So I get asked all the time on the channel if making minimum payments on your credit
card is going to be better or worse for your credit score because i think there's kind of a
general myth out there that if you make minimum payments it's going to help your credit score
because technically you're a better customer for the credit card companies but this just isn't
true there are other factors for making payments with your credit card that are going to help your
credit score but they don't necessarily have to do with making minimum payments
so if you do happen to be making minimum payments on your credit card then technically speaking you
are a better customer to the credit card companies in the sense that they can make more money off
of you in the form of interest because when you are making those minimum payments you're pretty
much paying about 99 interest and one percent in principle and it can take you a very long time to
get your debt paid off if you continue to pay the minimum payment but the flip side here is
that if you keep spending more on your credit card every single month and your balance keeps going up
even though you're making those minimum payments then eventually you're going to become more of a
risk to the credit card company because you have too much debt compared to how much your limit is
and so this is where it really can affect your credit score and it really doesn't have to do with
whether or not you're making the minimum payment or not it has to do with how much debt you're
accumulating compared to what your limit actually is because your credit card is actually affecting
three different areas of your credit score starting with credit history because as soon
as you open up that credit card you're going to start generating credit history so if you leave
that card open for 10 years that's going to help your score a lot better than just keeping
it open for a year now the next thing it's going to help with is called payment history
so obviously if you're making that minimum payment as long as you're paying that off by the due date
then it's going to help your credit score because you're accumulating a payment history
now just make sure that you don't ever miss that due date whether you're paying the minimum payment
or anything else because if you do have a late payment this can actually hurt your credit score
and you can even pay more interest on your credit card because of penalties so just make sure that
you always pay at least the minimum by that due date and then you don't have to worry about any
of those problems and then the third area that affects your credit score is called credit usage
and we touched on this just a minute ago but it has to do with how much your balance is
compared to what your limit is on those credit cards so technically if you have a ten thousand
dollar limit on your credit card and you spend two thousand dollars during the month and you carry
that over meaning you have a two thousand dollar balance that carries forward into the next month
then you would technically be using up twenty percent of your credit utilization or your credit
usage because you're using twenty percent of that ten thousand dollar limit now if you wanna end up
helping your credit score with the credit usage then just make sure that the balance that's being
carried over every single month doesn't exceed thirty percent compared to your total limit
so for instance if you have a thousand dollar limit then don't carry over a balance of more than
three hundred dollars every single month because that is going to help your credit score now if
you go over that amount over the 30 then that can end up hurting your credit score so as long as you
carry a low balance compared to what your limit is then your credit score can actually go up because
of that credit card that you're using so as far as making minimum payments on your credit card go
just because you're making minimum payments doesn't mean that you're going to help your
credit score more than paying off your entire credit card because like we just went over there's
the three different areas of your credit score that your credit card's affecting and as long as
you're hitting all of those marks then it doesn't matter if you're making the minimum payment or not
that just affects how much interest you're paying on the credit card so long story short as long as
you pay off that statement balance in full every single month by the due date then you don't have
to pay any interest on your credit card and as long as you keep that balance low compared to
what your limit is then technically you're going to be helping out your credit score as far as the
credit usage goes making your payments on time and building that credit history so just do those
three things and those are going to help your credit score whether or not you're making the
minimum payment or not now if you're interested in learning more about credit cards like maybe the
specifics of minimum payments or how the interest is charged then i'll leave some more credit card
videos over here that you guys can watch but thank you for watching this one have a great day