What happens if you only pay the minimum payment or pay more than that on credit card?

hobn_162

On a credit card, if you are unable to pay off your entire balance for a couple of months and you start paying more than what the minimum payment due is at least, is the only thing to worry about interest accruing? 

I am paying more than what the minimum payment amount is, just so I can pay it off faster and as much as I can at the moment. As long as you keep up with at least or more than minimum payments, is it just interest you need to be concerned about? Do I have to worry about what else could happen? No legal issues or CCJs will happen will they? 

CliveOfIndia

No, as long as you pay more than the minimum you'll be fine.  Yes, you'll pay interest of course, but nothing bad will come of it.  Just be aware that when you do finally clear the balance, you'll still have a bit of trailing interest to pay the next month - you need to clear two consecutive statements in full to get back to paying no interest at all.

It's always worth paying a bit more than the minimum - only paying the minimum for months at a time can start to give the impression that you're struggling financially, and will be viewed unfavourably by other lenders looking at your credit report (unless you've got a 0% promotional rate in force).

(Arguably, lenders like you to pay less than the full amount, as that way they earn lots of lovely interest from you.  But that's most definitely not the MSE way - always pay in full if you're able.  They'll still make money from you in the form of the fees they charge the retailer every time you use your card).

hobn_162 said:

No legal issues or CCJs will happen will they? 

Absolutely not - so long as you're paying at least the minimum each month you're complying with your contractual terms, you've done nothing at all wrong.

It's when you start paying less than the minimum, or not paying at all, that's when the problems begin.

DullGreyGuy

hobn_162 said:

On a credit card, if you are unable to pay off your entire balance for a couple of months and you start paying more than what the minimum payment due is at least, is the only thing to worry about interest accruing? 

I am paying more than what the minimum payment amount is, just so I can pay it off faster and as much as I can at the moment. As long as you keep up with at least or more than minimum payments, is it just interest you need to be concerned about? Do I have to worry about what else could happen? No legal issues or CCJs will happen will they? 

You're only into a problem with legals and CCJs if you are paying less than the minimum payment or going over your limit. 

If you are paying just the minimum payment then that is flagged to the CRAs and whilst it won't end up with you in debtors prison it may influence others decisions on if to offer you credit. 

Paying more than the minimum payment avoids both the the debt recover and the minimum payment flag but you'll be paying interest. 

Because of trailing interest, the interest on the interest, you have to pay off two months in a row in full to stop the interest. 

hobn_162

Thank you, yes I will be paying more than the minimum payment due - even it’s only a bit more, as you say, it looks better to not just pay the minimum and also helps to bring down the total amount due faster. 

I will be reinstating my direct debit hopefully in the next couple of months so it’s paid in full, when I can. 

CliveOfIndia

Just one other point to bear in mind, which sometimes catches people out.  If you don't clear the statement in full, you'll be charged interest each month on the full amount, not just the portion that's left after you make a partial payment.

If you've got a balance of £1000 and you pay off £950, you'll be charged interest that month on the full £1000, not just the remaining £50.

It's a little tricky to calculate precisely, as interest is calculated daily on each individual transaction.  If you've got just a single transaction of £1000 on the first day of your billing cycle and nothing else, you'll be charged 30 days' interest on that.  But if you spend £500 on day 1 and £500 on day 29, you'll be charged 30 days' interest on the first transaction and 1 day's interest on the last transaction (rounded to help illustrate more clearly, and ignoring 30/31 day months).  But hopefully you get what I mean.

hobn_162

Thanks. So when does someone get issued with a CCJ? When they don’t pay the minimum payment each month? 

born_again

hobn_162 said:

Thanks. So when does someone get issued with a CCJ? When they don’t pay the minimum payment each month? 

It would be a long time of not paying before you get a CCJ, but you will get a missed payment marker on your credit history, each month you miss.

Best advice, if you can't afford the minimum payment. Speak to your card provider. They are there to help you & the last thing they want is people defaulting & not paying. So they will help you.

molerat

hobn_162 said:

Thanks. So when does someone get issued with a CCJ? When they don’t pay the minimum payment each month? 

That sort of thing doesn't happen until you have paid nothing for many many months.

hobn_162

Thank you! I’ve not missed any payments on my credit card, and up until October I had a direct debit set up where I paid the balance in full every month, but in October I started having a bit of a harder time financially so I got rid of my direct debit and now have just had manual payments on my credit card to pay it off. 

I’ve never missed a payment and have been either been paying at least the minimum, but more often more than the minimum amount, which I will do again this month (pay more than the minimum).

I have just recently read about what CCJs are and I’m a bit worried about whether this could affect me.

I presume with a credit card it would only be issued to you if you weren’t making any payments on your card at all/missing at least the minimum payments?

Belenus

hobn_162 said:

Thanks. So when does someone get issued with a CCJ? When they don’t pay the minimum payment each month? 

That is a long way down the road. You would have to get into serious arrears.

A Credit Card company cannot 'issue' a CCJ. They have to take you to the County Court and win. If that happens the County Court will issue the CCJ.

They will only take someone to court after a lot of other options have been exhausted.They may just sell the debt on to a debt collection company who may or may not issue court proceedings.

hobn_162

Thanks, it sounds like it wouldn’t affect me as I’ve never missed a payment on my card. Just worried about not paying it off in full recently as I used to, but I hope to be able to reinstate my direct debit to pay it off in full again in the next couple of months.