money you still owe to their credit card company called

Question people wonder what is the amount of money you still owe to their credit card company called?

so I don’t know about you guys but if you ever noticed that when you check to

pay the minimum balance on your credit card that the credit card companies just

make you feel like it’s something that’s okay to be paying well it’s not okay to

be paying and that’s why I’m making this video because I want to go over all the

cons about paying the minimum balance on your credit card because honestly

there’s a few big ones three specifically that I want to cover

because it’s not a good idea to be paying the minimum balance unless you

absolutely have no other choice now before I get into everything I do want

to preface that if you have no other choice with your credit card company but

to pay the minimum payment then definitely do that because you are not

going to have any late fees and it’s not going to be reported on your credit as a

late payment so definitely make sure that you are at least making that

minimum payment if you’re in a pickle because then you’re not going to have

any real consequences other than interest and a couple other problems

that I’m going to be talking about in this video and if you just happen to

find this channel I’m Jason with honest finance and I make a lot of videos on

different topics that will give your life and your finances more value so if

you do have an interest in this particular type of content feel free to

subscribe or just give this video a big thumbs up but now let’s start talking

about the three big cons with making your minimum payments on your credit

cards so the first big problem with paying the minimum balance on your

credit cards is the obvious fact that you are going to be accruing interest

because you’re making the minimum payment because basically how it works

is you’re gonna have a statement balance that’s due every single month and if you

don’t make that statement balance paid off in full by the due date then you are

gonna accrue interest so obviously paying the minimum payment this is the

smallest amount possible it’s never gonna be the amount that you need to pay

off that statement balance so you are gonna be accruing interest but that’s

usually just a given and when I say that it’s just a given what I’m referring to

is the fact that most of us understand that you are gonna be paying interest

when you’re making those minimum payments but I don’t think a lot of us

understand how the interest is actually accruing now I’m not gonna go into this

and huge depth here but it is called a DB which means it’s average daily

balance and that’s the method that the credit cards are using and I’ll just

briefly explain how that works here okay so the easiest way that I can explain

how the average daily balance method works is just think of your billing

cycle as an entire average here so if you’ve got 30 days in your cycle

and you started your balance off with $0 and then you ended up at $1,200 then

what the credit card company is gonna do is they’re gonna take your balance every

single day during that entire cycle and then they’re gonna take an average and

then they’re gonna be able to apply their interest rate on to that average

and that is how they charge you the interest it’s just as simple as that

it’s just an average of the entire cycle but that’s the way that it works now if

you do happen to be paying interest on your credit cards there is something

that you can do to save a little bit of money on interest and that’s just the

fact that if you are going to be making big purchases do those towards the end

of the cycle because then your average is going to be lower because if you were

gonna buy a $2,000 fridge at the beginning of the cycle that’s gonna bump

up your average throughout the entire cycle so buy that at the end and that

will save you money on interest and then another thing you can do is if you have

money to pay off your card pay that off as often as you can during the cycle to

get your average down a little bit lower because the more you can put towards the

credit card the lower that average is going to be and that’s gonna save you on

interest so do that as far as those tips go if you are paying interest obviously

it’s a lot better to pay no interest but there are some of us out there that are

paying interest so if you are use those tips and you can save some money now the

next problem with making the stupid minimum payments and your credit cards

is just the fact that a lot of the credit card companies are only going to

be making you pay at least one percent of your balance plus the interest and

that’s it so a lot of the time it’s really easy to be making that minimum

payment but the problem is is that you’re never gonna get out of owning

them money because for instance if you had a $1,300 balance you might only oh

like 20 to 30 bucks as a minimum payment but it’s gonna take you over ten years

just to pay that off and you’re gonna be wasting all that money in interest so

they make you feel like it’s super easy to make that minimum payment but it’s

something you really don’t ever want to be doing so if you have been making

minimum payments just be aware that it’s going to take you forever to pay off

your credit card balance if you’re making that minimum payment plus the

other problem is you’re probably still making charges on your credit card so

stop making charges and pay anything more than you

can towards the minimum so for instance if you owe 50 bucks as a minimum just

try paying 75 something better than what the minimum is so that you can start to

climb out of the hole that you’re in now the third problem with paying your

minimum balance or just not paying off the statement balance in full is the

fact that you are gonna lose your grace period now what the grace period is is

it’s just the gap between when your cycle ends and when the due date happens

so usually it’s like 25 days after the cycle ends and that’s when your due date

that’s the grace period you don’t actually have to pay any interest on

purchases that you make during the grace period if you’re not accruing interest

meaning you’re paying off your statement balance every month but if you’re paying

your minimum balance obviously you are losing your grace period so just keep

that in mind you are paying interest on everything now obviously when I’m

talking about the grace period the due date the billing cycle all that kind of

stuff it is a little bit complicated when it comes to credit cards and

understanding how they work so I will leave a playlist up here that you guys

can watch these have some more in-depth videos on those specific topics so if

you guys want to learn more about the grace period or how credit card interest

works and stuff like that those videos will explain that but I’m just trying to

briefly explain why you don’t want to be paying your minimum balance but if you

need some more help those videos are here for you guys now in order to stop

paying interest on your credit cards basically the only way that you’re going

to be able to do that is to pay off that statement balance in full by the due

date now once you do that a lot of credit card companies actually require

you to do that two times in a row so for two months in a row you’re gonna have to

pay off that statement balance in full in order to get your grace period back

and to not pay interest on any purchases that is the only way that you’re not

going to be paying interest on your credit card is to once again pay off

that statement balance in full by the due date and then you are good to go and

you don’t have to worry about a thing now obviously every credit card issuer

has different rules so you are gonna want to check the fine print on how to

exactly get out of paying interest but generally what I found is that you got

to pay the two months in a row of your statement balance now your statement

balance for instance if it’s a thousand dollars you have to pay that full

thousand dollars off by the due date you can’t just pay 999 dollars

the due date otherwise that $1 that you owe is gonna cause the entire ripple

effect of paying interest on your grace period and your past purchases so just

don’t open up that can pay off that statement balance completely in full and

that’s all you have to worry about so at the end of the day if the credit card

company makes you feel like it’s okay to be making those minimum payments just

understand that it is something you don’t want to be doing unless you

absolutely have to because you are gonna be paying interest on it you’re never

gonna get out if you make those minimum payments and you’re losing your grace

period so don’t pay interest unless you absolutely have to now once again if you

just found this channel I’m Jason with honest finance and I make a lot of

videos on different topics that’ll give your life and your finances more value

so if you did get some value out of this video feel free to subscribe but for now

I am gonna leave a few more credit card videos that you guys can watch over here

but thank you for your time have a great day

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