To avoid penalty fees, you can make the minimum payment, pay a substantial portion of the bill, or pay the full balance.

Paying the minimum keeps you out of trouble with creditors, but it’s much more costly in the long run. You’ll pay interest on a balance that won’t decrease very rapidly. Paying a substantial portion of your bill each month will lower your balance more effectively and thus lower the interest you’ll owe each month. Better yet, paying the full balance means avoiding a finance charge entirely.

Suppose you charge $1,000 to a credit card that carries an 18% APR and requires a minimum payment of $20 per month. If you paid $20 each month, it would take you 91 months to pay off the balance without making any additional purchases, and you’d end up paying over $800 above the purchase price. If you paid $50 each month, you’d end up paying $176 over the purchase price. If you paid the full balance immediately, you'd only pay the value of your purchase — $1,000.