3 Reasons to Pay More Than the Minimum on Your Credit Card

Each month, your credit card has a minimum due payment amount. However, did you know that paying just the minimum on your credit card each month might be costing you more than you think? The minimum payment is the lowest amount you can pay to remain in good standing and avoid any late or missed payment fees when paid by the due date.

While paying the minimum may seem like a convenient option, there are more benefits to paying off as much as you comfortably can each month, even if you can’t pay the full statement balance. Here are 3 compelling reasons to pay more than your minimum balance due on your credit card.

1. Small Changes = Big Savings

   The more you pay down your balance, the more you can save in interest charges.

   For example: if you have a credit card balance of $1,000 at an interest rate of 13% APR, here’s a comparison* showing how much you’ll pay over time.

   Payment amount	Time to pay off balance	Total interest paid
   $20 (minimum payment amount)	12 years	$815
   $40 (double the minimum payment)	3 years	$173

   In the above example, by paying a fixed amount that’s higher than the minimum, you’d pay off your balance 9 years sooner and save over $642 in interest!

   One of the reasons paying off your balance using just the minimum takes so long and costs so much is that while the minimum due in the first month is $20 (2% of $1,000), this amount decreases each month as your total balance decreases, so you are actually paying off less of the debt each month.

2. Lower Debt Burden

   Paying off your credit card not only keeps your debt in control but also provides peace of mind, freeing up funds for your goals and dreams like buying a car or building up emergency savings to be better prepared for the unexpected.

3. Credit Score

   Using too much of your available credit can have a negative impact on your credit score. When you use less of your available credit, your credit health can increase. Generally, your credit score can improve if you keep your monthly balance below 30% of your total credit limit for each of your credit cards. We recommend aiming for a credit utilization rate of 10% or less of your total available credit to boost your credit score.

Where can I learn more about my minimum payment?

Statements from all credit card issuers include a “Minimum Payment Warning” on the first page of the statement. This shows you:

• How long it will take to pay off your balance if you make only minimum payments, and how much total interest you will be charged.
• How much you should pay each month to pay off your balance in 3 years, and how much you would save in interest.

This information will change from month to month, depending on how much you use your card, and how much you pay.

How can I pay more than my minimum balance?

When making your RCU credit card payment in digital banking, select the “Other” option to enter a custom payment amount.

What if I struggle to pay the minimum payment?

RCU’s Financial Assistance team is here to help. Please contact us at 1 (800) 479-2800, or visit redwoodcu.org/financialassistance.

^*The example is shown for educational purposes. It may not be applicable or accurate with regard to your individual circumstances, which include your interest rate, current balance, and monthly spending.