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Paying the credit card balance in full. Small steps lead to healthy habits. Make only the minimum payment, and you'll barely wipe out last month's interest. And if you keep charging items to the card, you'll fall further and further behind.
See how it affects you: To estimate your interest charges, divide your card's annual percentage rate by 12 and multiply it by your average balance. Multiply that by the balance you're carrying. You can start next month with less debt by paying more against your balance. And because your credit utilization ratio is a major factor in your credit score, high balances can badly damage your credit. That makes it harder to qualify for affordable loans and credit cards with the best terms. It can even affect your ability to find a job or rent an apartment, as employers and landlords commonly review applicants' credit.
See how it affects you: Use this credit utilization calculator to determine your ratio. If your debt is bumping up against your credit limit, focus on bringing down your balances as much as you can.
If you feel squeezed for cash at the end of the month, try paying your credit card bill right after payday. Or if you're able, volunteer for more shifts at work and put the extra cash toward your debt. To see how your credit utilization ratio impact your credit, check your free credit score on NerdWallet.
Paying the minimum is better than racking up late fees. Unfortunately, credit card debt can snowball easily. Emergencies can pop up, like car repairs and vet visits. So, what happens if you only pay the credit card minimum payment? While paying less than your full balance may save you money this month, it costs you more in the long run.
And credit card interest rates run high: According to December data from CreditCards. If you continue to make minimum payments, the compounding interest can make it difficult to pay off your credit card debt. The minimum payment calculation is based on your full balance, including interest from not paying your balance in full. With some credit card companies , if your balance is lower than the set minimum payment, that balance amount will be your minimum payment. But policies vary by company.
Below are credit card minimum-payment policies for some major credit card issuers.
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