Does making just the minimum payment hurt my credit score?

You shouldn't carry a balance on your credit card unless you have to. If your goal is to use your card but still maintain low credit utilization for credit-scoring purposes, you should aim to have an outstanding balance as close to $0 as possible at the end of your monthly billing cycle. For more information on this, please see our ... read full answerCredit Utilization Guide.

If you believe making purchases with plastic will cause you to overspend, you’re better off not using your card at all. When in doubt, debt-free is the way to be.

Credit utilization is basically the ratio of your outstanding credit card balance divided by your credit limit. Utilization that is too high indicates you are desperate for spending power and may encounter payment problems down the road. That is certainly a valid concern, considering how debt can easily snowball into unsustainability and thus impede credit-building efforts. It’s therefore unsurprising that people with credit utilization above 90% have the lowest credit scores on average, while those with utilization between 1% and 10% have the highest scores.

And remember, the best way to monitor your credit utilization is to sign up for a free WalletHub account, which updates your credit-report information and credit score on a daily basis.

Yes, you should pay more than the minimum on your credit card. While paying the minimum amount due on time every month will keep your account current, paying more than the minimum each month will save you money on interest, improve your credit score, and reduce the amount of time it will take to pay off your debt.... read full answer

Why You Should Pay More Than the Minimum on a Credit Card

You’ll Pay Less in Interest. Unless you’re carrying a balance on a credit card with an introductory 0% APR, most of your minimum payment goes toward interest charges, while reducing your balance only by a fraction. You’ll owe less interest in the long run by paying more than the minimum payment, and you’ll avoid interest charges altogether if you pay the balance in full by the due date every month.

Your Credit Will Improve. Paying more than the minimum amount due will reduce your credit utilization, which is good for your credit score and will make it easier to get credit in the future. Plus, a low credit utilization ratio frees up more of your available credit for emergency use. It’s best to maintain a utilization ratio below 30% for these reasons.

You’ll Pay off Your Balance in Less Time. When you only make the minimum payment, it can take a long time to pay off your balance in full. New interest charges accumulate daily, and minimum payments only cover a very small percentage of the principal balance.

You can use WalletHub’s minimum payment calculator to see how long it will take you to pay off your debt solely with minimum monthly payments. You’ll also see how expensive that would be.

Paying The Minimum: Not A Good Long-Term Solution

If you’re facing a financial emergency or if you have a credit card with an introductory 0% APR on purchases, paying only the minimum amount could save you money in the short term. Just be sure to make the minimum payment by the due date to avoid potential late fees and damage to your credit score.

As a long-term strategy, however, making only minimum payments every month will do very little to reduce your debt or boost your credit.

You shouldn't carry a balance on your credit card unless you have to. If your goal is to use your card but still maintain low credit utilization for credit-scoring purposes, you should aim to have an outstanding balance as close to $0 as possible at the end of your monthly billing cycle. For more information on this, please see our ... read full answerCredit Utilization Guide.

If you believe making purchases with plastic will cause you to overspend, you’re better off not using your card at all. When in doubt, debt-free is the way to be.

Credit utilization is basically the ratio of your outstanding credit card balance divided by your credit limit. Utilization that is too high indicates you are desperate for spending power and may encounter payment problems down the road. That is certainly a valid concern, considering how debt can easily snowball into unsustainability and thus impede credit-building efforts. It’s therefore unsurprising that people with credit utilization above 90% have the lowest credit scores on average, while those with utilization between 1% and 10% have the highest scores.

And remember, the best way to monitor your credit utilization is to sign up for a free WalletHub account, which updates your credit-report information and credit score on a daily basis.