Why Does the Credit Card Company Set the Minimum Payment So Low?
Credit card companies set low minimum payments to promote on-time payments and prevent widespread defaults, offering financially constrained cardholders a manageable way to reduce their outstanding balances while avoiding late fees.
by Kowsalya
Updated Oct 24, 2023
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Why Does the Credit Card Company Set the Minimum Payment So Low?
Credit card companies set the minimum payment at a relatively low level to provide their customers with a manageable option for making partial payments, thereby encouraging timely payments and reducing the likelihood of widespread defaults.
This approach allows cardholders facing financial constraints to make progress toward reducing their outstanding balance while also benefiting the credit card company by minimizing the risk of non-payment and late fees.
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