When you own a credit card or get a loan, you must remember to pay all your dues timely to avoid any defaults in your record. However, there are times when you need more funds. In such situations, your credit card allows you to pay a minimum amount, which is lesser than your original payment. There are various ways this facility may benefit you or cause an issue. This blog will discuss the pros and cons of making a minimum monthly loan payment.

What is the Minimum Monthly Payment?

The minimum monthly payment is the smallest amount you pay a credit card company each month to avoid penalties or a minimum installment payment on your loan. Suppose this payment is not made on time. In that case, creditors may charge a late fee, raise the annual percentage rate (APR), and notify the credit agencies about the default if you make one. Making the minimum monthly payment on time prevents late fees and penalty annual percentage rates (APRs) from building up.

Pros of Minimum Monthly Payment

Minimum monthly payments on credit loans are often helpful, as they are lesser than the actual bill amount. Here are some of the pros of making minimum monthly payments:

  • Helps build a credit score: Even when you don’t pay off the complete bill, you can create a credit record with your credit card companies for all of your on-time payments made in the past. The same goes for your online loan payments. Your payment history influences your credit score.
  • Helps avoid late fees and APR penalties: You can avoid late fees and penalty APRs if you make the minimum payment on time. High APR and extra late fees can cost you more money while paying credit card bills. 
  • Helps you pay for a more critical expense: Minimum payments help you pay for more urgent and essential expenses. This method comes in handy when you must pay a larger bill and need more funds. 
  • Helps in paying off other debts: There are times when we have to pay multiple debts. That time minimum monthly payments are helpful as it comes with the flexibility to pay the minimum amount. You can simultaneously pay off any other loans/debts without becoming a defaulter.
  • Helps when your income is lesser than expected: Minimum payments on the credit card or loans can help pay off the bills when your income is less than what you expected. That lets you stay out of default without paying the entire balance at once.

Cons of Minimum Monthly Payment

When you pay more than the minimum monthly payment on loans, your debt gets paid off faster. Some of the cons of choosing to pay the minimum repayments on loans are:

  • More interest: When you clear your credit card’s full amount each month, no interest is imposed on the transactions you made that month. However, If you do not settle your monthly account in full, you will be charged interest on the remaining balance.
  • Takes longer to pay dues: If you make minimum monthly payments, it will take you relatively longer to clear off your online loan.
  • Credit score suffers: Your credit utilization rate is the percentage of credit you use compared to the total amount of available credit. The score will be substantially higher if you make the minimum monthly payment. If you add more to it by paying the minimum payment, your credit usage ratio will rapidly exceed. This will make your credit score fall.
  • Tempts you to use your credit card: Lower monthly payments may tempt you to use your credit card more frequently, as there are no default warnings.
  • Piles Up the Payments: If you fall into the habit of only paying off the minimum amount required, your bill will begin to pile up on you.


Paying less than the minimum required could impact your debt and credit score. Keep your account functional and prevent yourself from becoming a defaulter by making the minimum monthly payment. But you have to pay more interest. Even though it is a beautiful alternative when money is tight, you should avoid making minimum monthly payments. It is always better to make your payments on time rather than letting them pile up and create a debt situation later.

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