Credit Cards: Paying Minimum or Paying Extra Early
Credit Cards: Paying Minimum or Paying Extra Early Though one is only required to pay the monthly minimum payment on a credit card, paying it off early by making more than the minimum monthly payment is not only good for one’s credit score, but it can save one a lot of money in the long run. The amount of interest accrued over a longer amount of time can be much larger than the amount that can accumulate in a shorter length of time. For example, if I had a credit card balance of $7890, I could pay it off in 42 years making the minimum monthly payment of $158. This would result in $21,533 in interest charges. However, if I were to make monthly payments of $286, it could be paid off in only 3 years and only incur $2,379 in interest charges. This shows the substantial amount of money that one may pay in interest charges; he or she would be basically be paying for the time they take to pay off the balance. Credit cards can be a wise way to pay for things if one is confident in their abilities to make (at the very least the minimum) monthly payments. For a fee in the form of interest charges, it gives him or her access to a larger amount of money than they may have available and allows them to pay it back in smaller increments. Paying it back on time will help him or her to build credit. Access to a credit card is sometimes a necessity. For instance, if one has an urgent need for something, whether it is diapers, medicine, or a last minute “forgot our anniversary” gift, sometimes one just doesn’t have the cash on hand to make these purchases. Things like these usually tend to pop up before payday hits. The option of using credit to cover these purchases is often very necessary. The same goes for other sorts of predicaments like medical issues or emergencies, auto repair, or legal quandaries. Sometimes people get credit cards with confidence in their abilities to pay off their balances, but unforeseen changes in their lives may keep them from making their monthly