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A credit crunch, a housing market meltdown, a seemingly bottomless stock market, an explosion in the unemployment rate and rising prices for everyday products and food costs are all hitting us at once as we continue to slide further into a recession.
With limited ways to gain funds is it no wonder that more and more businesses are relying on their credit cards to get by? However "getting by" also means that most of the money you do have may need to go to other bills first before your credit card.
The question is can you survive, for now, on just paying your minimum payment each month? For many the answer has to be yes.
Paying just the minimum payment now gives you the opportunity to have a larger amount of cash available to pay for other necessities, such as your rent or insurance costs.
It also gives you the ability to pay off other debts first that may have a higher interest rate than your credit card, perhaps a loan or mortgage payment.
Here are a few things to consider when paying only the minimum is all you can do: Realize You May Be Spending More In The Long Run When you carry a balance on a card you are charged for that balance based on your interest rate.
Your minimum payment, usually anywhere between 2 to 4 percent of your overall balance, is what you are expected to pay each month.
If you are constantly charging yet only paying the minimum amount, sooner or later, your interest amount will total more than your purchases on a card.
Although this scenario may take years, even decades, its important to know that paying just the minimum is going to cost you money in the form of interest, even if it is just for a few months.
Spend Wisely When paying the minimum is all you can do try to limit your spending.
With little or no purchases added to your card you will be able to knock off some of your debt rather than just paying for the interest you have accumulated from carrying a balance and adding new purchases.
Continue To Pay On Time Just because you are paying only a small fraction of your balance does not give you leeway to forget to make a payment.
Keep paying on time so you can continue to build your credit.
Be Smart Paying only a small portion of your balance is not something you can do forever.
Don't let yourself be bogged down in credit card debt! If you have a high interest rate on your card consider transferring it to another card with a lower rate or even getting a new card that has a 0% introductory offer.
This could easily save you thousands of dollars in interest payments.
Or think about using your available funds to pay off your highest debts first and leaving the minimum payments for your cards that have a lower interest rate.
This will help you settle your debts faster while saving you money in unnecessary interest.
Always remember that minimum payments are a necessary evil only when times are tough.
Unless you want to stay in debt forever and give free money to your creditors, paying only the minimum is just temporary.
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