A key reason to pay more than the minimum payment due on your credit card each month is to save money by reducing the amount of interest you pay over time. Minimum payments mostly cover interest and only a small portion goes toward the principal balance, so paying just the minimum means your debt decreases very slowly and interest compounds, increasing the total amount you owe
. Paying more than the minimum helps you pay off your debt faster, significantly shortening the repayment timeline. For example, paying $500 instead of $200 monthly on a $10,000 balance at 20% interest can reduce the payoff period from over nine years to just over two years and save thousands in interest
. Additionally, paying more than the minimum lowers your credit utilization ratio-the percentage of your credit limit you are using-which is a major factor in your credit score. Lower utilization can improve your creditworthiness and potentially qualify you for better loan rates
. In summary, paying more than the minimum:
- Saves money by reducing interest charges
- Helps pay off debt faster
- Improves your credit utilization ratio and credit score
- Avoids falling into a costly debt cycle where balances grow faster than you can pay them off
