When in difficult times you are short of means to pay for your credit card bills, paying minimum would give you a breather. Though it may not save you from finding a concrete solution for paying your credit card debt. And soon you may be under a debt trap. On the contrary assuming that paying minimum is a good option, is like digging one's own grave. If you are not aware of this or are confused by credit card jargon, don't worry you are not alone. Revolving and minimum payment are the key terms to be learnt.

Revolving credit and minimum payment

Revolving credit means once you get a credit limit then you can use it as long as it stays, within the present credit limit. It is required that each month you pay the minimum amount which also includes the interest charges. As your balance gets reduced, your funds increase and are available for you to use, up to your credit limit. For instance, if your credit limit is Rs.15000 and you have made a purchase of worth Rs. 10000, you'll have Rs.5000 for future purchases. Know if you make a minimum payment which is normally 5% i.e. Rs. 500, you'll have Rs. 9500 available credit.

If you go on paying minimum then it take years to cover your due amount. As it contains a large portion of interest component and a tiny portion of the balance amount. Always make payment before the due date. It will help you to chip away your due amount without paying any interest on it. Avoid paying minimum and try to clear your credit card dues even before the due date. If you think that paying minimum is more convenient option, then banks are even happier!