All credit cards have minimum payment requirements. This is often only about 3-4% of your balance every month. As long as you pay the minimum, you will not be charged late payment fees. Late fees can be as much as $30, so it’s important to pay at least the minimum.

Credit card companies have recently changed their minimum payment rules to make sure borrowers’ balances do not grow while people are making payments. In the past, minimum payments may not have covered all the interest charges on a credit card balance so the principal balance actually grew over time. This process is called “negative amortization.” Recent changes in federal regulations have forbidden negative amortization. Even though this change may increase your minimum payment, its better to pay more and pay down your bill than to see your bill grow.

It’s always better to pay the minimum than not to pay at all. Missed payments result in fees and they can increase your interest rate. They also hurt your credit history, making it harder and more expensive for you to get credit in the future.

If you pay just the minimum, you are paying off mostly interest, so it will take a long time to pay off your balance.

Here’s the Bottom Line

If you want the convenience of a credit card to pay for items instead of cash and have money in the bank but are worried about high interest rates or getting into too much debt, you should probably consider a debit card. Debit cards, sometimes called check cards, are accepted everywhere that credit cards are, but they take money directly from your checking account. Since you're only spending money that you already have, there are never any finance charges. Keep in mind that with a debit card you have to be sure not to spend more than your account balance or you may be charged overdraft fees. More information on debit cards.