Why paying credit card 'minimum payment due' is a bad idea

The saying “a little knowledge is a dangerous thing” could very well be replaced with “a minimum payment due is a dangerous thing”.
 
We don’t want to sound alarming, but something as common as paying minimum balance could prove disastrous to your credit score and you could be paying more money than you owe.

Consider this situation – It is the end of the month, you do not have enough money to in your account to pay of your credit card bill which is due at the end of the month.

That’s when you notice this option which you would generally not look at under normal circumstances called Minimum Payment Due (MPD) which shows you a sum which you can pay with the funds available in your account.

Now that your interest is piqued – what is this Minimum Payment Due (MPD) and will it save me from getting a bad remark on my credit report which in turn may affect my credit score?

Well, then you have come to the right place to learn about MPD or Minimum Payment Due.
 
What is Minimum Payment Due (MPD) and how does it help you?

The Minimum Payment Due (MPD) is the minimum amount of your credit card bill that you will need to pay to fulfill contractual monthly payment agreements with the bank.

It is generally 5% of the total credit card bill which you will need to pay at the end of the billing cycle.

Paying Minimum Balance Affects Your Credit Score

One of the major effects of paying minimum balance is the damage it does to your credit score while paying minimum balance helps you meet contractual obligations but it affects your credit history. A positive credit history is required to get future loans and credit cards.
For maintaining the credit score to its optimum levels, it is advised that you pay your credit card balances in full.
 
Why is MPD a bad idea?

You may think it is a great idea by which you will get through the month and control your spending the following month and pay off your bills. This way of thinking is only postponing the inevitable – you are falling into a major credit card debt.
 
With each MPD and non-payment of credit card bills, the payable in each cycle increases drastically. For a regular defaulter, it becomes a debt cycle out of which it is difficult to appeal to.

A credit card is a financial instrument of convenience, optimum usage and payment of balance without is the best way to use it. Good usage of credit card also instills a sense of discipline for which you will be rewarded with good credit health and more offers from lenders.

Conclusion

A credit card is a financial instrument of convenience, optimum usage and payment of balance without is the best way to use it. Good usage of credit card also instills a sense of discipline for which you will be rewarded with good credit health and more offers from lenders.