It is one of the first things you will hear as advice when you contemplate getting a Credit Card. “Pay your dues in full.” And there is good reason for that oft-repeated advice. There are a few negative consequences that arise from avoiding payment of your entire Credit Card bill. Let’s tell you about it.
- Your Credit Score will sink
Yes, we understand that you will need to make minimum payments on your Credit Card on that rare occasion. But the trick is to try and avoid it as much as possible. Don’t make it a habit, simple. Regularly paying only the minimum due on your Credit Card can have a negative impact on your Credit Score.
Did you know? 30% of your Credit Score depends on how much debt you’re carrying, especially on Credit Cards.
Here’s what you can do. Put a self-imposed spending limit on your Credit Card. This should be a sum that you will be comfortable paying off completely.
- Bad credit management can inflate your monthly bills
A payment of the minimum due on your Credit Card means you need to pay only 4-6% of the total due on the Credit Card. If you continue to pay only the minimum due on your card, the balance will never decrease.
- Your Credit Card becomes a burden
Leaving an unpaid balance on your Credit Card adds a whole lot of interest to your dues. Remember, Credit Cards come with the highest interest rates for delayed repayment. The rate on Credit Cards is between 20-24%. That’s quite a sizable chunk of the pie, isn’t it?
Psst … That’s why they also advise you to take a Personal Loan to repay your Credit Card debts. That’s because Personal Loans have a much lower interest rate compared to a Credit Card.
Making minimum payments on your Credit Card is convenient, no doubt. But this should not become a habit.
Did you know that you can even boost your Credit Score by using a Credit Card? Yes, you can!
Follow one rule of thumb with Credit Cards. Use it responsibly.
Additional Reading: Balance Transfer Between Credit Cards
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