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Can I pay my credit card bill in parts?
As long as you pay at least the minimum amount listed on your statement, you can make part payments on your credit card. Here's how it works.
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If you are unable to pay off your total credit card balance in one go, you have the option of paying off part of the balance instead. This could be the minimum amount listed on your credit card statement (usually around 3% of the total owed), or any amount above the minimum.
When you make a part payment, the remaining portion of your credit card balance will usually attract interest charges – unless you have a card that offers a promotional 0% p.a. interest rate for your balance.
What is a part payment?
A partial or part payment is any repayment that is less than the total amount you owe.
With a credit card, making part payments allows you to pay off your balance over time. So, when you get your monthly credit card bill, you have three main repayment options:
- Pay the account's closing balance in full. If you pay the total owed, you can avoid interest charges on your credit card.
- Pay the minimum amount. The minimum repayment amount listed on your credit card statement is the smallest amount you can pay while keeping your account in good standing – usually around 3% of the total owed. Only paying the minimum increases the risk of higher costs and long-term debt.
- Pay another, partial amount of your choosing. Making a part payment is one way you can reduce your credit card balance more effectively than paying the minimum repayment.
Some credit cards also give you a fourth, more structured option for part payments:
- Instalment plans. If your credit card offers instalment repayments, you could pay all or part of your balance off in fixed monthly amounts, over a set period of time. For example, if you owed $2,000 on your card, you might set up an instalment plan and pay $200 per month for 10 months. Sometimes you can also get a reduced interest rate on the balance.
How do part payments work?
A part payment allows you to keep using your card, and stops you running into any late fees or other penalties. Because interest is charged on your outstanding balance, reducing your balance will reduce the amount of interest you're charged.
How do I pay off part of my credit card balance?
To make a part payment on your account, choose the amount you want to pay off your card and then use one of the repayment methods listed on your credit card statement. For example, BPAY, direct transfer or cheque.
You can make a part payment once, before the due date listed on your statement, or make several part payments throughout the month.
As credit card interest is charged daily, making more frequent payments will help you reduce your balance and interest charges for the next billing period. It also means you can plan repayments around your payday – whether it is weekly, fortnightly or monthly.
But part payments don't stop you accruing interest on the remainder of your balance. You'll also lose the benefit of any interest-free days for the next billing period.
So if you continue using your credit card for purchases, your next statement will have a higher balance, higher minimum payment amount and more accrued interest.
Is making a part payment a good idea?
While it's ideal to pay off your entire credit card balance by the due date on each statement, that's not always possible. So there are times when making a part payment can give you some financial breathing space, while also continuing to reduce your balance over time.
This can make part payments a better option than only paying the minimum amount due on your statement – as you'll see in the example below.
Example: How a part payment could help you pay off your credit card
Say you have a $5,000 balance on a credit card with a 19.99% p.a. interest rate and a minimum payment amount of $30 or 3% of the balance (whichever is greater). If you only made minimum payments, it would take you just over 14 years to clear the balance and cost you around $5,466 in interest charges.
In comparison, if you made a part payment of, say, $400 per month, it would take you about 1 year and 3 months to pay off the balance and cost you around $653 in interest. That's a difference of 12 years and 7 months and $4,813 in interest charges compared to only paying the minimum amount.
Keep in mind that this example doesn't take into account any other purchases or fees. But it still gives you an idea of the potential value you can get from making a part payment instead of the minimum payment on your credit card.
How can I use part payments for multiple credit card debts?
Having debt on a few credit cards can make it more difficult to pay your whole balance off. Here are some strategies where you could use part payments to deal with multiple credit card debts.
- Pay the balance with the highest interest rate first. With this strategy, you pay as much as you can off the card that charges the highest interest rate and make minimum payments on the other cards. Once your part payments have cleared the balance on the card with the highest rate, you can focus on paying off the next one.
- Pay off the lowest balance first. Sometimes known as the "snowball method", this option sees you order your debts from smallest to largest amounts. You pay the minimum repayment on all debts except for the smallest, which you make part payments on until it is paid off. Once this debt is paid off, you can put part payments towards the second smallest debt, while continuing with minimum payments on your other debt. This method can help you keep track of your goals and progress, which can make it easier to stay motivated.
- Pay off the card you want to cancel first. If you have debt on a credit card that you no longer want to use, you could focus on paying it off so you can cancel it as quickly as possible.
With any of these options, you will still need to pay at least the minimum amount that's listed on each of your credit card statements. It's likely that every credit card will have a slightly different due date, which means you could end up making repayments at different times throughout the month.
You will also be charged interest on each credit card balance until it is paid off.
How can I save on interest charges while making part payments?
There are a few tips and strategies you can use if you want to keep credit card interest to a minimum while you pay off the balance. These include:
- Paying as much as you can off the balance. Even if you can't pay the full balance on your credit card, paying the highest amount that's affordable for you will help you reduce the debt and save on interest as a result. You can use a credit card repayment calculator to see how much different part payments will help you save.
- Consolidating your accounts. If you have more than one credit card, consolidating them into one account could help you save on both fees and interest charges. You can learn more about debt consolidation options in this guide.
- Setting up an instalment plan. Some credit cards may offer a reduced or promotional interest rate if you set up an instalment plan for your balance. You can see if this option is available by logging in to your credit card account or by calling the number on your card or account statement.
- Getting a balance transfer card. Balance transfer credit cards offer an introductory low or 0% p.a. interest rate on debt that you transfer to the new account. The introductory period typically ranges from 6 to 26 months for a 0% p.a. balance transfer offer, but could be up to 30 months for a low rate balance transfer offer. This gives you a window of time when you can make part payments towards your balance with reduced or no interest charges.
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Any part payment that is higher than the minimum amount listed on your credit card statement will help you reduce the balance and subsequent interest charges. But remember that paying more off your card will help you clear the debt faster and reduce interest charges.
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