How Bad Can It Be If I Only Pay The Minimum Required Amount On My Credit Card?

Very Bad.

Most credit cards charge 18% on the remaining balance carried over every month. Assuming you have RM3000 in your card and you pay just the minimum balance of RM150 per month. It will take you 4 years and 7 months to pay off the whole loan. And how much interest would you have paid back to the bank? A whopping RM973.60! In total, you paid the bank back RM3,973.60.

In the US, the minimum payment is only 2% of your balance, unlike the 5% in Malaysia, which was a good initiative by the government. If Malaysia had followed the 2% move, how long and how much would our debt be?

If we follow 2%, we would only complete the loan after 10 and a half years and paid a total interest of 3,396.31 or a total sum of RM6,396.31.

In the US, the monthly minimum is USD10 and not RM50 like us, which makes the situation even worst for us. I shall not calculate that as it will be worst than the above 2% calculation.

So, as you can see, paying the minimum on your credit card is a killer to your financial planning. Always strive to pay as much as you can or slightly more than the minimum. Even an extra RM10 per month can reduce your repayment from 4 years 7 months to 4 years 2 months and save you RM118.42 in interest.

All the best!