Making Your Credit Card Payment On Time Doesn’t Stop Interest


There are plenty of credit card myths out there. And there seem to be new ones created every day, partially because credit card issuers use some of the sneakiest and confusing tactics out there.

But that doesn’t mean you shouldn’t know how your credit card works if you use one on a regular basis.

A new survey from a company called CreditDonkey revealed that more than a third of consumers (33.4%) believed that making the minimum payment on their credit card either reduces the interest rate on the balance or stops interest from accruing until the next billing cycle.

So let’s debunk these myths immediately to ensure cardholders aren’t hurting themselves unknowingly.

Doing the Bare Minimum

When you make the required minimum payment on your credit card, you’re simply doing the bare minimum to ensure the card issuer doesn’t issue you a late payment or report a delinquency to the credit bureaus.

In other words, you’re not doing anything all that spectacular. You’re simply doing what is required of you, and nothing more.

As a result, you’re not going to stave off interest. Sure, a slightly reduced balance will mean less interest charged in subsequent months (assuming you don’t run up your balance more), but this is the most ineffective way of paying off your credit card debt.

And it certainly won’t stop interest from accruing between billing cycles. In fact, if your credit card APR is above 0% and you carry ANY balance from month to month, you’ll pay interest.

This is where they “get you.” Before you know it, those finance charges will hit you month after month, whether you notice them or not.

So you must pay your credit card balances off in full each month (including any prior balances) to ensure you aren’t charged any interest.

Transfer the Debt If You Can’t Pay It All Off

Assuming you are one of the many that cannot pay off your credit card balance in full, there’s always a credit card balance transfer.

A balance transfer allows you to make one large payment to pay off your credit card bill completely, and then move the debt to a new credit card issuer (the one who made the payment for you).

The point of the whole thing is to transfer the balance from a sky-high APR to a 0% APR credit card, which will mean zero interest charged during the promotional period, typically 12 months or longer.

In this case, carrying a balance month-to-month and making the minimum payment won’t result in interest charges because the APR is set at 0%.

This is the one exception to the rule debunked above. If the APR on your credit card is 0%, you can make the minimum payment without accruing interest. The huge downside is that your debt isn’t being tackled effectively.

Read more: Carrying a balance doesn’t help your credit score!

By Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.

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