Can't Make Your Credit Card's Minimum Payment? Here's What to Do

by Maurie Backman | Updated July 21, 2021 - First published on May 10, 2021

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Not making your credit card minimums could destroy your credit. Here are some better options.

In an ideal world, you'd pay off your credit cards in full every month. That way you'd avoid carrying a balance and accruing interest as a result. But sometimes, unplanned expenses can cause credit card balances to climb. If that happens, you may reach the point where even your minimum payments are too much to handle. Failing to make those minimum payments, however, could destroy your credit score and make it harder to borrow in the future. If you're struggling to keep up with your credit card minimums, here are some avenues to explore.

1. Consolidate your debt

Consolidating your credit card debt could make it much more affordable. One reason credit card debt can be hard to manage is the high interest rates you'll pay. There are a few ways you can pay less interest.

First, you could look at doing a balance transfer, where you move your various balances onto a single credit card with a lower interest rate. That could, in turn, lower your minimum payments. Another option is to take out a personal loan at a lower interest rate. You can use the money to pay off your credit card debt, and then repay that loan in installments over time.

2. Do a cash-out refinance

If you own property, a cash-out refinance might be an option. You'd borrow more than your current mortgage balance and get a check for the difference. You can then use that money to pay off your credit cards, and from there, repay your new mortgage at a lower interest rate than you paid on the cards.

Here's how this might work in practice. Say you have $20,000 in credit card debt and owe $90,000 on your mortgage. You could do a cash-out refinance for $110,000:

  • The first $90,000 pays off your initial mortgage.
  • The remaining $20,000 can be used to pay off your credit cards.

From there, you'll pay off your new $110,000 mortgage over time. Since today's refinance rates are low and it's possible to pay off that balance over a 30-year period, your monthly payments may end up being relatively low -- and manageable.

Of course, to qualify for a cash-out refinance, you'll need to have enough equity in your home. Equity is the portion of your home you own outright. If you owe $90,000 on your mortgage but your home is worth $160,000, then you have $70,000 in equity. And in that case, you shouldn't have much of a problem qualifying for a $110,000 cash-out refinance, because you're only tapping $20,000 of that $70,000.

3. Get a second job

If you can't manage your credit card minimums on your existing income, you may need to consider boosting your earnings with a side job. You can use that extra money to make sure you don't fall behind. In fact, if you make enough money from your second job, you may even be able to pay down your credit card balances more quickly, thereby helping to dig yourself out of credit card debt sooner.

As long as you make your minimum payments on your credit cards each month, you'll be considered current -- and your credit score won't be negatively affected. But if you fall behind on those minimums, your credit score could take a big hit. So don't let that happen. If you're having trouble making your minimum payments, explore other options. You could consolidate your debt, do a cash-out refinance, or boost your income to come up with the necessary cash.

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