Many of you have probably noticed that the little section on your credit card bill that reads “Minimum Payment” is considerably lower than your entire bill. The convenience of owning a credit card is having the option of putting off a bill, like a loan, and paying it later. You still have to pay something every month if you want to avoid any penalty fees, though. That is where the minimum payment comes in — the lowest amount of money that you are required to pay on your credit card statement each month. Credit card companies are required to set the minimum fee so it is possible to bring your balance down, provided you don’t charge anything extra to your balance.
Minimum Fee Calculation
Every credit card company will stipulate their minimum payment calculations in the agreement you initially sign. This will either be a flat fee, or it will be a percentage of your outstanding balance.
If your minimum payment is based on a percentage of your balance, it could be anywhere between 1% and 5% on average. If it is calculated based on a flat fee, it is all fees and interest due that month, plus 1 percent of the principal amount owed. Again, this will be specified in the terms you initially agreed to when you signed up with your credit card.
Pitfalls
Paying the minimum on occasion is not a bad thing. However, it can be a dangerous habit to get into. With the interest accrued on your balance the next month, as well as the additional charges added with your next month’s statement, your balance will continue to grow. Becoming dependent on those minimum payments will not lessen your balance if you continue adding charges to your account. This is how many people fall into debt.
Failure to pay at least the minimum payment will not only bring on penalty fees, but it can also damage your credit rating, and in worse cases, cause the credit card company to take legal action in recovering the money they lent you with their credit card.
Low Interest Credit Cards
Although all credit cards have a minimum fee, some credit cards are less of a worry than others. If you think you are the type of person who depends too much on paying the minimum, you can use 0% introductory APR credit cards to make the minimum monthly payment and take advantage of the 0% interest for the rest of the account balance for an extended period of 15 months or so. After the introductory period, you may apply for another 0% interest credit card or you may also choose a low interest credit card to minimize the interest cost.
| Credit Cards | Purchase APR | Transfer Info | Annual Fee | Credit Level |
|---|---|---|---|---|
| Wells Fargo Cash Wise Visa® Card | 0% intro APR 14.49% - 26.49% (Variable) APR after that | 0% intro APR 14.49% - 26.49% (Variable) APR after that | $0 | Good / Excellent CreditLearn MoreView Card Details |
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| Barclaycard Ring™ Mastercard® | 10.49% Variable APR | 10.49% Variable APR No balance transfer fee | $0 | Excellent CreditLearn MoreView Card Details |
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- Earn a $200 cash rewards bonus after spending $1,000 in the first 3 months
- Earn unlimited 1.5% cash rewards on purchases
- Enjoy 1.8% cash rewards on qualified mobile wallet purchases, like Apple Pay® or Android Pay™, during the first 12 months from account opening
- No category restrictions or sign ups and cash rewards don't expire as long as your account remains open
- Get up to $600 protection on your cell phone (subject to $25 deductible) against covered damage or theft when you pay your monthly cellular telephone bill with your Wells Fargo Cash Wise Visa® Card
- 0% Intro APR for 12 months on purchases and balance transfers, then a 14.49%-26.49% variable APR; balance transfer fees apply
- $0 Annual Fee
- Select "Apply Now" to learn more about the product features, terms, and conditions
- Click here for more details on Wells Fargo Cash Wise Visa® Card
- A low, variable APR on purchases, balance transfers and cash advances
- No annual fee
- No balance transfer fees
- No foreign transaction fees
- Chip technology, so paying for your purchases is more secure at chip-card terminals in the U.S. and abroad
- Free online access to FICO® Credit Score
- Click here for more details on Barclaycard Ring™ Mastercard®
