What are the benefits of paying off more than the minimum payment on your credit card? | Refresh Financial

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What are the benefits of paying off more than the minimum payment on your credit card?

A TransUnion survey of 1,010 Canadians collected data regarding attitudes towards paying their credit card bills. It found that  39 per cent of those surveyed weren't certain about the benefits that come with making more than the minimum payment on their monthly debt repayments.

39 percent!

Paying more than your minimum comes with more benefits than you might realize so, let’s take a look at some of those upsides.

Your debt is paid down faster when you make more than the minimum payment

This comes with a whole pile of benefits, including lowering your credit usage percentage (which makes up 30% of your credit score), minimizing the amount of interest you are paying on your debt and increasing your overall credit score.

Your minimum payment amounts shrink

Providing you’re not using more of your credit each month than you’re paying down, your minimum payments are going to become smaller and easier to handle.

You’ll become debt-free a lot faster

If your goal is to be debt-free, just paying the minimum on all you’ve borrowed each month is not going to do the trick. You’ve got to get aggressive with your debt to see it eliminated.

When you do, you’ll open yourself up to better interest rates, rewards, and terms on all that you borrow in the future.

A note about Total Payment Ratio (TPR) and minimum payments

Soon, how much you pay back each month on the money you’ve borrowed might become even more important in terms of your credit score. While not officially part of credit score calculations yet, TransUnion has talked about (since 2015!) incorporating what’s called Total Payment Ratio or TPR into your credit score calculations. TPR is a number you reach when you divide your total monthly debt payments by the minimum payment. So if you make payments of approximately $100 a month and your minimum payment is $10, your TPR is 10. If you only pay $20 when the minimum payment is $10, your TPR is 2. The higher your TPR is, TransUnion says, the less likely you are to have any delinquencies on your credit report. In practical terms, what this means is that when you make payments that are bigger than your minimum payment, it could hold extra weight in your credit score calculations. Beyond just being good for reducing your credit usage percentage, it will also take into consideration how much you pay each month directly.

So, make it a habit to pay down your debts faster. Never just pay the minimum payment, unless you can't avoid it. You’re going to save yourself interest and open yourself up to all sorts of new borrowing terms and rates. You’ll have a better credit score and smaller minimums in no time.


Refresh Financial's credit builder loan can boost your credit score and put savings into your bank account to help you pay off your debt.

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