Minimum payment is usually a small percentage of your card balance . Making just the minimum payments increases the amount you pay at the end due to interest charges. Making only minimum payments gives a false sense of security to the user, when you are making only minimum payments you are just making the interest payments and not contributing towards the principal payment.
For example , Ayushi used her credit card for most of her payments and used to make only minimum payment each month . She had Rs1,00,000 as her outstanding balance and her minimum payment percentage was 2.5% so she paid Rs 2500 as her minimum payment balance and her yearly minimum payment would be Rs30,000. Her monthy interest rate was 3.10% and her yearly APR was 37.2%. So her yearly interest payment would be Rs37,200. As we can see in this case Ayushi is not even making the interest payment completely .
It is advisable to the ones who want to get out of debt sooner refinancing credit cards at a lower rate with a personal loan is one reliable method of doing it.
Don’t forget credit card debt is probably your most costly debt !
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