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Orange County Credit Union provides a broad range of banking products and services like checking, savings, loans, and investments for every season of life. Through our blog, our aim is to equip readers with helpful advice that will enable them to reach financial goals.

Why Making Minimum Credit Card Payments Isn't Enough


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Why Making Minimum Credit Card Payments Isn't Enough

Sandra Diaz

Credit cards can be a great tool to help fund the things you want and need in your life, while also building your credit, but they need to be used wisely. Debt is quite common and knowing how to pay down your debt can help you save money as well as preserve and improve your credit score in the long run. While making the minimum payment seems like it can be a good way to keep everything afloat, it can actually hurt your short- and long-term goals.

You’ll spend more money. As long as you’re not using your card, making the minimum payments will eventually pay down your debt, but it can take years. Due to the long timeframe to pay off the debt, you’ll end up paying more for your credit card purchases. Even paying just a small amount over the minimum (more than the interest) can cut down on the time it will take to pay off the debt. Plus, you'll also be decreasing the overall amount you'll be paying back as there’s less time for the interest to continue accruing.

You'll have less available credit. A benefit of having a credit card is being able to buy things with it. If you’re only making the minimum payment, you won't be able to make much traction on the balance so it may be awhile before you can use your card. Paying off the balance quickly give you access to your available credit.

You'll impact your credit score. Hitting your max limit isn't good for your credit score, and could have lasting effects into the future. Part of your score is based on your credit utilization ratio—the relationship between how much you owe compared to your credit limit. If this number is higher than 30%, it can negatively affect your credit. Paying more than the minimum amount helps you continue to lower your overall balance.

If you're not sure how to go about paying off credit card debt, check out Use the calculators to determine how long it will take to pay off your balance based on your minimum monthly payment and how paying a little more than the minimum payment can shrink your debt faster.