Minimum Repayments

When it comes to wise credit card management, avoiding minimum repayments must stay at the top of your priority list, and there is a reason why should consider this approach to your personal finances.

A minimum payment is the amount that each of us must pay every single month to keep our credit account in order. However, Credit Card minimum repayments are not a clever way to manage any debt, as many people might believe.

Repayments involve the cost of your debt, or in other words, the interest rate over the borrowed money. Many people opt for reducing either the minimum payments or the interest rate in the belief that such action will reduce the total cost of their debt, but doing so is only a theory that will not reduce monthly payments.

Therefore, minimum repayments without careful study before applying any adjustment will impact your credit negatively, often the result of calculating your interest rate in the wrong way.

Minimum Repayments are dangerous because they leave a percentage of your outstanding debt uncovered, and those monies cause major credit damage that subsequently will affect your credit score.

If you really want to reduce the interest rate on your credit, go for the bigger monthly repayments rather than play the "minimum game". Beware of lenders who lower minimum repayments, because this is a trap encouraging cardholders to fall deeper into their actual debt.

After the Office of Fair Trading (OFT) ruled to make lenders comply with a £12 cap on their default penalty payments, decreasing the minimum repayment make borrowers stretch their credit card debts for longer periods of time.

This action only ends up with the borrower paying much more interests than those in the original repayment plan.