What is the problem with paying only your minimum credit card balance each month?
Answer Options:
- A) It lowers your credit score
- B) You have to pay interest
- C) The bank will cancel your credit card
- D) All of the above
What is the problem with paying only your minimum credit card balance each month?
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Correct Answer:
C) Pay the full balance each month.
Explanation:
The best way to avoid paying interest on credit cards is to pay the full balance each month. By doing this, you avoid carrying a balance into the next billing cycle, which would otherwise incur interest charges. Paying only the minimum balance will result in interest on the remaining balance, while making payments online or having multiple cards does not directly impact the interest charged.
Correct Answer: B) You have to pay interest
Paying only the minimum balance on a credit card means that you will incur interest on the remaining balance, increasing the overall debt. While it can potentially impact your credit score over time if your balance remains high relative to your limit, paying only the minimum does not directly lower your credit score immediately, nor does it lead to immediate cancellation of the card by the bank. Therefore, the primary issue is the added interest charges.