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Five Principles of Making Credit Card Payments


When you have multiple credit cards, all with balances, you have the tough job each month of deciding which credit cards you should pay and how much you should pay. Here are some guidelines to help you make those decisions. Keep in mind if you're focusing on getting out of debt, your payment plan might look a little different.

1. Make At Least the Minimum On All Your Credit Cards

Woman with hand on credit card, other hand on purse, close-up
Jason Hetherington/ Stone/ Getty Images

You should always make the minimum payments on your credit cards, no matter what. Anytime you pay less than the minimum, you're considered late. Not only will you be charged a late fee, your interest rate might rise (if you're 60 days delinquent) making it more expensive to carry a balance.

After 30 days, your delinquency is reported to the credit bureaus and added to your credit report. A single late payment in your entire credit history might not do much damage, but the more delinquencies you have, the worse the affect your credit score will be.

2. Get Current On Any Delinquent Accounts

You should get caught up on any accounts that are behind. Again, as long as you pay less than the minimum, you'll continue to be assessed late fees and have your late payments reported credit bureaus.

If you have any extra money in your budget after making your minimum payments, put it all towards bringing your accounts current. If you're late for 180 days or more your creditor might charge-off your account or refer it to collections or both.

3. Bring Maxed Out Accounts Below The Limit

Anytime your credit cards go beyond your credit limit, it raises red flags to current and future lenders. It causes them to wonder if you can responsibly handle credit. Plus, you face over-the-limit fees if your credit card charges this fee and you've opted-in to having over-the-limit transactions processed. Similar to getting current on your accounts, put your extra money toward bringing your accounts below their credit limit.

4. Bring High Balances Closer to $0

To maintain a good credit score, you should keep your balances closer to $0. Focus especially on balance that are close to the credit limit. High credit card balances increase your credit utilization and hurt your credit score. By keeping your balances low, you're showing that you can handle credit responsibly. Your credit score will reflect that.

5. Pay Off Balances With High Interest Rates

If you want to get out of debt quicker, you should focus on paying off those credit cards that have high interest rates. Since you pay more in finance charges on high interest rate credit cards, it's wisest to pay those balances off quicker to avoid paying extra money to the credit card company. Of course, if your goal is to get out of debt, you should evaluate your credit card interest rates along with the interest rates of your other debt.

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