Paying Minimum with Your Credit Card Debts Hurts you the Most

By Paul J. Easton

One of the most common mistakes, probably the most expensive as well, an individual can make with their credit cards is habitually paying the minimum amount due each month. Without knowing this, it is unfairly burning you more money long term.

It is very easy to make only the minimum payments every time because it is affordable and gives you the chance to spend some amount to other expenses. By freeing up some cash flow, you can get that latest DVD player or that designer's dress you always wanted. Without knowing it, you are destined for a financial disaster short-cut.

The practice of paying the minimum is hurting a lot people who need to work towards financial freedom. Here's an example. If paid with minimum amount due for years, a previously low balance can turn into a very big debt when compounded with interests and hidden charges. This turns out to be a small problem turned into a nightmare and may get over a decade to repay. With multiple credit cards, this can lead to a true financial tragedy.

To fight this problem, you have to pay more than the minimum each due date, probably twice the minimum amount. Make an effort to send your payments promptly to avoid late charges. You perhaps won't notice the extra amount but it will go straight onto your principal. This deducts the debt faster and reduces the interests every time. The more you reduce the balances, the lesser you will have to deal with more interest.

With only the interests and other fees and charges as the ways for credit card lenders to earn profits, the habit of paying the minimum is what they subtly encourage from you. It's essential to know that the credit card companies never let you pay back your balances in small amounts just out of their kindheartedness. This is their business and this is how they make their money. Paying the usual 2% of your balance each month as minimum definitely assures that you will be substantially filling their cash coffers.

As you can afford squeezing it to your budget, increase the amount you pay every time gradually. Try increasing it each month with a certain amount like $10. Soon enough, you will notice that you are starting to actually put a dent in the balance. Trying this step will exactly cut off years of repayment period; thus, saving you hundreds or even thousands of dollars.

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