Responsible credit use is important for short-term budget reasons as well as long-term financial reasons. Creditors can zap you over both terms if you don't consistently make each month's minimum payments on time. The minimum payment is indicated on your monthly credit card statement and sending in less than that can cause credit issues.
Minimum payments are typically based on a percentage of your total balance. Creditors may prefer that borrowers just make minimum payments because doing so delays total debt payoff and allows them to charge interest for a longer period. Over time, the minimum payment should drop as you pay down your debt. It's usually best to pay as much as you can when a monthly statement arrives, especially on high-interest cards.
Card providers charge late payment fees if you don't make the minimum payment by the due date. That fee is often in the $25 range. Some people mistakenly assume they're okay as long as they make some kind of payment. The reality is that many providers charge the same fee whether you pay nothing or submit a payment that's less than the minimum. Making late or below-minimum payments can cause late fees to pile up quickly.
The major long-term consequence a creditor can invoke against you is to report you to credit bureaus. If you don't make the minimum payment on time, card providers may report your account to credit bureaus. Some wait as long as 30 days after the payment deadline, while others aren't as patient. From a long-term perspective, the negative implications on your credit score can be more significant than a single late fee.
Most card providers won't take action on a first below-minimum or late payment. However, repeated problems could lead to a higher interest rate or having your card suspended until you pay at least a portion of the balance and the late fees. You could ultimately lose card privileges altogether and the provider may attempt to escalate your repayment timeline. In the extreme case, your account might go to collections if you consistently avoid minimum payments.
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