Paying for your expenses through your credit card might seem very convenient, but when it comes to the debt settlement against the credit card, many people do not know how to settle that debt while not putting a large restraint on their monthly spending. Paying the bill against your credit card is not always simple. As you might know, there are three types of payment options to settle the debt on your credit card:
- Minimum Payment
- Current Balance
- Statement Balance
People are often confused about these three options. Let us find out in-depth how choosing different options can be beneficial in different situations.
Paying the Minimum Payment
This option is viable only for people who are running very thin on their budget and have to avoid potential blockage from the credit card issuer. The minimum payment is the minimum amount that is payable to the credit card issuer against your credit bill. Most often, the credit cards such as American Express, Discover or other credit cards have a fixed amount of minimum payment to be made for debt settlement against the credit card bill. This minimum amount varies widely but is generally between 1 percent to 2 percent of the maximum balance of the card. However, paying the minimum amount can lead the credit card issuer to charge interest on your card.
Paying the Statement Balance
Debt settlement against your credit card bill by paying the statement balance is viable when you have a monthly budget set aside for your credit card transactions. It is the total amount due at the end of every billing cycle and includes all the unpaid transactions until the end of the billing cycle. This option prevents interests from being charged against credit card debt.
Paying the Current Balance
The current balance of your credit card includes all the unpaid transactions until the end of the billing cycle as well as unpaid transactions in the ongoing billing cycle. This method of payment frees your card of all unpaid transactions, and the debt is reduced to zero.
For debt settlement against your credit card bills, the preferred method of payment depends on the monthly budget you have on your hand. Paying the statement balance or current
balance will save you from hefty interest rates, however, paying minimum payment will save your card in case you are low on budget.