How minimum payments on credit cards work:
Credit cards are a convenient way to pay, and also offer the possibility of borrowing money at a low or zero rate for a short period. They come with their drawbacks however, and the best way to avoid these drawbacks is to make sure you understand the monthly repayment aspect of the card well, and then keep to making the repayments where possible.
Charges kick in when you don’t make the minimum payment each month. It should be straightforward to find out from your provider what this repayment should be, and it usually involves an amount as a percentage of the total balance owed plus interest, as well as any charges that you owe. And there might be a minimum amount stipulated, so even if the above mentioned sum is below a certain threshold (for example, £10) you will have to pay the minimum amount anyway. The APR or Annual Percentage Rate is a major factor here.
Paying down your credit card balance as soon as is convenient is usually quite a good idea. While you won’t incur any extra charged if you keep up with the minimum repayments, it’s usually better to pay more off as you can. This is because the interest will still accrue on the amount owed while your making repayment. So it could take years to pay it off if you’re only making the minimum payments.
Part of the reason for this is that the minimum repayment amount decreases as the debt is reduced (since it’s usually a percentage of the amount owed). This gives more financial flexibility since you’ll be required to pay less and less each month, but means that if you stick to this minimum it can take a long time.
It’s better to see how much you can afford and try to pay that amount each month regardless of the minimum repayment. This can have a substantial impact on how long it takes to clear. You can set the amount you wish to pay per month with your bank, and stick to that regardless of the minimum repayment.
And it’s better to get in touch with your credit card issuer as soon as you think you can’t make a monthly payment. You can usually reach an arrangement with them to put a brief hold on any charges, and when you start making the minimum payment again then they waive the charges and there will be no impact on your credit score.
It’s always better to get it paid off as soon as possible, and in event of a risk of a missed payment, keep in touch with your provider.