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Making the most of your monthly credit card payments
When you have a credit card, you’re expected to pay off at least some of your statement balance every month.
The lowest amount you’re allowed to pay is called your minimum payment.
We don’t recommend making only your minimum payment every month. In fact, we’ll often contact customers who regularly do this to offer some advice and help if needed.
Here’s a simplified example to show you how minimum payments cost more. You have a £3,000 balance on a credit card with an effective interest rate of 24%. Read our guide to interest rates for more detail on how they work.
If you’re having a hard time managing your money, don’t hesitate to get in touch with us. We’ll talk everything through with you, look at your products and services and even help you consider your best options.
The most common and safest way to pay every month is with a regular Direct Debit.
This way, you won’t run the risk of forgetting to make a payment, being charged any late fees or losing a promotional rate. If a Direct Debit isn’t taken for 37 months, it will become inactive, and your bank or building society will remove the details from their systems. If this happens, you’ll need to set up a new one.
In months when you can afford to pay more than your minimum amount, you can
also make additional payments online, on the Mobile Banking app or by in-branch bank transfers, cheques or cash.
All credit card providers calculate minimum payments differently. If you’re a Lloyds Bank customer, in general your minimum payment is either 2.5% of your balance plus any interest and fees or £5 – whichever is higher. Even if you have a 0% promotional offer, you need to make the minimum payment each month.
Below are two simple examples showing a customer’s minimum payments if they are currently on a promotional offer giving them 0% interest for a 12-month period.
Example 1
Let’s say you have a balance of £2,000.
2.5% of this is £50, so your minimum payment is £50.
Example 2
On the other hand, say you only have a balance of £199.
2.5% of this is £4.98, so your minimum payment this month is £5.