TL;DR
– Minimum payments are typically 1–2% of your balance (or $25–$35, whichever is higher) — set by the issuer, not by what gets you out of debt.
– Paying only the minimum on a $5,000 balance at 22% APR takes ~19 years and costs ~$8,000 in interest.
– The fix: pay a fixed amount well above the minimum every month, automatically.
Your statement says “minimum payment due: $87.” It feels official — like the issuer calculated what’s reasonable. They did calculate it. What’s reasonable for them (maximum interest collected) and what’s reasonable for you (getting out of debt) are very different numbers.
How minimum payments are calculated
Most US issuers use one of these formulas — check your cardmember agreement for yours:
- Percentage of balance: 1–2% of the statement balance (most common). A $4,000 balance at 2% = $80 minimum.
- Percentage + interest + fees: e.g., 1% of balance plus that month’s interest and fees. This is the most common structure among major issuers.
- Flat floor: $25–$35, whichever is higher than the percentage calculation. Small balances default to the floor.
The percentage typically stays fixed, which means your minimum shrinks as the balance shrinks — the opposite of what a payoff plan needs.
What minimum payments really cost
The math is brutal because minimums are designed to keep the account profitable, not to retire the debt:
| Balance | APR | Minimum payment | Time to payoff | Total interest |
|---|---|---|---|---|
| $3,000 | 22% | Shrinking minimum | ~15 years | ~$4,400 |
| $5,000 | 22% | Shrinking minimum | ~19 years | ~$8,000 |
| $10,000 | 24% | Shrinking minimum | ~25 years | ~$18,500 |
Figures computed using the common issuer formula (1% of balance + monthly interest, $25 floor). Your card’s exact formula varies — the shape of the trap doesn’t.
Why issuers love minimum payments
Every month you carry a balance is a month of interest revenue. A minimum payment covers that month’s interest plus a sliver of principal — keeping you current (good for the issuer’s books) while maximizing the total interest you’ll pay over the life of the debt. It’s not a conspiracy; it’s the business model. Your job is to opt out of it.
Escaping the minimum-payment trap
Pay a fixed amount, not a percentage. Pick a number — $300, $500, whatever your budget allows — and pay it every month regardless of what the minimum says. A fixed $300/month on a $5,000 balance at 22% clears it in ~21 months instead of ~19 years.
Pay more than the minimum on the right card. If you carry multiple balances, minimums on all, extra on the highest-APR card (avalanche) or smallest balance (snowball).
Consider a balance transfer. If the fixed payment still leaves too much going to interest, a 0% card (up to 21 months) converts every dollar of that payment into principal reduction.
Automate it. Set autopay for your fixed amount timed to payday. The trap works on forgetfulness and “just this month” exceptions — automation removes both.
What happens if you can’t even make the minimum?
Missing the minimum triggers a late fee (up to ~$30–$41), penalty APR (often near 30%), and a 30-day-late mark on your credit report if it stretches past 30 days. If you’re consistently short:
- Call the issuer before the due date — hardship programs exist and can lower your rate or payment temporarily.
- Contact a nonprofit credit counseling agency (NFCC member) — free consultations, and debt management plans that consolidate payments at reduced APRs.
- Don’t take a cash advance or payday loan to cover it — that’s trading a problem for a worse one.
Frequently asked questions
Is it bad to only pay the minimum on a credit card?
It keeps your account current (no late marks), but it’s the slowest, most expensive way out of debt — decades and thousands in interest. Always pay more when possible.
How is the minimum payment calculated?
Typically 1–2% of the statement balance or a $25–$35 floor, whichever is higher. Some issuers use 1% of balance plus interest and fees. Your cardmember agreement states the exact formula.
Does paying the minimum hurt my credit score?
Not directly — on-time minimum payments keep your history clean. But the high utilization from a lingering balance does drag your score down.
What percentage should I pay instead?
Forget percentages — pay a fixed dollar amount that retires the debt on your timeline: balance ÷ months you want to take, plus a buffer.
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