Negative Impact to Your Credit ScoreOne of the factors used to calculate your credit score is the percentage of your available credit that you have used. A full 30 percent of your credit score is calculated based on the amount owed. By paying only the minimum, you often will owe more in interest for the month that you pay, which will increase your utilization percentage even if you do not use the card. If you have a credit card with a $10,000 limit and you owe $3,500 then you have 35 percent utilization, which will reduce your score. Any credit utilization percentage over 30% will hurt your score.
Extended Time to Become Debt FreeIf you only pay the minimum amount each month, even if you do not make additional charges, it will take an extended time to pay off the card. If your utilization score is affecting your credit score, then this length of time will cost you additional money in higher interest for other credit. You can also lose other opportunities where credit score is factored, including employment or rental application acceptance.
Paying High Amount of InterestIf you pay off your credit card by only paying the minimum payment each month, you will have paid a lot more total costs than if you had made larger payments throughout the life of the debt.
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