The convenience of credit cards is that you have the option of paying the minimum due each month. The minimum payment is calculated as a percentage to your total outstanding. The appropriate interest on the total outstanding is part of this minimum due amount. Consumers find it very easy to pay the minimum amount, but it typically costs you more on the interest and takes more time to complete you due in this pattern of payment. Look out for the reasons why you should pay more than the minimum in your credit card:
- Spend lesser amount on the interest:
When you make the minimum payment into your credit card account, you are not paying anything substantial towards to the actual outstanding. Most of the amount out of this minimum caters to the interest on the total due. Paying an amount more than the minimum which suits your pocket will save the cost of interest.
In case, you continue spending on your credit card, the outstanding further increases and never does your debt come down. It is advisable that in case you have huge outstanding on your credit card, please cease to use the card until you clear it. This will help you regularise your balance.
- Complete the repayment early and clear off your dues:
Not only do you pay more in interest, you also turn out repaying the credit card balance over an extended period of time. The minimum amount comprises less of the actual due and more of the interest. So, paying more than the minimum means contributing more to the principal outstanding and clearing your outstanding sooner.
- Improve your credit score: Credit card outstanding contributes to around 30% of your credit score. Your credit score is affected if the outstanding amount on your credit card is relatively high. Minimum payment hardly contributes towards the principal outstanding. It decreases the principal outstanding very little at a time. The more you pay, the sooner you will clear your dues and get a decent score.
- Qualify for a home loan:
In case you are planning for a home loan, you should try to pay off your dues fast. The lesser your other loan and credit card outstanding, the better you qualify for a home loan. Home loan qualification is affected by how much balance you have on your credit card. Clear your dues faster to be eligible for a good home loan deal.
- Increase the amount of credit available to you:
what is the use of credit card if there are no balances available to you? If you continue to pay the minimum to your credit card, there will be very little balances which you can use. So, the faster you repay, the better are the balances at your disposal.
Repay your credit card balances on time. Plan your expenses and credits to go in line with your income. Achieve the best-considered credit score of 800 plus. Enjoy a healthy financial health.