Making Credit Card Payments
How should I manage making my monthly credit card payments?
The best way to keep your credit rating high and to enjoy your credit cards without added stress is simple: don’t buy more than you can pay off each month.
If you pay the balance on your credit card each month, you won’t accrue interest or find yourself in over your head. If you plan on using the card to buy larger purchases that need to be paid off over a long period of time, the suggestion is: make one large purchase on the card and do not use it again until you have paid off your balance.
What does it mean to make a "minimum monthly payment"?
The "minimum monthly payment" is the smallest amount you can pay and still be a cardholder in good standing. Banks often encourage you to make the minimum payment to keep you owing. Some statements refer to the minimum as the "Cardholder Amount Due”, which is not the total amount you owe, but only the lowest possible amount you can pay without collecting late fees.
What is the result of only making minimum monthly payments?
If you only pay the minimum, it can take years to pay off the debt, and you will pay a lot more in interest. If you don't pay anything, or pay less than the minimum, you will be charged a late fee and will be subject to loss of your credit card. In addition, there may be a negative report to credit bureaus. That report could affect your ability to obtain credit in the future. Making just the minimum payment is the most expensive way to pay off your balance. The more you pay each month, the shorter the time it will take you to pay off the debt and the less interest it will cost you.
What is a cash advance?
There may be times when you would like to get a cash advance on your card. A cash advance is the withdrawal of funds from your credit card, up to the credit limit allowed. The amount you withdraw may be subject to daily limits and there is no interest free period, so interest is charged from the day you withdraw the funds. This should only be used in case of an emergency, when you know you can return the amount quickly.
A cash advance is a loan billed to your credit card. You can obtain a cash advance with your credit card at a bank or an automated teller machine (ATM) or by using checks linked to your credit card account. Most cards charge a special fee when a cash advance is taken out. and do not offer a grace period on cash advances. This means you pay interest every day until you repay the cash advance, even if you do not have an outstanding balance from the previous statement.
What are the interest rates on cash advances?
On some cards, the interest rate on cash advances is higher than the rate on purchases. Be sure you check the details on the contract sent to you by your card's issuer. It is usually much more expensive to take out a cash advance than to charge a purchase to your credit card. Use cash advances only for real emergencies.
How do I decide which purchases are okay to put on my credit card?
Credit cards are the perfect way to purchase larger items that you would normally need to save for, such as a new refrigerator, a computer, or a bedroom set. They are also perfect for buying smaller items like clothes and schoolbooks. These days, credit cards can be used for just about anything, but the most responsible way to use them, is very carefully.
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