Paying only the minimum amount due on your credit card bill each month may seem convenient and easy, but it can lead to financial problems down the road As tempting as it is to just make the minimum payment, doing so will cost you more in interest charges, take longer to pay off your balance, and potentially hurt your credit. Here’s a detailed look at what happens when you pay only the minimum amount due on your credit card every month.
How Credit Card Minimum Payments Work
The minimum payment is the smallest amount you must pay on your credit card bill each month to avoid late fees, penalty interest rates, and credit damage Credit card companies calculate the minimum payment in different ways, but it is typically a percentage of your statement balance (usually around 2%) plus any interest charges and fees.
For example, if your balance is $1,000 and your card requires a 2% minimum payment, your minimum due would be $20 plus any accrued interest and fees Some issuers instead have a set minimum payment amount like $25 or $35 Whichever is higher, the percentage or flat rate minimum, is the amount you are required to pay that month.
Consequences of Only Paying the Minimum
While paying the minimum keeps your account in good standing, making only small payments has several downsides:
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You’ll be in debt longer: When you only pay the minimum, very little goes toward paying down your actual balance. The bulk of your payment covers interest charges. This means your debt lingers and grows via interest.
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You’ll pay more interest: Carrying a balance month-to-month means ongoing interest builds up. Interest rates on credit cards are very high, commonly 19%-25%. All that interest from not paying in full really adds up.
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Your credit could suffer: High credit card balances hurt your credit utilization ratio, which makes up 30% of your credit score. The longer you carry debt, the worse your credit.
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You won’t make progress on financial goals: Whether it’s paying off your cards for good or saving up for a big purchase, only paying the minimum will prolong your debt and make other goals harder to accomplish.
Let’s look at a few examples to see just how much paying the minimum costs compared to paying off your balance in full each month.
Cost of Only Paying the Minimum
If you have a $5,000 balance on a card with a 20% APR and a 2% minimum payment amount, here’s a comparison:
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Paying the $100 minimum due every month, it would take over 17 years to pay off the balance. In total, you would end up paying nearly $7,200 in interest charges.
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Paying $250 per month instead, you would be debt-free in 2 years and 3 months, paying only $1,431 in interest.
As you can see, just slightly increasing your payment from the minimum can save thousands in interest and get you out of debt years faster.
Impact on Your Credit Scores
As mentioned, carrying high balances and racking up interest charges will drag down your credit. Paying more than the minimum helps in two ways:
- Your balance decreases faster, lowering your credit utilization ratio
- You pay less interest, increasing the amount that goes toward your principal
Lower utilization and less interest paid will help improve your credit scores over time.
What to Do If You Can’t Pay More Than the Minimum
Ideally, you should try to pay your balance in full every month. But if money is tight, paying more than the minimum will still help your situation. Here are some tips:
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Call your credit card company and ask if they can reduce your interest rate. This will minimize the interest fees each month.
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Look into consolidating your credit card debt through a personal loan or balance transfer card. This can lower your overall interest costs.
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Make more than the minimum payment, even if it’s just $20 or $30 extra. Every bit helps pay down your principal faster.
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Use a budgeting app to cut expenses elsewhere so you can put more money toward your credit card balance.
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Avoid further credit card charges so your balance stops growing.
Paying only the minimum keeps your account in good standing but costs more in the long run. Whenever possible, pay off your full balance or as much extra as you can each month. Your wallet and your credit scores will thank you.
Does only paying the minimum balance due on your card affect your credit score?
Over time, only paying the minimum balance can negatively affect your credit score as the balance you carry affects your credit utilization ratio, which accounts for about 30% of your score.
Look into 0% balance transfer credit cards
If youre struggling to get out of credit card debt, a 0% balance transfer credit card can help you save on interest. For example, the Citi Simplicity® Card offers an intro 0% APR on balance transfers for a full 21 months from date of account opening, then a variable 18.24% – 28.99% APR applies. The intro APR only applies to balance transfers completed in the first four months from account opening and during that time, there is an intro balance transfer fee of 3% of the amount you transfer ($5 minimum). After the intro transfer fee expires, the balance transfer fee is 5% of the amount you transfer ($5 minimum).
Receive a 0% Intro APR for 21 months on balance transfers and for 12 months on purchases from date of account opening.Credit score
Good to Excellent670–850Regular APR
18.24% – 28.99% variableAnnual fee
See rates and fees. Terms apply. Read our Citi Simplicity® Card review.
Information about the Citi Simplicity® Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
The Citi Simplicity® Card may not earn rewards, but it can still save you money due to its amazing intro-APR offers.
- One of the longest intro-APR offers for balance transfers
- No annual fee
- No rewards
- No welcome bonus
There is an intro balance transfer fee of 3% of each transfer (minimum $5) completed within the first 4 months of account opening. After that, your fee will be 5% of each transfer (minimum $5).
Credit Card Minimum Payments Explained
FAQ
Is it okay to just pay minimum payment?
According to the CFPB, “Unless your financial situation leaves you no choice but to only pay the minimum, pay your entire balance each month or as much of the …Jan 9, 2025
What happens if I pay only the minimum amount due?
Paying only the minimum amount due allows you to avoid penalties and harming your credit score. But it barely reduces what you owe.
Do you get charged interest if you pay minimum payment?
Paying only the minimum means you’re carrying balance and charged interest, increasing the total cost of your debt. Making timely minimum payments helps avoid late fees and damage to your credit score, but it’s best to pay more than the minimum to reduce your debt faster and save on interest.
What happens to my credit if I only pay the minimum?
What happens if I only pay the minimum due on my credit card?
If you only pay the minimum due on your credit card, the remaining balance may accrue interest and increase your credit utilization, which could negatively affect your credit scores and make it harder to get out of debt. It can be tempting to pay only the minimum amount due when you receive your credit card bill each month.
What happens if I pay more than my minimum payment?
Any amount you pay in excess of your minimum payment will be applied to the purchases balance first, which has the highest APR. As a result of these regulations, credit card customers can make more informed decisions, including the amount they want to pay on their credit card balances each month.
What happens if you pay a minimum due?
You may stay in debt longer and pay a lot more than your original balance, thanks to interest that typically compounds daily at high rates. When you pay the minimum due, only a fraction of your payment is applied to the principal—the amount you charged to purchase goods and services.
What is a minimum due amount?
The minimum due amount is the least amount that you need to pay every month against your credit card statement balance. But, paying only the minimum amount has its own advantages and disadvantages as well.
Should you pay only the minimum payment on a credit card?
Making only the minimum payment on a credit card has more disadvantages than benefits. So, you should always try to pay the full outstanding balance rather than paying only the minimum due. By doing this, you can not only avoid interest charges but you will also have your full credit limit to use.
What happens if you don’t pay a payment due date?
If you pay the full outstanding by the payment due date, you can avoid interest charges, but if you pay only the minimum amount, the interest starts accruing on the remaining balance. The minimum amount keeps increasing every month if you don’t pay the full amount every month.