Should I Pay Only the Minimums on My Credit Cards?

A bit of advice that appears to fly in the face of conventional wisdom regarding your credit cards says that it might be ok for you to pay only the minimum payments on your credit cards.  While this is not a good long-term plan, there are some compelling reasons why you might consider this path.

To get you through.  With things as difficult as they are financially right now, it might be prudent to pay minimums temporarily if you need cash for other important items.  When it comes down to it, you need a place to live, food on the table, and in most cases a car in the drive in order to get to work.  If you are struggling with these basics, then you should consider making only the minimum payments on your credit card balances.  This will get you through a rough spot and keep you on track as long as you continue to make payments on time.

As part of an overall debt reduction strategy.  If you have instituted a strategy to reduce debt by paying as much as you can on other high-interest debts, then you can buy time by paying only the minimum on your credit card account.  This will allow you to keep your focus and since it is only temporary, you can buy necessary time to get through until you can make payments on the card again.  Make sure that you keep communications open with your credit card companies so that they know what is going on with your account.  You need a plan in place in order to make this work, so be sure to sit down and devise one before you begin.

When saving money in an emergency fund.  Again, this is a temporary situation in which you can use the money for a more important task.  Everyone needs an emergency fund.  Pick an amount and begin to throw as much money that you can into it.  Pay only the minimums until you get your fund built up, and then attack it to get the balance paid down and finally off for good.
Emergency funds are important for things like unexpected medical bills, auto repairs, house repairs, etc. And, even though you could pay for those with a credit card, you will thank yourself over and over if you have the cash on-hand to pay them rather than putting it on the card.  Keep your card for regular weekly and monthly purchase that you have budgeted for and for which you will be able to pay off without incurring higher interest rates and fees.
Pay only minimums when it is absolutely necessary.  Part of your overall financial strategy should be to constantly review your finances to see what needs attention.  You should employ every option that you have in order to keep yourself solvent and flexible.  It is all about having the right tools to reach your goals.  As a matter of fact, having and using credit cards should be a part of your short and long term financial goals.

A wise consumer knows when credit cards are best used and when cash should be used to make certain purchases.  And it is not something that you can make blanket statements about.  Everyone is in different situations and what is right for one person might not be right for another.

Make sure you take all of the above into consideration and then make your choices based on sound reasoning and not emotion.  If you follow this path, you will be better off financially in the future.

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This entry was posted on Friday, March 20th, 2009 at 12:45 am and is filed under Credit Card Debt, Credit Card Use. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.