Alabama Credit Card- Why You Should Pay More than the Minimum

By: EconomyWatch Content Team   Date: 30 January 2010

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When you receive your monthly statement for your Alabama credit card you will probably notice that there is an entry that will tell you what your minimum payment is for the month. The minimum payment is a small percentage of what your monthly balance is. While paying the minimum might seem like the easiest thing to do it also has a high cost attached to it. You will take longer to pay off your balance and you will be charged interest.

Reasons to Pay More

There are some very good reasons why you should pay more than your minimum payment on your Alabama credit card. Let us take a look at those reasons here.

You save money in the long term when you make more than the minimum payment. The reason for this is because the finance charges are greater if you pay very little. If you make the decision right now to pay as much as you can comfortably afford on your credit card every month you will save yourself a tremendous amount of money. It is your hard earned money after all!

You will take much longer to pay off your credit card balance if you make only the minimum payments. The more you owe the longer it will take. As well you will pay a great deal in interest charges. To use a concrete example of this, if your Alabama credit card has a balance of $5,000 owing and the annual percentage rate is 14 percent then it will take you more than 20 years to pay it off if you pay only the minimum required every month.

Making minimum payments does not help your credit score at all. In fact it can negatively affect it.  If the balance on your credit card is high in comparison to your limit then this can bring down your credit score. Minimum payments reduce your balance very slowly. On the other hand, if you make bigger payments this will make your credit score go up as it reflects more positively on your Alabama credit card management.

If you are only making minimum payments and are dangerously near your credit limit then your credit card is not going to be very useful in the event of an emergency. If something comes up you will have to find another way to pay for it. You probably got the card in the first place so it could be there to help you in the event of a circumstance where money was scarce. When you make only the minimum required payments you pay the interest on the card but you hardly touch the principal.


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