Why you should pay more than the minimum credit card payment

9 December2010

Credit cards provide a quick, easy and convenient way of paying for things. Not only do they enable you to spend money in advance and spread out the cost - they also provide protection against emergency costs that could otherwise be unaffordable.

Another advantage of credit cards is that they`re relatively flexible - you`re only required to make a minimum repayment each month, but apart from that you can repay as much as you want, when you want.

It can be reassuring to know you only have a minimum repayment to make - in a financial emergency, it can be helpful to reduce your repayments temporarily.

However, you should always try to repay a good proportion of your debt each month, because making only the minimum repayments could mean your debt takes a very long time to pay off - and costs a lot more in interest than you`d expected.

A typical example

Let`s say you have a £1,000 credit card debt with an interest rate of 18%. The credit card has a minimum repayment of 3% or £5 a month (whichever is higher).

Paying this back in equal payments over the course of a year would cost you £92 a month, paying back £1,093 in total.

On the other hand, making only the minimum monthly payment could cost you around £1,900 overall and take you a total of 166 months to repay - which means almost 14 years spent repaying the debt.

Making the minimum payment may be easy, but the longer you take to repay what you owe, the more interest you`ll pay and the longer you`ll be at risk of financial problems if anything goes wrong. It`s better to repay your credit card balance more quickly whenever you can.

What if I can`t afford to repay my debts more quickly?

If you simply can`t afford to make more than the minimum monthly payments on your credit card debt, it`s likely that you have a financial problem, and it`s important that you discuss your situation with an expert as soon as you can.

Review our latest credit card best-buys

Product Transfer
rate & period
New Purchases
rate & period
Representative
APR
 
CardBarclaycard
Platinum Credit Card with Extended Balance Transfer
0%
26 mths
3.5% Fee
0%
6 mths
18.9%
(variable)
Representative example: With this credit card the representative APR is 18.9% (variable) based on an interest rate of 18.9% (variable), transfer fees of 3.5% and a credit limit of £1200.
CardBarclaycard
Platinum Credit Card with Balance Transfer
0%
25 mths
2.8% Fee
0%
6 mths
18.9%
(variable)
Representative example: With this credit card the representative APR is 18.9% (variable) based on an interest rate of 18.9% (variable), transfer fees of 2.8% and a credit limit of £1200.
CardTesco Bank
Clubcard Credit Card for balance transfers
0%
25 mths
2.9% Fee
0%
3 mths
16.9%
(variable)
Representative example: With this credit card the representative APR is 16.9% (variable) based on an interest rate of 16.9% (variable), transfer fees of 2.9% and a credit limit of £1200.
CardHalifax
Balance Transfer Credit Card
0%
25 mths
3% Fee
0%
3 mths
18.9%
(variable)
Representative example: With this credit card the representative APR is 18.9% (variable) based on an interest rate of 18.95% (variable), transfer fees of 3% and a credit limit of £1200.
CardNatWest
Platinum
0%
24 mths
2.9% Fee
0%
6 mths
17.9%
(variable)
Representative example: With this credit card the representative APR is 17.9% (variable) based on an interest rate of 17.95% (variable), transfer fees of 2.9% and a credit limit of £1200.
CardRoyal Bank of Scotland
Platinum
0%
24 mths
2.9% Fee
0%
6 mths
17.9%
(variable)
Representative example: With this credit card the representative APR is 17.9% (variable) based on an interest rate of 17.95% (variable), transfer fees of 2.9% and a credit limit of £1200.
CardMBNA
Platinum Credit Card
0%
23 mths
2.5% Fee
0%
3 mths
16.9%
(variable)
Representative example: With this credit card the representative APR is 16.9% (variable) based on an interest rate of 16.9% (variable), transfer fees of 2.5% and a credit limit of £1200.
CardFluid
Balance Transfer Card
0%
23 mths
2.89% Fee
0%
3 mths
16.9%
(variable)
Representative example: With this credit card the representative APR is 16.9% (variable) based on an interest rate of 16.9% (variable), transfer fees of 2.89% and a credit limit of £1200.
CardMBNA
Credit Card
0%
22 mths
2% Fee
0%
3 mths
16.9%
(variable)
Representative example: With this credit card the representative APR is 16.9% (variable) based on an interest rate of 16.9% (variable), transfer fees of 2% and a credit limit of £1200.
CardLloyds TSB
Platinum MasterCard
0%
21 mths
1.5% Fee
0%
3 mths
17.9%
(variable)
Representative example: With this credit card the representative APR is 17.9% (variable) based on an interest rate of 17.95% (variable), transfer fees of 1.5% and a credit limit of £1200.
CardNationwide Building Society
Credit Card
0%
20 mths
1.55% Fee
0%
3 mths
15.9%
(variable)
Representative example: With this credit card the representative APR is 15.9% (variable) based on an interest rate of 15.9% (variable), transfer fees of 1.55% and a credit limit of £1200.
We provide a representative range of products on competitive terms and do not act exclusively for any credit provider. Credit limits may vary depending on your circumstances.


Tags: credit cards, credit card, minimum payment, credit card minimum payment, payment, minimum

Fees payable when continuing service is provided. Repaying debt over a longer period may increase the total amount to be repaid. Calls are recorded and are usually free from UK landlines. Mobile phone users may be charged and should check with their service provider. Cards are provided by third parties and are subject to eligibility, status and terms and conditions. Applicants must be UK residents aged 18 or over.

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