⚠️Minimum Payment Calculator
Discover the true cost of making only minimum payments on your credit card. See how much interest you'll pay and how long it will take to become debt-free.
Frequently Asked Questions
Why is paying only the minimum payment so expensive?
Minimum payments are designed to keep you in debt longer, maximizing the bank's profit from interest. Example: $5,000 balance at 19.99% APR with 2% minimum payment takes 20+ years to pay off and costs $8,000+ in interest. Why? Most of your minimum payment goes to interest, not principal. Month 1: $5,000 × 1.67% monthly rate = $83 interest. If minimum is $100, only $17 goes to principal. You're barely making progress. Banks love minimum payers - they're the most profitable customers. Always pay more than the minimum if possible.
How is the minimum payment calculated?
Credit card minimum payments typically use one of these formulas: (1) Percentage of balance: Usually 1-3% of current balance, with a floor (e.g., $25 minimum). Example: 2% of $5,000 = $100. (2) Fixed amount: Flat payment like $35/month regardless of balance. (3) Percentage plus fees: Balance percentage + interest + fees. Example: 1% of balance + monthly interest charge. Most major issuers use method #1. The minimum decreases as your balance decreases, which is why payoff takes so long. By law, the minimum must cover at least the interest charges (otherwise your balance would grow forever).
What happens if I make a purchase while paying off debt?
New purchases increase your balance and extend payoff time significantly. Example: $5,000 debt with $100/month spending takes 33+ years to pay off at minimum payments (vs 20 years with no new purchases). Why? Interest is charged on the entire balance including new purchases. Your minimum payment barely keeps up with interest + new charges. Best strategy: Stop using the card while paying off debt. Put it in a drawer or freeze it (literally in ice). Use debit or cash instead. Once you're in debt, every swipe is a step backward. Focus on payoff first, then use the card responsibly (pay in full monthly).
How much should I pay above the minimum?
Pay as much as possible - even $50-100 extra makes a huge difference. Example scenarios for $5,000 at 19.99% APR: Minimum only ($100): 20 years, $8,000 interest. Minimum + $50 ($150): 4 years, $1,400 interest. Minimum + $100 ($200): 2.5 years, $800 interest. Fixed $250: 2 years, $600 interest. Rule of thumb: Try to pay at least 5% of your balance monthly. Even better: Pay the total new purchases each month to prevent balance growth. Use the avalanche method: Pay minimums on all cards, then put extra toward the highest APR card. Every dollar above minimum saves $2-3 in interest.
Can minimum payments hurt my credit score?
Paying only minimums doesn't directly hurt your credit score (you're not late), but it has indirect negative effects: (1) High credit utilization: If you're using 30%+ of your credit limit, your score drops. Minimum payments keep utilization high for years. (2) Length of debt: Chronic debt may signal financial stress to lenders. (3) Opportunity cost: High balances prevent you from getting new credit or better rates. Positive side: On-time minimum payments do build positive payment history (35% of your score). But it's a trap - you're paying thousands in interest just to maintain your score. Better strategy: Pay balances in full, keep utilization under 10%, and your score will soar while saving money.
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Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.