Is it possible to make a part payment on my outstanding credit card balance?

Information verified correct on February 21st, 2017

Making a part payment is one way you can reduce your credit card balance more effectively than paying the minimum repayment.

When you're presented with your credit card bill you have three choices: pay the minimum repayment amount, pay the full amount, or pay an amount somewhere in between.

This third choice is a part payment, and simply refers to you making a more substantial payment than the minimum repayment. A part payment will reduce what you owe, but won’t clear your debt completely.

Some people believe making part payments stops you being charged interest. Unfortunately that’s not the case. Let’s have a look at how part payments actually work.

How do part payments work?

When you make a part payment you reduce the amount you owe your card provider. This allows you to keep using your card, and stops you running into any late fees. Because interest is charged on your outstanding balance, by reducing your balance you’ll reduce the amount of interest you’re charged.

Part payments don’t stop you accruing interest. The only way to avoid interest is to fully repay your balance every month. Anything left unpaid will be charged interest. You’ll also lose the benefit of your interest free days for the next billing period.

While part payments won’t help you during this billing period, they will help you during the next. This is because interest is charged daily, so by making part payments throughout the month you’ll reduce your balance and interest charges for the next billing period.

Let's look at an example.

Rob has a balance of $10,000, with a credit card that charges a rate of 19% p.a. If he paid the minimum repayment of 2% he'd make payments of roughly $200 each month and pay off approximately $500 off his balance in addition to $1,800 worth of interest over one year. If Rob kept this up it would take him longer than 25 years and more than $27,000 in interest.

If he instead made a part payment of $600 a month, he'd pay total interest of $1,803 over the 1 year and 8 months it would now take him to pay off his balance.

As you can see making a part payment can be a great solution to large credit card debt.

How can you use part payments on multiple credit card debts?

Having multiple credit card debts can make it difficult to pay your whole balance off. Here are some strategies which use part payments to reduce multiple credit card debts.

Pay the highest interest rate balance first. This strategy sees you order your debts from lowest interest rate to highest interest rate and pay the minimum repayment on all of them except for the highest interest rate debt. Make part payments on this debt and reduce it and then work your way down the list.

Pay the lowest interest rate balance. Another strategy concerning part payments is the snowball method. This sees you order your debts from smallest to largest. You pay the minimum repayment on all debts except for the smallest, which you make part payments on. Once this debt is paid off you move to the next debt, and pay the amount you were paying on your first debt in addition to the minimum repayment. This sees you gradually build up your part payments to bigger the debt is.

Pay highest balance first. You could employ a strategy similar to the snowball method except with the highest balance first.

Balance transfer offers

If you're in debt one way to be able to use part payments to full effect is to take advantage of a balance transfer offer.

These allow you to transfer your debt to a new credit card and get a lower interest rate—sometimes even 0% for a number of months. This means your payments will go more towards the actual debt rather than interest charges, and can give you a headstart.

Look below to compare different balance transfer offers.

Balance transfer offer comparisons

Rates last updated February 21st, 2017
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Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Interest Saved
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Earn 2 Velocity Points per $1 spent and save with a reduced annual fee and a 0% p.a. balance transfer offer for 18 months.
0% p.a. for 18 months 20.74% p.a. $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ANZ Platinum Credit Card - Exclusive Offer
Receive a low introductory offer of 0% p.a. on purchases for 3 months and 0% p.a. on balance transfers for 12 months. Also, enjoy an annual fee waiver in the first year.
0% p.a. for 12 months 0% p.a. for 3 months (reverts to 19.74% p.a.) $0 p.a. annual fee for the first year ($87 p.a. thereafter) Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
0% p.a. for 15 months 19.99% p.a. $149 p.a. Go to site More info
Citi Rewards Credit Card - Platinum Card
A long term balance transfer offer with platinum rewards and benefits.
0% p.a. for 24 months with 1.5% balance transfer fee 20.99% p.a. $49 p.a. annual fee for the first year ($149 p.a. thereafter) Go to site More info
NAB Premium Card
Benefit from platinum perks plus take advantage of a low interest rate on balance transfers.
0% p.a. for 24 months with a one off 3% balance transfer fee 19.74% p.a. $90 p.a. Go to site More info
American Express Essential Credit Card
Receive a $50 credit on eligible spend and get Smartphone screen insurance combined with a no annual fee for life card. Also enjoy a 0% p.a. balance transfer rate for 12 months.
0% p.a. for 12 months with 1% balance transfer fee 14.99% p.a. $0 p.a. Go to site More info
Virgin No Annual Fee Credit Card
No annual fee for the life of the card with $100 cashback and a 0% p.a. offer on balance transfers for 18 months. Spend criteria applies for cashback offer.
0% p.a. for 18 months with 2% balance transfer fee 18.99% p.a. $0 p.a. Go to site More info
HSBC Low Rate Credit Card
A competitive offer from HSBC featuring a long term balance transfer deal and low ongoing interest rate on purchases.
0% p.a. for 15 months with 2% balance transfer fee 13.25% p.a. $55 p.a. Go to site More info

Credits don’t equal payments

If you buy something from a store and subsequently get a refund it won’t be counted as a payment. On your credit card statement you have a section where payments are listed. A credit won’t show up here, but will instead be in the section below where "Other credits or payments" are listed.

Repay your balance in full

As always our advice is wherever possible repay your outstanding credit card balance in full each and every month. It’s the only way to avoid interest and get the maximum benefit from your interest free days.

Part payments throughout the month are useful because they help minimise the interest you’re charged, but if you can keep your balance at $0. If you’re not sure you’ll be able to clear your balance one month, making part payments is a good idea, or as mentioned above, if you’re already in debt they can be a good way to bring your balance back down to $0.

If you’re finding it hard to fully repay your balance or you feel tempted to spend more than you can afford, speak to your bank's customer service team and get them to reduce your credit limit, or see what other options may be available to you.

Marc Terrano

A passionate publisher who loves to tell a story. Learning and teaching personal finance is his main lot at Talk to him to find out more about home loans.

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