When it comes to credit cards, making your payments on time every month is one of the most important things you can do to maintain good credit. But if you’re only making the minimum payment every month, you’re setting yourself up for years of payments. And it could potentially damage your credit in the long run — even if you always pay on time. Here’s what happens when you make minimum payments on your credit cards:

You Pay a Lot More in Interest  

The reason it’s ideal to pay your credit card bill in full every month is so you aren’t charged interest. When you carry a balance from month-to-month, you start paying interest charges. And if you continue to charge on that card, you create a cycle of charging and paying that can go on for years. Often, the minimum payment required covers only the accrued interest (or just a bit above), which means you’re not going to come close to paying off the principal in a reasonable amount of time. It’s the start of a frustrating cycle where you pay and pay, but never make meaningful progress toward paying it off.

You Could Spend Years Paying it Off

When you make your minimum monthly payment on time every month, it can give you the feeling of being in control of your finances. But it’s a false sense of security. Whether paying the minimum because you can’t afford to pay more, or you’d simply rather put your money toward other things, you are only prolonging the payoff process.

Ready for a wake-up call? Take a look at the “minimum payment warning” on your credit card statement. It’s eye-opening to realize how long you will be paying and how much interest will accrue along the way. But you can shrink both those numbers by starting to pay more. If you double the minimum payment, you slash it in half (as long as you don’t add new charges). But even paying as little as $10 over the minimum will help you start to make a dent in the principal.

Your Credit Could Suffer

If you have one or more credit cards at or near the limit and only make minimum payments, you run the risk of damaging your credit. That’s because your credit utilization ratio — the percentage of available credit you’re using — will stay too high for too long. This can make it harder to obtain any additional credit; and if you do qualify, your rates will be much higher.

Plus, if you’re in the process of looking for a job or a new place to live, a high credit utilization ratio may cause hesitation from prospective employers or landlords.

Help is Available

If you’re only making minimum payments because you can’t afford to pay more, we may have a solution that can help you. With our free credit counseling, you’ll receive a full review of your income, expenses and debts, along with a customized budget and recommended solution for getting out of debt. For many clients, that means a debt management plan, which helps clients pay off credit card debt, in-full, much more quickly than paying it off on their own.

Talk with a certified counselor or get started right now with our online financial review.