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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.
There are a few different options for part payments on credit cards. So, let's take a look at how this process works and what other factors you need to think about.
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:
Some credit cards also give you a fourth, more structured option for part payments:
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.
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.
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.
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.
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.
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.
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:
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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