When It’s Okay to Make Minimum Payments
Tuesday, January 15th, 2008If you’re savvy about your credit cards, you know that you shouldn’t normally make only the minimum payment that’s owed on your balance. In most cases, making nothing more than the minimum payment results in taking a lifetime to pay off your balances. When you finally do pay off the balance, the total amount that you’ve paid including all of that accumulated interest is far more than what your purchases were really worth. So in most cases, you should be making more than the minimum payment to make sure you get the best deal out of your credit cards. But there are some times in life when it’s acceptable to make only the minimum payments on your cards. Knowing when those times are can make it easier to organize your monthly spending.
The best time to make only a minimum payment is when you have a zero percent interest rate on your card. This means that you aren’t accumulating interest during this period so it’s essentially a grace period allowing you to relax a little bit. Of course, if you have the money to start paying off the card during this time, you should do so. But if not, you can sit back and breathe for a little while as you get your debt sorted out. Just make sure that you know when the zero percent period ends so that you’re paying more than the minimum at that time.
Likewise, if you have every low interest rates on your cards, it’s acceptable to make only the minimum payment for a short period of time. The best example of an instance when this is a good choice is when you are paying off a number of different cards at once. Pay only the minimum balance on the cards with the lowest interest rates so that you can put all of your extra money towards paying off those cards that have high interest rates. As you pay off those cards, you can begin putting more than the minimum payment towards these lower-interest cards.
Finally, it’s okay to make only minimum payments on any card when you are in the midst of a medical or financial emergency. Credit cards are great for emergencies and you shouldn’t be afraid to use them as such. If you’ve just become unemployed or taken a pay cut, you may need to reduce what you pay towards your credit card balances in order to be able to afford the rest of your life. Making the minimum payment will allow you to maintain good credit while you get settled into your new situation. Make sure that this is only a temporary period and that you start making more than your minimum payments once you’re back on your feet.
