Almost everyone has a credit card these days. This is mostly because to the advantages it provides, including reward points, discounts, and ease of payment. The use of credit cards has grown as a result of these advantages, yet frequently people misuse them, which can have unintended negative effects on them.
What is the disadvantage of making a minimum payment
Credit Card You pay 3 to 4 percent interest on the balance each month when you only make the minimum payment. This indicates that each month, the interest on the amount you owe keeps rising. As a result, you pay more interest and your principle balance rises. This may place you in a debt trap, which is a cycle.
Impact on credit score
In addition to raising your balance, paying the minimum has an impact on your credit score. You must pay your bills on time and in full if you want to keep your credit score high. Making minimum payments on a regular basis might have a detrimental effect on your credit score, which may cause issues with subsequent loans and other financial goods.
Risk of falling into a debt trap
Making minimum payments as a habit might lead to debt traps. Your outstanding balance will rise and you will ultimately pay more interest the more you make the minimum payment. This can develop into a negative habit that may be difficult to overcome..
What to do
Avoid making the minimum payment on your credit card if you are unable to pay it in full. Make periodic budgets for your spending and make prudent use of credit cards. Ask your credit card company for a payment extension if you need extra time to pay your debt.
Disclaimer: The information given in this article is for general information. Please consult an expert before making any financial decision. Use credit cards wisely and take care of your financial health.
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