Now i know this stuff is boring. But if you're using a credit card, you need to understand the basics of how you can make your payments because honestly, if you're relying on the credit card companies themselves, they're not going to give you much of this information in a way that makes sense.
So i'm going to go over the four different options that you have for your payments in 2022.
So that the next time you pay off your credit card, you can make a better move.
Types of Credit Card Payments
So as far as the payment options go every single time that you pay off your credit card, you're going to have the option to pay a minimum payment the statement balance the outstanding balance or any amount and so we're going to go over each of those and hopefully you guys can make more sense of what they all mean.
MINIMUM PAYMENT
So we'll start with the minimum payment here because this is always the easiest one to pay, but the problem is is that it's also the most expensive one to pay because typically you're only going to be paying about one to three percent of your total balance as far as the minimum payment goes, but this includes interest, so a lot of the time this can take you years.
We're talking even more than a decade to pay off your current balance.
If you continue to only pay the minimum balance because if you owe two thousand dollars on your credit card, and let's say your minimum payment is only 30 bucks.
Well in reality you could pay 25 towards interest and only five dollars towards your principal balance every single time.
You're making that minimum payment.
So as you can see, this could take a very very long time to pay off that balance because you're paying so much interest and so little towards your actual balance.
So my advice is that you avoid paying the minimum payment at all costs unless it's absolutely necessary because honestly you do want to make that minimum payment at least so that you don't accrue any late payments or anything that's going to hurt your credit score, but that minimum payment is always going to be very expensive and if you are only making the minimum because that's your only choice i would probably stop using the credit card and get that thing paid off as soon as you can.
STATEMENT BALANCE
The next types of Credit Card Payments that you'll have is called the statement balance, and this is basically everything that occurs within your billing cycle, which is typically about a month's worth of spending and when i say spending i mean spending on the credit card returns, and maybe even interest.
if you're accruing any so basically everything that happens on the credit card within the billing cycle ends up on your statement balance now, the statement balance is actually the most important one that you need to pay attention to because as long as you pay off the statement balance in full every single month by the due date, then you're not going to be accruing any interest and so this is a very good thing if you don't want to pay any interest on your credit card, as long as you pay that statement balance off in full every single month by the due date, but just be aware that you have to pay off that statement balance in full.
So if you owe a thousand dollars on your statement balance, and you pay 999 dollars by the due date, then that one dollar that you're leaving left over is going to open up interest and now you're accruing interest and usually the only way to get rid of the interest is to pay off that statement balance in full by the due date for usually a couple months in a row, and that's typically the rules that the credit cards have.
So if you technically want your credit card to be free to use then just make sure to pay off that statement balance in full and that is the main option that you always want to pay attention to to have interest-free credit card.
OUTSTANDING BALANCE
The next types of Credit Card Payments option is called the outstanding balance or the total balance and what this means is that it's your statement balance plus any new purchases that you've made that aren't pending anymore.
So for instance if your statement balance ended two weeks ago, and you've made a lot of purchases since then then all of those purchases are also going to add on to that total balance or the outstanding balance now, you do not have to pay off your entire outstanding balance in order for the credit cards not to charge your interest.
You just have to pay off the statement balance, but if you really want to go ahead and pay off that outstanding balance and you have the money to do it then go ahead because it's probably just going to be easier on your budget and you can get more on top of your spending as far as the credit cards.
ANY AMOUNT
Now the final types of Credit Card Payments you have to pay off your credit card i would just call it any amount and i personally use this all the time because what you can do is you can select any amount you want to pay towards your credit card.
So if your statement balance is a thousand dollars, and it's due 20 days from now, then tomorrow you could just pay a hundred dollars as the any amount option and now you only own 900 and you can just do that as often as you want during the month just to pay down your credit card.
So either you can pay off your statement balance.
You can hit it towards the outstanding balance, or you can just slowly get towards your minimum payment if you're going to choose that option.
So the main point here is that you're not restricted just to make one payment per month.
You can make as many payments as you'd like, and you can make them for any amount that you want to and you're never going to be restricted to have to pay a certain amount of money towards your credit card, but i do want you to be aware that all of these different payment types are going to be a lot easier if you're using the online services, or if you're calling your credit card.
because if you're just relying on a monthly invoice to come in the mail these payment options aren't going to be as easy and you really need to be using your telephone or the internet for this stuff to happen.
So these are the different types of Credit Card Payments which we explained here in this article.