Why do I say that your credit card payment is the most important? Aside from the obvious reason that you need good payment management habits to avoid getting dragged into the debt pit, a good payment practice will also save you thousands of dollars in interest rates and penalty charges.
There are many things you need to consider when it comes to paying your credit card bills. Here are some of the most important questions you should pay attention to:
‘How much should my payment be?’
There are three options: minimum, minimum plus, and full. Many card holders resort to minimum payments due to minimal cash outlay and a flawed sense of confidence in their debt management plans. Unfortunately, however, this is a recipe for disaster. Credit card debts can easily pile up and most often than not, minimum payers end up smothered in debt. You should remember that credit card issuers utilize compounded interest, meaning interest also incurs interest when you carry a balance every month. It is not surprising that many end up paying 70% in interest of their total outstanding balance by the time it is completely paid off.
Minimum plus is a better option than just paying minimum. If you can pay more than 50% of your outstanding balance every month, much better. To give you a good idea of how much you will be paying in interest and how long it’ll take you to pay off your outstanding balance, use credit card calculators available online.
Full payment is of course the best payment plan. You will not only save yourself from paying exorbitant interest charges, you will also be earning bigger rewards while boosting your credit score.
‘What if I miss my payment?’
It is fine to pay the minimum if the alternative is missing the payment altogether. Consequences are not at all appealing and you may end up paying more money than what you actually owe. First, you’ll be charged a late payment penalty which ranges from $25-$35. If you have maxed out your credit card, that means another $25-$35 in penalty. On top of these, your credit card issuer can easily increase your interest rate especially when you are using a variable interest credit card. Late credit card payments also show on your credit report, so it can also spoil your credit score if you are not careful.
‘How Can I Avoid Payment Problems?’
It is easy to forget about due dates, especially when they refer to your payables. One of the most effective ways of ensuring that you always pay on time is to arrange auto payments with your bank. Your bank will make deductions from your account and pay the same amount to your credit card issuer. Also, you can consolidate your credit card balances so that you’ll be paying fewer cards. Make sure to mark due dates on your kitchen calendar, PDA calendar, and computer calendar. It’ll give you a sense of urgency to pay it off.
It pays to have a card that helps you manage your credit card payment. Pay attention to this key factor when doing credit card comparison; you might just find a good offer that includes this option.
