Pay Your Credit Card Balance in Full
I often find my clients paying the minimum on their credit card balances. Some of these people are in a situation where they can not afford to pay more, but some would be able to pay the full balance, but they choose not to because they don’t really understand how accumulated debt works.
Why is it important to pay your credit card balance in full?
If you can pay your credit card balance in full each month, you can benefit from the card’s advantages without having to pay interest charges. Paying your credit card balance in full is also the best way to avoid accumulating debt.
If you can’t pay the entire balance, you should at least make the minimum payment. Failing to make the minimum payment can have an impact on your credit rating and lead to a higher interest rate.
Can you afford to pay more then the minimum payment? Then do it! If you only intend to make a partial payment, be sure to do it as soon as possible before the date indicated in your statement. This will reduce your daily balance faster and allow you to save on interest charges.
More complete credit statements help you plan ahead. Starting on September 1, 2010, federally regulated financial institutions must disclose new information on statements sent to consumers.
In the new credit card statement you will see, among other things:
- An advanced notice indicating any change in your interest rate, and the reason for the change, such as the end of a promotional offer or missed payments
- An estimate of the length of time it would take to pay off the balance in full if you paid only the minimum amount required each month and did not make any new purchases. For example, if you had a balance of $1,000, the annual interest rate on your credit card was 18% and you only made the minimum payment (3 percent) each month, it would take you 10 years to repay the balance!!!
To learn more how much you can save by paying your credit card balance faster, talk with your financial planner who will be able to help you understand your financial statements and have a plan to eliminate your debt.
Related posts:
- Debt Elimination
- Holiday Spending – without Holiday Debt.
- How To Get Out of Debt?
- Bank of Canada Lowers Interest Rate
- Stop Making the Same Money Mistakes!
- Getting Your Finances in Order Before the Holidays
- What is Debt Consolidation?
Most people who can’t afford to pay the balance in full also have more than one credit card. It would be nice to pay them all off in full and just be debt free, but it were that easy.. we’d all do it.
Even if you are the type of person who pays the balance in full, as a way to get rewards from the credit company, you are STILL spending more than a person who uses cash. The rewards simply aren’t worth it.
I read the terms and conditions of a recent credit card offer I just received in the mail. I can earn 2 points for each $1 I spend for the first 12 months. After 2500 points I can turn that in for a $25 gift card. This means that after I spend $1250 in “Qualifying” purchases I can get a $25 gift card. I can’t even use the $25 to put in my savings.. I have to BUY something with it.
I promptly shredded the offer.
I’m all for getting rewarded… but the best reward is a debt free lifestyle with REAL money flowing into your life.
David.
David, I totally agree with you, but in some instances credit card rewards work well. If someone has a business and they have to buy different products anyway, then use the credit cards and receive the rewards.
But most people who use credit cards do have more than one card, the average Canadian has 4 credit cards and an outstanding debt over $2,700. Great points. We don’t use credit cards either. Pay with cash or forget the deal.