5 Times It’s Ok to Make Minimum Payments

Most credit card advice is to always pay more than the minimum on your credit cards. When you make minimum only payments it increases the amount of time it takes to pay off your credit card balance. Not only that, you’ll end up paying more in interest making minimum only payments than you would if you increased your monthly payments. While that “pay more than the minimum” advice is good advice, it doesn’t fit every situation. There are times when it’s ok to make minimum only payments.

When you’re focusing on paying off another credit card

The most effective get-out-of-debt plans involve you making a lump-sum payment to one credit card while making the minimum payments on all your credit cards. This works because you’re dramatically decreasing the debt on one credit card. The alternative, spreading your payments and making small dents in all your balances, would take longer.

You simply can’t afford to pay more

If your money is stretched and you’re barely making ends meet, it makes more sense to send the minimum payment on your credit cards. Trying to send higher credit card payments will only make your money problems worse. Send the minimum payments until your financial situation improves.

You need to create an emergency fund

Everyone needs an emergency fund – a savings you can use when emergencies come up. Having an emergency fund keeps you from having to use your current credit cards or apply for a credit card when an emergency comes up. Saving up an emergency fund takes time and is difficult to do when your extra money is going toward credit card balances. It’s ok to pay the minimum credit card balance until you get a small emergency savings. Once your emergency savings is established, increase your minimum payments again.

You have a 0% interest rate deal

The reason to make minimum payments is to pay the balance faster and avoid paying interest. If you have a 0% interest deal, you’re not incurring any interest charges. It’s only ok to make minimum payments in this situation if minimum payments will allow you to pay off the balance before the 0% interest promotion ends.

The minimum payment would cover your entire credit card balance

Sometimes your credit card balance is so low that your minimum payment would wipe out the entire credit card balance. If this situation applies to you, by all means, make only the minimum payment.

Always Pay At Least the Minimum

While there are some situations in which it’s ok to make minimum only payments, you should always make at least the minimum payment. When you pay less than the minimum, you face late payment penalties including a late fee, late payment remark on your credit report, and interest rate increase if you’ve done this twice within the past 60 days.

If you think you’ll have trouble making your minimum payment, contact your credit card issuer to work out payment arrangements. Your credit card issuer may be able to lower or waive your minimum payment to make it more affordable.