

If your credit card issuer requires a minimum payment of 1 percent of the monthly balance each month, but annual your interest rate is 21 percent, that means that your monthly interest rate is 1.75 percent. That’s right – your interest rate continues to accrue when you pay the minimum balance, and month after month, you’ll find your total debt obligation actually increasing, not decreasing.

Paying the minimum hurts your credit utilization.

Your credit card debt – even if your making those monthly minimum payments on time – is one of the factors that influences your credit score. When you’re using your maximum credit limit and only paying the minimum, that balance can diminish your credit.

Americor Financial offers credit counseling services that can help your resolve your debt.

Americor Financial provides a variety of financial services that can help you manage your debt and meet your repayment goals. To learn how you can pay off your debt quickly, visit Americor Financial for more information.