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Common Cents

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Credit card minimum payment trap

Paying the Minimum paymentThe smallest amount you can pay on a bill, like a credit card, without being charged a late fee.More in the glossary keeps your card in good standing. But most of it goes to InterestThe price of borrowing money. You pay interest when you borrow, and you can earn interest when you save.More in the glossary, so the BalanceThe amount of money in an account, or the amount you still owe on a debt.More in the glossary goes down very slowly.

Enter your card's balance and APRAnnual percentage rate. The yearly cost of borrowing money, including interest and some fees, shown as a percent.More in the glossary to compare paying only the minimum with paying the same amount every month. This assumes you don't add new charges.

We filled in example numbers. Change them to match your situation.

It's on your statement, often called the purchase APR.

How your minimum payment is figured

Each card has its own rule, written on your statement or card agreement. This example uses that month's interest plus 1% of the balance, and at least $25.

Try an amount you could afford most months.

Your results

Paying only the minimum

Time to pay it off
15 years
Interest you'd pay
$4,433.02
Total paid
$7,433.02

Paying $150 every month

Time to pay it off
2 years and 2 months
Interest you'd pay
$771.44
Total paid
$3,771.44

What this means

  • Your first Minimum paymentThe smallest amount you can pay on a bill, like a credit card, without being charged a late fee.More in the glossary would be about $85. Paying only the minimum, it takes 15 years to pay off, and you'd pay $4,433.02 in interest.
  • Paying $150 every month instead, you'd save $3,661.58 in interest and be done 12 years and 10 months sooner.
  • This assumes you stop adding new charges to the card while you pay it down. New charges make it take longer.
  • Your credit card statement has a box called "Minimum Payment Warning." It shows how long paying only the minimum would take on your real balance.

Can't make the minimum payment? Call your card company before you miss it. Many will work with you in a hard time. A nonprofit credit counselor can also help, for free or at low cost.

Where to get free help

  • Nonprofit credit counseling (NFCC)

    A certified credit counselor can go over your budget and debts with you, for free or at low cost.

  • Submit a complaint to the CFPB

    Having a problem with a bank, lender, credit card, or debt collector? The Consumer Financial Protection Bureau sends your complaint to the company for a response.

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