Friends who have used credit cards should know that credit cards have minimum repayments. When credit card holders are unable to repay their debt before the repayment date, they can choose the minimum repayment amount to ease the repayment pressure, but paying the minimum repayment on the credit card will have some impact.

What will happen if you pay the minimum payment on your credit card?

Although minimum credit card repayments can avoid overdue payments and reduce repayment pressure, they also have the following disadvantages:

1. Charge high penalty interest

If you choose the minimum repayment on your credit card, interest will be accrued on the current bill in full at a daily interest rate of 0.05%. At the same time, the interest will be compounded, which will increase the repayment burden in the long run.

2. The credit card is reduced

The long-term minimum repayment of the credit card will be considered by the bank as insufficient repayment ability, so the bank will reduce the credit card.

3. There is a risk of overdue payment

The minimum credit card repayment will result in more money to be repaid in the future, which will be very serious if there is a problem of insufficient capital turnover. Overdue is prone to occur.

4. Impact on personal credit

The use of credit cards will be recorded in the People's Bank of China's credit report. Although the minimum repayment is not considered overdue, you should choose the minimum repayment every month. Loans will affect the bank's judgment on personal creditworthiness.

Are there penalty fees and interest for overdue credit cards?

After a credit card is overdue, there will not only be penalty fees, but also interest. After the credit card is overdue, a certain percentage of repayment penalty fees will be paid. Liquidated damages = (minimum repayment amount – amount repaid as of the due payment date) × 5%. Furthermore, there is no interest-free period after the credit card is overdue, and interest will be calculated from the statement date.

If the credit card is not repaid in full by the due date, interest will be accrued from the date the transaction was recorded, and compound interest will be accrued on a monthly basis. If the repayment amount is less than the minimum repayment amount, a repayment penalty will be paid based on a certain proportion of the unpaid portion of the minimum repayment amount. Repay the minimum repayment amount, and although interest will be charged, there will be no repayment penalty, and you can maintain a good credit record.

Credit cards have a three-day grace period for repayment, which means that the cardholder can pay off the current bill within three days of the repayment date. It is not considered overdue, and naturally no fees will be incurred.