Avoid The Credit Card Monthly Minimum Payment Trap

Credit cards have recently become part of the daily modern life. Particularly in the digital age which encourages mobile and contactless transactions. Currently, it is common find people with credit cards in their wallets.

Among the biggest myths prevalent in the use of credit cards is that the minimum payments for each month are intended to help borrowers repay their existing balance promptly. But then again, such a statement is farther removed away from the truth.

Actually, paying only the minimum installments on your card bill will cause your charges in interest to skyrocket. This will, in turn, inflate the overall cost of the credit card debt you have.

The Trap – Why You Need To Avoid The Minimum Monthly Payments

The trouble starts when people think the minimum payment is more like a monthly charge rather than an option. It can be tempting to only pay this smaller sum of your card bill; the credit card provider will be contented with the smaller amount. This might have you thinking that you need to charge hundreds or even thousands of dollars worth of purchases nearly free.

However, this amount is not free because you will eventually have to settle that whole debt. Also if you only pay the minimum amount every month, then it might take decades before you are debt-free.

For instance, consider this scenario: Let us say you have a $2,000 balance on a credit card with 15 percent APR. When you only make minimum payments (first monthly cost of $40), then you will take more than 14 years plus costs above $2,200 as interest to repay. This is provided that you do not charge any additional purchases to your card. That is before you can repay the bill fully. This means that it will cost you more in interest only than the initial loan balance amount.

As an alternative, you may consider paying a fixed payment of $80 each month. In so doing, soon you will notice the period of time to repay the balance reduce to under 3 years. To boot, your interest charges will reduce to around $400. This is less than a quarter the amount it was when following the monthly minimum-payment plan.

Borrowers need to realize that minimum payments only serve a particular goal for both consumers and credit card providers. They offer additional flexibility for card users yet at the same time providing some level of assurance to card issuers. This to issuers means that the borrower has not defaulted on the repayment of their debt. In an emergency or short-term situations, credit cards can prove to be very useful.

However, it is important that borrowers realize that just because there is a minimum payment. It does not permit them to frequently spend more money than they can afford. But unless you are faced with unique circumstances or unexpected major expenses.

It is best to stick to your budget then repay most when not the entire outstanding card balance for each month. This will be the ideal way to guarantee that you do not get into the trap of making the minimum payment.

Ways to Avoid the Minimum Monthly Payment Trap

Even though this may seem to be unbelievable at first, the numbers show how much minimum card payments can be a financial trap for many borrowers. This difficult financial situation may be avoided in a number of ways.

To start with, it is not a good idea to have a balance on a credit card – never. When possible, it is best to always avoid having any charges on the credit card that are not able to repay in full by end month. When this rule is ignored for a while, bit by bit. It can quickly have your debt snowballing into large out of control cycle of debt.

Secondly, in general, it may be a good idea to establish a fixed payment plan for your card bill each month. In essence, you need to consider putting aside as much money as you can for repaying your card bill: the aim is to always pay down the existing balance in full and fast as you possibly can.

By simply putting a dent in the total outstanding card balance does not mean you have to relax and start paying less. When the average consumer earlier examined was to put in S$400 each month. Then the period of time needed for paying down the card debt will be reduced down to three years. This will, in turn, reduce their consumer’s total interest to be paid by nearly about $3,848.

Lastly, when you have a lot of outstanding balance that you need to repay soon. It may be a good idea you consider either going for a balance transfer or getting a debt consolidation scheme. These tools will help you stay away from those high credit card rates of interest for several months or better yet for several years.

Typically, the balance transfer loans may be ideal for smaller debt amounts that may take 12 months and less to repay. On the other hand, debt consolidation loans may be great for those bigger loan balances which will take several years to pay off.

By utilizing either of these tools will also help you save a lot of money in interest costs. It will also you pay back your obligations a lot faster


Work towards being a master to your credit cards and not a slave. With a little control and some planning will have a great impact to keep you debt-free. It will also help you develop good credit thus attain your set financial goals. Slipping into huge amounts of card debts can be viewed similarly to the way a person fall into a trap. For this reason. It is crucial that you manage as well as prevent accrual of credit card debts.

When you wish like to know whether you have been maintaining a healthy credit score with your credit cards. You may check your score by getting your credit report from the Singapore Credit Bureau at $6.42 for each copy.