When it comes to paying off your credit card balances, you have multiple options. Paying the minimum on a credit card can be tempting. Why pay more if you don’t have to? If times are tough and you’ve been relying on your credit cards to help you pay other bills, it’s understandable if you feel you can only afford the minimum payment temporarily. Paying the balance in full, however, is best when you’re able. It may help prevent your credit score from lowering and can save you money in the long-term.
How are credit card minimum payments calculated?
The minimum payment for credit card accounts can vary from month to month. It’s typically calculated in one of two ways: As a percentage of your outstanding balance plus new interest and fees, or as a fixed amount, whichever is greater. For example, say a lender charges either 1% of your balance plus interest or $25. If your balance for a statement period is lower than $25, you’d simply need to pay the entire balance. It’s important to check your statements to understand the policy for your specific card and issuer.
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