The Costly Mistake of Credit Card Overpayments

Image courtesy of Salvatore Vuono /

Whilst credit cards can provide a useful and sometimes even vital means of cash, they are, of course, to be used with care. Credit card debt can spiral out of control very easily if left unchecked and should be monitored very carefully to ensure that interest and fees do not accrue on a monthly basis. It is advised that people with expensive debts such as credit card debt should try to pay it off as quickly as possible and not just pay the minimum amount each month. Doing so can lead to relatively small balances taking a very long time to pay off.

Whilst overpaying is generally seen as a good idea by many analysts, it seems some lenders are reducing the amounts taken in a monthly direct debit to compensate for this. For example, if your minimum payment was at  200, but you overpaid by  50, your next monthly direct debit would be set at  150, thus negating the effect of the overpayment in the previous month. In doing so, the amount paid off your total debt would be the same as if you’d just cleared the minimum each month, with interest accruing at the same rate.

Not noticing the reduction in payments to compensate could be a very costly mistake, especially if you are attempting to clear a debt prior to the expiry of any cheap introductory rate or balance transfer.

How to avoid making this mistake

It is not always possible to clear a credit card debt at the end of every month, especially as monthly household costs seem to be spiralling and wages are standing still. Whenever possible, you should clear the absolute maximum you can afford, to keep the level of credit card debt manageable.

Paying off your credit card debt by standing order rather than direct debit will help you to retain control over the levels of payment made. Rather than paying an amount specified by your lender each month, your payment is defined by you at the bank. Whether you choose to overpay by  50,  100 or even more, as you set the level of the payment, your lender has absolutely no influence or say over what happens.


Other credit card pitfalls avoided

The reduction in subsequent payments following an overpayment is one of the many pitfalls associated with running a credit card. Whilst there is not space here to cover them all, here are some more ways to make the best of your cards.

If you have a 0% deal that requires only the minimum amount to be cleared from the balance each month, it is wise to keep aside funds in a savings account to use to pay off the debt as soon as the 0% period expires. This way, the credit card debt can be cleared before interest begins to accrue.

Using credit cards to purchase holiday money or money from a cash machine is to be avoided whenever possible. Cash advance fees are usually added on in transactions such as these, which are absolutely avoidable if you just use the card for regular purchases. Similarly, check any terms and conditions over use of a credit card abroad to see what the fees are.



About Pepper

I am a single working mom, trying to raise my kid the best way I know how. Join me as I navigate my way through the jungle that is Single Mom-hood, armed with rose-colored glasses and strength of spirit. As pepper adds spice to food, so does my daughter add spice to my life. She makes life no less than…PEPPERRIFIC!

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  1. Our society and market now is much dwelling into the notion that having credit cards are really helpful but the truth is it takes us to more problematic position by encouraging us to purchase more against our purchasing power. Thus it takes a good decision if you think getting one and paying your purchase on time can be beneficial on your part.

  2. I also overpay my credit at times but most of the time, I try to pay the exact amount. Another major mistake is not paying the full amount as credit card company charges the full interest on the amount if there is a portion not paid from the previous due amount.

  3. Yes! It is easy to fall into these credit card traps and fees especially if you didn’t read the fine print. That’s the reason why I had my card cancelled.

  4. Wanderer Juan says

    These are good tips to avoid accruing credit card debt. Credit card debt can be detrimental to one’s financial standing.

  5. gosh! over payment and delayed payment, which one would you choose? Both have disadvantages pala. The best is to pay on time and always monitor transactions.

  6. People really have to learn every tidbit of using a credit card. I’ve got a friend who failed to pay her cc debts and it went up to 300 thousand pesos! Now she’s broke.

  7. Packers Movers kolkata says

    Hey Pepper, nice post, really your blogging stratagy awesome, i saw so many blog but your blog i really like it,. keep it up.

  8. if you really want it… you could take out a cash advance on it. Per transaction fees apply (but obviously not interest since your not owing).

  9. Danilo Petrozzi says

    I totally agree with you. Debt must be monitored very carefully because its really easy to lose control

  10. You need to watch your credit cards balance and history, all these facts will influence your future loans applications. Ask for a free report from any credit authority.

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