What happens if we pay minimum due on credit card

General
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what happens if we pay minimum due on credit card

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What happens if we pay the minimum due on a credit card?

Answer:
Paying only the minimum due on a credit card can have serious financial consequences. Here are some important points to consider:

  1. High Interest Charges: By paying only the minimum due, you will carry forward the remaining balance to the next billing cycle, and interest will be charged on this balance. Credit card interest rates are relatively high, so you end up paying a significant amount in interest over time.

  2. Debt Accumulation: By consistently paying only the minimum due, you are prolonging the time it takes to pay off your credit card debt. This can lead to a snowball effect where your debt keeps growing due to high-interest charges.

  3. Credit Score Impact: Making only minimum payments can negatively impact your credit score. Credit agencies consider your credit utilization ratio, which is the amount of credit you are using compared to the total you have available. High credit card balances can lower your credit score.

  4. Long-Term Financial Health: Opting for minimum payments might provide short-term relief, but in the long run, it can harm your financial stability. It’s essential to pay more than the minimum to reduce your debt and avoid high-interest charges.

Overall, paying only the minimum due on a credit card is not advisable. It’s crucial to pay off your full balance whenever possible to avoid accumulating debt, high-interest charges, and negative effects on your credit score.