Final answer:
It is crucial to review monthly credit card statements and pay more than the minimum to avoid high interest charges, late fees, save money in the long run, and maintain a healthy credit score.
Step-by-step explanation:
Dear Caitlyn,
I want to point out why it's essential for you to review your monthly credit card statement rather than just setting up an automatic minimum payment. Not reviewing your statements can lead to overlooking errors or unrecognized charges, which could be signs of fraud or incorrect billing. Moreover, consistently making only the minimum payment means you'll end up paying much more in interest over time. For instance, if you and a friend both have $2,000 in credit card debt, and you both make minimum payments of $60, but your friend pays an extra $10 each month, your friend will pay off the debt faster and pay less in interest charges.
Consider this: if your credit card has an interest rate, for example, of 15% per year on your balance, and you're only covering the principal and a small portion of interest with your minimum payment, the remaining balance continues to accrue interest. This is essentially throwing money away. Also, late payments can result in fees that quickly add up, costing you even more. It would be much wiser to pay more than the minimum to reduce the debt quicker and avoid these extra costs.
In short, reviewing your statements, paying off your credit quickly, and avoiding late fees are crucial steps to maintaining fiscal health. By doing so, you'll save money on interest, potentially improve your credit score, and have a clearer picture of your financial situation.