Last Updated on Mar 5, 2020 by James W

If you haven’t been paying attention to how often you’ve used your business’ line of credit, you might be in a shock once you open your statement. If it shows a huge balance owing, you may be tempted to fall back on the minimum payment.

A minimum payment is incredibly handy when money is tight. As either a percent of your balance or a small flat fee, it’s generally a lot easier to cover than the full amount you owe. It gives you some wiggle room should your finances be tied up in other parts of the business.

But is it a good idea to rely on your minimum payment all the time? Here are some reasons why you should always try to pay your full balance.

What is a Minimum Payment?

Your minimum payment is the lowest amount of money you may pay and not get hit with late fees. You may, however, end up accruing additional interest on any balance that you carry over.

This is true for the average line of credit or credit card — including both business and personal options.

It’s important to note that many financial institutions like CreditFresh recommend you always use the appropriate product for your needs, so you only ever use a personal line of credit to make purchases for your personal life.

But what kind of purchases does this entail? Admittedly, drawing this line may be hard if you’re an entrepreneur and your business is your life. Something like a CreditFresh Line of Credit by CBW bank is intended to be used for unexpected emergency expenses when your savings won’t cover them. If you need more help, you can visit CreditFresh to get more info about a personal line of credit and when you might use one.

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Reasons Why You Should Pay More When You Can

At first, it may seem like you’re making the practical choice by paying the minimum payment. You’ll avoid late fees and keep more of your money free for other business expenses, after all.

But ultimately, following this strategy isn’t a good business move.

You’ll pay more in interest

Remember, interest will accrue on any outstanding balance that moves from one month to the next. Depending on your account, you may also pay finance charges.

Don’t take our word for it. Use a minimum payment calculator like this one to see just how much you’ll pay by using the minimum payment.

You’ll spend more time paying off your debts

You can use that same calculator to see how long this balance will hang around. You may be paying back a new security system or POS system for months — or even years — after you have them installed.

By paying the minimum, you’re barely chipping away at your debt, which means more of your line of credit limit will be tied up for longer. This could spell disaster in case your business faces an emergency. With less cash at your disposal, you may have to tap into other loans or liquidate something valuable.

Bottom Line: Always Pay More When You Can

Although paying less upfront may seem attractive, don’t be duped by this offer. The minimum payment is there in extreme cases when you can’t pay off your bill in full by the due date. It’s never meant to be a long-term strategy for paying your bills.

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If you can, always pay your full balance off. And if you can’t, pay as much as your budget allows.


Founder and chief editor of Blogger, Affiliate Marketer, Tech and SEO geek. Started this blog in 2011 to help others learn how to work from home, make money online or anything related to business and finances. You can contact me at