That time of the month comes around. Your credit card statement has arrived in the mail. A minimum payment of $50 is required by the 8th of the month. You make the $50 payment.
What the bank was trying to hide from you was that your actual payment due was more that $50. It was probably around $500.
Why didn’t the bank want all the money you owed them?
Interest. By not collecting the entire amount due, the bank is able to collect more money from you later. When your bill comes around next month, the bank is able to claim you owe more than $450 ($500-$50) from the previous bill. So each time you make a minimum payment, the cycle continues, and the bank makes more and more money off of you.
What if you cannot afford to pay your full due balance?
Although not ideal, at the very least, you should make your minimum payment. This allows you to be in good credit standing, and won’t affect your credit score. If you can make more than the minimum payment, you should pay off as much as you can. In this way, you will reduce the amount of interest the bank can charge you. Furthermore, you reduce the risk of racking up an interest so high that you can’t even afford to make a minimum payment. If you miss a minimum payment, it will affect your credit score. In order to come out of the cycle of paying interest on your credit card, you should work on reducing your monthly credit card spend.
Thus, keep debt at bay, pay your entire balance off.