When paying your credit card bill, you can choose either the total or minimum amount due. Do you always pay your full balance or just the minimum per month?
Some cardholders pay only the minimum balance because it's easier on the budget. Banks in the Philippines require a monthly credit card payment of at least a small percentage, ranging from 3% to 10%, of the total amount due.
Yes, paying the minimum on your credit card bill is better than skipping a payment
and incurring a late payment fee. But it will actually cost you more over time.
Here are the advantages you'll enjoy if you always pay your credit card in full.
Avoid Interest on Your Credit Card Bill
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When you pay just the minimum balance on your bill, you leave a balance that's carried over to the next credit card billing cycle. In addition, the bank will charge you a high interest on the overdue amount plus the outstanding balance. Also called the finance charge
, the monthly interest will cost you from 2% to 3.54% depending on the credit card provider.
As long as you're making the minimum payment, your credit card balance increases from month to month. This can make it harder for you to pay off your total balance. You just keep on paying your credit card bill monthly, but you can't get your balance down to zero.
So always make your full credit card payment
by the due date, and you'll never have to pay any interest. A zero finance charge on each credit card billing statement doesn't just look good on paper—it also means no debt to deal with.
Improve Your Credit Score
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Two important factors that affect your credit score
are your payment history and credit utilization ratio (the percentage of your credit you're using).
The credit payment history includes not just how timely you pay your credit card but also how much you pay. To get a good credit score, build a strong payment history by paying your monthly credit card bill in full.
Another way to boost your credit score is to avoid carrying a high balance on your credit card. Keep it well below your credit limit to reduce your credit utilization ratio
and increase your credit score. Consistently paying off your credit card bill maintains a zero balance on your account.
Be More Financially Disciplined
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If you make full credit card payment one of your financial goals, you're committing to set aside a portion of your monthly budget for that. You'll aim to keep your balance low, making it easier for you to pay your bill in full every month. As a result, you'll be more frugal with your credit card spending to keep your balance within your target limit. This trains you to be more responsible in using your credit card
Reduce Your Financial Stress
Time and again, studies have proven that credit card debt causes so much stress
. With so many other bills and financial obligations to tackle, it greatly helps to keep unpaid credit card balances at bay.
If you always pay your credit card bill in full each month, it will be one less thing to worry about. You can rest easy knowing that you're in control of your credit card payment.
It takes a lot of commitment and willpower to make a full credit card payment every month. While it sounds difficult, consider the benefits you'll gain from it. With a plastic card comes a responsibility to pay back exactly what you owe on time.
Sometimes though, financial emergencies can keep you from paying your credit card balance in full. In that case, try to pay as much as you can to keep your balance low. And when you've recovered, get back to consistently making a full payment on your credit card bill.