Anonymous
Anonymous asked in Business & FinancePersonal Finance · 1 decade ago

Explain why it is unwise to make only the minimum payment on your credit card?

15 Answers

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  • 1 decade ago
    Best Answer

    because you are only paying the interest on what you owe...you are not necessarily paying down the credit card....the closer you are to the credit limit, the worse it affects your credit score

  • 1 decade ago

    Unless you are beating the interest rate you are paying somewhere else, the interest definitely adds up (it was a great deal on a sweater, but after the interest payments, you were paid twice as much for 1 year longer than you could wear it).

    Another point that should be made is that if you pay the minimum, the credit card company is more likely to increase your interest rate in the future, and paying the minimum looks horrible on your credit report so buying a house or car will cost extra because of your habits.

  • 1 decade ago

    Because the Minimum Payment usually doesnt even cover the finance charges that have occured during that period, so your not really paying off your credit card, your paying the finance charges, take this for example: I made the minimum payment on my credit card and the next months statement said that my balance was only $2.00 lower than it was the last month I received it...after paying the minimun payment, which was $82.00!!!!! I had incurred $80.00 in finance charges that month because of the balance, the credit card companies will always put your payment towards finance charges first and your actual amount due second...the only way that paying the minimum payment would work for paying down the actual bill is if you have a credit card with 0% APR...and even then you have to read the small writing because sometimes the 0% APR is only good on a balance transfer or on purchases, you should try for a card that gives you 0% APR on both balance tranfers and purchases

    Source(s): Personal Experience
  • 1 decade ago

    Because you'll be paying interest from day one on every subsequent purchase. So, the donut you bought for breakfast will end up costing you many dollars because you'll pay interest on it from today until you finally pay it off--maybe in two or three years.

    Add it up. If you have $150 balance and the payment is $10, it would take you 15 months to pay off that bill--if there weren't interest being added on every single month, whether you buy anything new or not! In that 15 month, you might accumulate an additional $40+ in interest--again if you never buy another penny on this card. Now it becomes 18 months! If you were buying a car that you're still driving in 18 months, that might make sense. But the donut or socks or movie ticket, or whatever, is long gone and you're still paying. Not to mention that in that 18 months, you've spent $40 on interest. That's 20 donuts you don't get to buy.

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  • Mark G
    Lv 4
    1 decade ago

    Well, it's kind of like taking a few dollars and throwing them in the street so that you can delay paying your bills. Credit card companies love people who only pay the minimum balance, because they make far more money off of them than anyone else. Pay the whole balance each month if you can. If you can't, look for a lower interest rate form of financing to pay the bill. Don't carry credit card debt.

  • 1 decade ago

    The interest that will be added to the charges is HUGE!!! If u buy, say, a coat that costs about $100, then it will take a few years to pay off that one coat+interest if u pay the minimum 2%. That is, a few years for just the one item, imagine charging hundred or thousands a month! The overall cost of the one coat will end up being more than triple of the original cost.

    Source(s): A TV show on credit cards
  • Anonymous
    1 decade ago

    Because you are paying mostly interest and very little capital the law states that credit card companies don't have to make you pay more than 1% of the capital per month. . .in other words you could be looking at 7 years just to pay off a 20 gas bill. . .seriously, the whole time you are paying interest and credit card companies look at how much you owe when they assign your credit scores. . .so it hurts you there too. . .meaning the next time you go for a loan you will have to pay a higher interest rate. . .over time this will cost you thousands of dollars in interest. . .not wise!!

  • 1 decade ago

    dude, because of the interest you are paying. For example, I owed Dell like $800.00 for a laptop. I send $300. for the first payment and the interest was like$35.00 or so. Then I sent them another $200. the interest was like $25.00 Then I sent another $175 and my interest was like $12.00 or so. Then I paid it at $50.00 a month so I wouldn't have to pay too much interest. If I had of paid the normal $23.00 per month I'd be paying only the interest and the bill would neve go down. Well I really don't remember how much the interest was but I am giving you a sample. The interest rate was like 29% which is ridiculous but I had to file bankruptcy due to serious medical condition and out of work so I messed myself up and have to pay high interest rates....good luck

  • Anonymous
    1 decade ago

    At 18% interest, a $2,000 balance will take 19 years and cost an extra $2,600 if you make only the minimum payment required each month. And that's if you don't ever charge another penny.

  • 1 decade ago

    Because the interest charges will pile up faster with you making only the minimum payments, and you'll end up paying more money over the long term.

  • Anonymous
    1 decade ago

    Because it will take literally YEARS to pay off the balance due to the interest. If you pay even $5 a month more than the minumum amount...that $5 extra will go solely on principle which is what you want...the faster you pay the debt down, the more money you save

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