Asked 3w ago
Hello! I would like to ask what will happen when you just pay the minimum payment for your credit card bill? 1. Will you incur interest on the leftover (unpaid) bill? 2. Will your credit score be affected? 3. What else would happen? Fact: I do have enough cash and ability to pay off the whole credit card bill, and I am fully aware and in control of spending wisely. Hence, what is so bad about paying just the minimum payment? Reason why: I think this is a good way to delay payment in cash.Thanks!
You should always pay off your credit card bills in full.
When you leave a balance on your credit card, you are essentially taking an unsecured loan from the bank. These interest rates typically run upwards of 25% p.a. (twenty-five, not two-point-five) and will compound daily. Credit cards already allow you to delay payment in cash, as long as you pay by the due date.
This is why some recommend that those who cannot manage their money well to use debit cards, because credit card debt can be incredibly destructive towards one's personal finances.
Yes, interest will be applied on the unpaid amount. This amount not fully paid is subject to interest rate of 20+% per annum. Just Google-ed an example (DBS Live Fresh card) charges 26.8% p.a. on the unpaid amount. The interest rates are stated in the t&c's of the respective cards.
No, as long as you pay the minimum amount on time, your credit history should not be affected. But do note that other banks can see the balance you owe when you apply for credit card/loans, and the outstanding amount affects the loan amount you are eligible to apply.
Banks track something called balance-to-income ratio. If the ratio is too high, you may be put under Debt Consolidation Plan. https://www.abs.org.sg/consumer-banking/consumers/debt-consolidation-plan
Unless you invest the cash from paying off the bill in full in an investment that pays more than 20+% p.a., paying 20+% interest p.a. to delay payment is probably not wise.