There’s a lot of misinformation out there about credit cards in general. That’s because they work with credit, which is a tricky thing to tackle as it plays a role in so many things. Understanding the best way you can deal with your credit cards has to do with understanding how credit works.
Understanding credit is a process, and only a credit repair consultant can thoroughly explain it. However, you should make sure you don’t believe any of the false claims out there. Here are some myths we’ve debunked and explained.
Myth 1: Minimum Payments Are What the Bank Decides Them To Be
Minimum payments, in technical terms, are determined by the bank. This means that no matter what, you do have to pay a specified amount to the bank every month or risk defaulting. However, a lot of online articles out there use the word minimum payments to assert that by making your minimum payments, you can relieve yourself of debt.
What many advice columns online mean is that you can make your payment schedule based on your budget, and even meeting those minimum requirements can help pay off debt.
Myth 2: Minimum Payments Need To Be Made Together, Once A Month
You don’t have to treat credit card balances like a bill. If your cash flow is altered such that gathering your minimum payment amount at one point in the month is hard, then space the payments out! Pay up in chunks at weekly or biweekly intervals.
Myth 3: Regular Minimum Payments Will Get You Out Of Debt
This is the best myth to employ some math skills to debunk. Let’s suppose that you’ve made multiple large payments, and now you have a large balance. Remember that there are two kinds of changes happening with a credit balance. You’re paying the minimum amount, and interest is accumulating.
If your minimum payment isn’t covering the interest for that month as well as making a dent in the old balance of the amount you’ve spent and previous interest, you’re in trouble. You’re essentially emptying a boat that has a massive leak with a thimble!
Myth 4: Minimum Payments Are the Best Way to Create Solid Credit History
Credit cards are often touted as the saviors of non-existent credit history. When applying for a loan or mortgage, a solid record of paid card bills can make you look like a worthy candidate. A thick file full of regular payments can seal the deal for you.
However, if you’re drowning in debt, you’re not going to be a suitable loan applicant. Making regular payments is good, but only making regular minimum payments in the face of a large balance makes it look like your finances are overwhelmed.
The nuances of credit cards and how to set a payment schedule can be hard to grasp. If you’re struggling, don’t hesitate to reach out to us for our affordable credit repair consultancy services.
At Oak Credit Repair, we’re invested in your financial goals, and we can get you there with the help of our credit counselors and consultants. Call us at (484) 238-1225 to set up an appointment!