The Benefits of Paying More Than the Minimum on Your Credit Cards

One of the most attractive things about using a credit card is that you have the convenience of paying just a small amount of your balance each month until the balance is completely repaid. You may be tempted to take advantage of this convenience and use your money for other things. While the minimum payment is certainly easier to make, it typically costs much more in the long run than if you paid your balance in full. Here are a few reasons you should bite the bullet and pay more than the minimum on your credit card each month.

You'll save money on interest.

a woman working on a laptop holding a bill
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When you make the minimum payment, you ultimately pay more in finance charges than if you paid your balance faster by making bigger payments. You could save hundreds, possibly even thousands, of dollars in interest just by raising your monthly credit card payment even by a little.

For example, if you have a $2,000 balance at 14% APR, paying the minimum will cost $1,833.24 in interest. If you instead send $100 a month and make no future charges, you'll only pay $290.77 in interest, saving more than $1,500 in interest. (Based on's Minimum Payment Calculator and minimum payment calculated at interest+1% of balance.)

You'll pay off your balance sooner.

Making the minimum payment not only costs more money in the long fun, it will also take you longer to completely pay off your balance.

For example, it would take more than 14 years to pay off a $2,000 credit card balance (at 14% APR) when you only make minimum payments! By the time you pay off your balance, you may have used and discarded what you initially purchased on your credit card.

On the other hand, sending $100 a month consistently would allow you to pay the balance in just under two years. (Again, assuming you make no future charges on the card and your APR doesn't change).

You can improve your credit score.

While your monthly payment isn't factored into your credit score directly, it does play role in the health of your credit.

Credit utilization - the ratio of your credit card balance to your credit limit - is 30% of your credit score. If your credit card balance is high relative to your credit limit, it costs precious credit score points. A low credit score can make it harder to qualify for credit cards and loans.

Minimum payments only lower your balance a small amount at a time because a large amount of your payment is applied to monthly interest instead of your credit card balance. So if you have a high utilization, it will take several months, maybe even years, to reduce your balance and lower your utilization. Bringing your balance down faster by paying more than the minimum will help improve your credit score.

It helps you prepare for a mortgage.

If you plan to buy a home or make another large credit purchase in the near future, you'll probably need to pay off some debt to qualify for a loan or to at least qualify for a competitive interest rate.

Minimum payments won't lower high credit card balances quickly enough. Raise your payments to pay off credit card balances before you make an application for a large loan.

You'll increase your available credit faster.

Your credit cards are useless if you don't have any available credit because your balances are so high. And if your balance is slowly decreasing because you're only paying the minimum, it will be several months before you can use your credit cards again. Increasing your payment amount allows you to pay your balance down quickly so you can free up available credit..