Paying the minimum amount each month can make it feel like what you owe on your card is affordable.
But this can be a bad idea. If you don’t pay off your balance at the end of the month, and you’re not in a 0% introductory period, you’ll have to pay interest on your outstanding balance. The interest rate on credit and store cards can be a lot higher than for a personal loan.
Even if you’re on a 0% rate for an introductory period, paying only the minimum each month will make only a small impact on your debt. And it could take a long time, and cost a lot, to repay the balance even if you don’t carry on spending.
Also, if you make only minimum repayments, this will show up on your credit file. Other companies might assume you’re struggling and will be more reluctant to lend you money.
This could even affect your chance of getting a mortgage in the future.
Always try to repay as much as you can. Even if you only increase it by a small amount each month, it can make a huge difference.
Credit card providers are obliged to contact and encourage people who have made very low or minimum payments on their credit cards for the past 18 months. This is where you have paid more in interest, fees and charges than what you have paid back to get the balance down on your credit card.
Lenders are required to suggest higher affordable repayments. If you don’t respond, or ignore the issue, and the situation persists for more than 36 months this could lead to your account being suspended. Your creditor could also take enforcement action against you.
If you start missing any payments on credit or store cards, it’s time to think about getting debt advice.