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When paying your credit card bills, you might have been tempted to pay just the "minimum payment due"
Of course, it feels manageable, especially when cash is tight.
But, what you choose to pay doesn't just affect your wallet today; it could also bring some long-term effects to your finances in the future.
So, here's how paying the minimum or the full amount affects you and why it matters.
Paying the minimum amount due means you won't be marked as late, which protects your credit score in the short term
But that's just one side of the whole story. The not-so-good part is that you'll accumulate interest from the bank.
In Malaysia, credit card interest rates can go up to around 18% per year.
So, when you only pay the minimum, the remaining balance rolls over and accumulates interest daily.
And over time, you could end up paying far more than what you originally spent.
If you pay your full statement balance every month, you effectively avoid interest charges altogether
According to Chase Bank, paying off your credit card in full will benefit you a lot. For instance, you'll get no interest charges on your balance, you'll raise the chances of you getting a credit limit increase, and you'll establish a healthier credit score.
More importantly, this habit makes it easier to get approvals for things like car loans, home financing, or even better credit card perks later on.
It's one of the simplest ways to build a healthy credit profile.
But beyond interest and debt, your payment choice also affects credit utilisation
Credit utilisation, or how much of your available credit you're using, indirectly affects your credit score.
When you pay your full statement balance, your utilisation can drop close to 0%. This often leads to a noticeable score improvement in the next reporting cycle, which usually happens every 30 days.
On the other hand, minimum payments typically only reduce your balance by about 2% to 5%, keeping your utilisation high. As this gets reported over time, it can start to drag your score down across one or two billing cycles.
There are situations where paying minimum makes sense, but it shouldn't be your default
If you've been spending on emergencies or unexpected bills, or have just been having tight months, making full payments can be unrealistic.
In those cases, paying the minimum is a safety net that keeps your account in good standing.
But it works best as a temporary measure, not a long-term strategy. If you find yourself relying on minimum payments often, it might be time to reassess your spending or consider restructuring your finances.
If you can afford it, always aim to clear your full balance
If you can't, pay more than the minimum whenever possible.
For more #lifestyle stories
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- Is "Buy Now, Pay Later" Affecting Your Credit Score? Here's What M'sians Need To Know
- A Simple Guide To Checking Your Credit Score In Malaysia Through CTOS, CCRIS & RAMCI
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