How to Reduce Minimum Payments on Credit Cards

It is tempting to pay the minimum but it may end up trapping you long term.

It is tempting to pay the minimum but it may end up trapping you long term.

Credit cards have a bad reputation. Some of that reputation is understandable. After all, credit cards tend to have higher interest rates. If you run up high balances, they can be a challenge to pay down. They do provide convenience, though, and can be handy for emergencies. If you’ve found you’re having trouble keeping up with your minimum payments, there are some strategies you can use to reduce your minimum payments.

How Minimum Payments Are Calculated

Each credit card company has its own method for calculating your minimum payment. Typically, it’s 1-to-3 percent of your daily balance. Your daily balance is a combination of purchases you’ve made, any cash advances you’ve taken and interest.

You may also need to pay fees as part of your minimum payment. These may include late fees and over-the-limit fees if you’ve charged more to your card than your credit line allows. For specific information as to how your minimum payment is calculated, contact your credit card company or review the literature that came with your credit card.

Lower Your Balance

One strategy for lowering your minimum payment is paying down your credit card balance. You can make a one-time payment to bring down your balance or pay a little extra each month to slowly bring down your balance. Over time, this will lower your minimum payments.

Lower Your Interest Rate

The compounding interest on credit cards can make them a challenge to pay down. To lower your minimum payments, you can also try to lower your interest rate. If you have another credit card with a lower interest rate, consider transferring your balance. You can also contact your credit card company and let them know you’re having trouble making minimum payments. They may lower your interest rate so the minimum payments are lower.

If you have equity in your home, you may want to consider getting a home equity loan or line of credit. These typically have a lower interest rate than credit cards. You can use the funds to pay down or pay off your credit cards and then pay off the loan or line of credit.

Make Timely Payments

If you make late payments, your credit card charges a late fee of up to $37. This is added to your minimum payment, which can make it even more difficult to pay. Making payments on time eliminates these fees and looks good on your credit report. Having a good credit score can help you secure lower-interest credit cards in the future.

Tip

  • If you are having trouble making the minimum payment on your credit card accounts, you may be able to request a period of zero interest that will allow you to pay down your balance so that the minimum is more manageable afterward. Call your credit card company to explain your situation. Ask for a financial hardship, unemployment or underemployment forbearance. If granted, this temporary stay can make all the difference in your credit health.

Warnings

  • Don't run up credit card bills so that you are forced to make minimum payments.
  • Although there are ways to lower your monthly minimums, the best way to eliminate debt is not to charge more than you can afford to pay off every month. Even if the payments are low, the interest you pay is money wasted.
 

About the Author

Melinda Hill Sineriz has been writing professionally for over 10 years. She worked as an editorial assistant for Forward Movement Publications in Cincinnati, Ohio. She wrote for several years for allmusic.com and edited and wrote a chapter for a book with Wooster Press. She graduated from Miami University in Ohio with a Bachelor of Arts in English. She has a master's degree in teaching.

Photo Credits

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