Minimum Payment
The minimum payment is the smallest amount a credit card issuer requires you to pay each month to keep your account in good standing. Paying only the minimum is extremely expensive: most of the payment covers interest, leaving the principal nearly unchanged.
$5,000 balance at 20% APR: minimum payment ~$125/month → 22+ years and $6,000+ in interest. Paying $250/month → 2 years and ~$590 in interest.
Credit card minimum payments are typically 1–3% of the balance, or $25–$35 (whichever is greater). On a $10,000 balance at 22% APR, the minimum might be $200/month — but most of that is interest ($183), leaving only $17 reducing principal.
At that rate, paying off the balance takes over 40 years and costs more than $15,000 in interest. Paying $500/month instead clears the debt in 24 months and costs less than $2,000 in interest.
Always pay more than the minimum. Credit card statements are legally required (since 2010) to show how long it will take to pay off your balance making minimum payments only — the number is almost always shocking.
Put this into practice with our free calculator:
Open calculator →Related terms
- Debt Avalanche Method
- The debt avalanche method pays off debts in order of highest interest rate first. It minimises total interest paid and is the mathematically optimal debt payoff strategy.
- Debt Snowball Method
- The debt snowball method pays off debts from smallest to largest balance, regardless of interest rate. Each paid-off debt frees up cash to accelerate the next — creating a growing 'snowball' of payments.
- Balance Transfer
- A balance transfer moves existing credit card debt to a new card, typically at a 0% promotional APR for 12–21 months. It can save significant interest if the full balance is paid before the promotional period ends.
- Credit Score
- A credit score is a three-digit number (typically 300–850) that summarises your credit history. Higher scores mean lower borrowing costs — a higher score on a mortgage can save tens of thousands of dollars over the loan's life.