Five Principles of Making Credit Card Payments

Updated May 30, 2021

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Part of managing multiple credit cards with balances is figuring out your credit card payments each month. Should you pay the minimum on each card? If you pay more than the minimum, how much more should you pay? Should you pick one card and pay more on that one?

Here are some some strategies to help you figure out how much to pay on your credit cards to at least keep them in good standing.

If you're focusing on getting out of debt, your payment plan might look a little different.

Pay at least the minimum on all your cards

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You should always make at least the minimum payments on your credit cards, no matter what. Your payment will be considered late if you pay less than the minimum or miss your minimum payment. Late payments come with a few consequences. Not only will you be charged a late fee, but your interest rate also might rise (especially if you're 60 days delinquent), making it more expensive to carry a balance.

After 30 days with no payment, your delinquency is reported to the credit bureaus, added to your credit report, and factored into your credit score. A single late payment in your entire credit history might not do much damage, but the more delinquencies you have, the worse the effect on your credit score will be.

Paying the minimum each month is the longest and most expensive way to pay off your credit card balances.

Catch up on any past due accounts

You should get caught up on any accounts that are behind as quickly as possible. Until you get caught up, you'll continue to rack up late fees and delay the amount of time until your interest rate goes back down.

These delinquent bills will stay on your credit report and hurt your credit score until you've paid off the past due balance. If you have any extra money in your budget after making the minimum payments on all your cards, put it all towards bringing your accounts current.

Once your account is 180 days past due, your creditor might charge-off your account, refer it to collections, or both. At that point, you'll lose your purchasing ability and you'll no longer have the option of making monthly payments on your credit card.

Contact your credit card issuer before you're too far past due to discuss hardship payment options like temporarily lowering your interest rate or minimum payments.

Bring your maxed out accounts below the credit limit

Any time your credit cards go beyond your credit limit, it raises red flags to current and future lenders. It causes them to wonder if you can responsibly handle credit. You may be charged an over-limit fee if your credit card charges this fee and you've opted-in to having over-the-limit transactions processed.

After paying the minimum and getting caught up on past due balances, put your leftover funds toward reducing maxed-out balances. Lowering your balance also will help your credit score.

High credit card balances can hurt your credit score, since the amount of debt you're carrying is 30% of your credit score.

Bring high balances closer to $0

To maintain a good credit score, you should keep your balances closer to $0. Focus especially on balances that are close to the credit limit. High credit card balances increase your credit utilization and hurt your credit score. Keeping your balances low shows that you can handle credit responsibly and will help improve your credit score.

A good rule of thumb is to keep the total of your balances to no more than 30% of your combined credit limits.

Pay off high-interest-rate balances

If you want to get out of debt quicker and save money on interest, you should first focus on paying off high interest rate credit cards first. Since you pay more in finance charges on high-interest-rate credit cards, it's wisest to pay those balances off quicker to minimize the amount of interest you pay.

After you've met the minimum payment on your other accounts, put a lump sum payment toward your balance with the highest interest rate until it's paid off.

Of course, if your goal is to get out of debt completely, you should evaluate your credit card interest rates along with the interest rates of your other debt.