Paying less than the minimum
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Paying less than the minimum
| Mon, 03-14-2005 - 6:02pm |
The minimum payments on my credit cards are now taking up too much of my monthly budget. They total over $300.00 month. This leaves me with hardly anything left after paying the credit cards and the rest of my bills. So in order to pay for anything "extra", like car repairs, haircuts, clothes, etc. I usually end up having to use these same credit cards to pay for such things. If I didn't have these credit card payments, I could pay for these kinds of expenses in cash. So it's like a catch-22. The situation is keeping me dependent on the credit cards and keeping me further in debt.
I was wondering, what if I started paying the credit cards, let's say, half of the minimum payments, thereby leaving me with more money so that I might not have to use them anymore. What might they do to me? I have always paid at least the minimum payments on time, so not doing so would be something new to me, and I don't know what would happen.
Right now I have a very good credit score, and I' m sure that not making the minimums would hurt my credit score somewhat, but what else might happen? Should I call them up and propose my idea to them? What happens if you miss a payment? Let's say you pay one credit card bill one month, and the other one the next month, thereby skipping a payment?
Does anyone know what could happen? Any similiar experiences?
Thanks.
I was wondering, what if I started paying the credit cards, let's say, half of the minimum payments, thereby leaving me with more money so that I might not have to use them anymore. What might they do to me? I have always paid at least the minimum payments on time, so not doing so would be something new to me, and I don't know what would happen.
Right now I have a very good credit score, and I' m sure that not making the minimums would hurt my credit score somewhat, but what else might happen? Should I call them up and propose my idea to them? What happens if you miss a payment? Let's say you pay one credit card bill one month, and the other one the next month, thereby skipping a payment?
Does anyone know what could happen? Any similiar experiences?
Thanks.

Welcome to the board, and thanks for joining us. I know it can be frustrating trying to get ahead at the beginning of the journey to get out of debt. And to be honest, short of a lottery win or major inheritance, there really is no quick and easy way out.
In answer to your question, if you begin paying less than the minimum, here is what will happen:
1. They will charge a late fee, probably at least $35.
2. They will raise your interest rate, probably to around 25 or 30%.
3. Your minimum due for the next month will increase by the amount you did not pay the previous month, plus the late fee, plus the extra interest accrued because of your increased interest rate.
4. They will report you as 30 days late on your credit report. If you continue to pay less than the minimum, they will report you as 60, then 90, then eventually they will send it to collections, which will simply destroy your credit rating.
If you begin paying every other month, something similar will happen.
As you can see, it can lead to a situation that will be much, much harder to get out of and, moreover, it will ruin your credit rating. Not to mention, you are probably only barely paying the interest that is accruing each month, so if you don't pay the minimum due you will end up owing more and more each month even if you're not actually charging anything.
Here is what I suggest instead:
1. Call the credit card companies and ask them to lower your interest rate in recognition of your good payment history and credit rating. Sometimes that's all it takes to get your interest rate lowered.
2. If that doesn't work, shop around for a credit card offer that will reduce your monthly payments. Alternately, and perhaps preferably, call your bank or credit union and see about a personal loan to consolidate your debts and lower your payments.
3. Get in the habit of living *below* your means. This may require quite a bit of work and re-conditioning. If you find it impossible to pay your credit payments and make ends meet elsewhere without charging more, you may need to look into getting a second job temporarily until you are able to manage on the one income. Many of us on this board have done exactly that. The main thing is, if you want to be debt-free, you have to learn to live under your income, which includes setting money aside each month to save for the "unexpecteds."
4. Stick around this board. It is full of the most helpful, amazing folks, and you will be well supported.
Congratulations on taking a step toward recovery, and on coming here while your credit is still good. You will thank yourself for taking these steps. I hope to see you around.
Blessings,
Heather
Please listen to everyone that has posted. If you are going to stop paying the minimums and you have no plan to ever get out of debt, you might as well just file bankruptcy right now. Both options (paying less than the minimum or filing bankruptcy) will ruin your credit for years to come, but at least bankruptcy lets you start over.
The best plan is to live very frugally for the next little while so you can pay more than the minimums and reduce those payments, then keep paying every extra penny you have so the balances start dropping. As the balances drop, you will be charged less interest and you will start getting out of debt even faster. Eventually you won't be so dependent on the credit cards and you will get some zero interest offers, and transfering your balance and not paying interest for a while will allow you to make some real headway on your debt.
The easiest way to save money and have more to pay toward your credit cards are spend less at the grocery store, cancel your cable, cancel your phone (cancel home phone if you have a cell), find a cheaper internet connection, get a cheaper cell phone plan, get a friend to cut your hair for free, stop at thrift stores, switch to cheaper car insurance, don't buy gifts for anyone this year, don't eat out, take your lunch each day... those are some of the things I've done.
I think the last thing that you need to do is miss a minimum.
Hugs!!!
I know it's hard and everyone here has already told you what would happen if you skip the minimums.
Just wanted to let you know we understand your frustration and where you are feeling at right now.
Have you had a chance to track ALL your spending?
Becky
CL of 4th, 5th & 6th grade Scoliosis
From what I understand, Credit companies are even less forgiving now. If you are late, they jack up the interest rate, thereby making your problem worse. I would try to cut expenses first. We canceled our cable and DSL when it was really bad.
Have you looked into credit counseling? They can help get you a reduced payment, just make sure you use a reliable one.
As for the credit card trap, I can still remember when that realization came to me. That if I didn't ahve to pay the credit cards, I wouldn't need the credit cards. It reminds me of new variation on share cropping or company town & store of the 19th century. You had to buy everything from the people you worked for who changed more than you made, so you were always in debt and could never leave.
Good luck and keep your spirits up.
Welcome to the board!
You now know from the other posters the ramifications of missing the payments on your credit cards.
You mentioned that in part the reasons you keep charging are because of incidentals such as haircuts, clothing, other bills etc...
In order to really conquer the credit card debt you've got to analyse your spending.
For instance if you need to get your hair done, try to stretch out the time between visits, go to a cheaper but yet reputable salon, find a friend or friend of a friend that does hair in her home, even try beauty schools where students use their skills and you'll pay next to nothing.
Find cheaper alternatives for things you cannot cut out completely, but be prepared to pare down on things like high speed or extra channels etc...doing all this will free up more money to attack your largest debt.
I hope things work out for you,
Kassandra
Kassandra
"It is said that life has its peaks and valleys. The challenge is to accept them equally and experience them
Hello and welcome to the board.
All my best,
Danni