Your credit card minimum payment, visualized

How the minimum is calculated

Every issuer publishes its own formula, but a common one is 1% of the balance plus that month's interest, with a dollar floor. On a $5,000 balance at 24% APR, the monthly interest is 2%: $100. The minimum is $50 + $100 = $150.

Of that $150, only $50 touches the debt. The rest pays for the month that just passed. And because the minimum is tied to the balance, it shrinks as the balance shrinks. The payment gets smaller, so the payoff gets slower.

The year counter

Follow the example forward with no new charges. After one year the balance is still around $4,432. After five years, about $2,736. After ten years, about $1,497. The last few hundred dollars take years, because the payment has shrunk toward the $25 floor.

In total: 234 payments, about 19.5 years, and roughly $8,887 in interest, more than the $5,000 that was borrowed. Total paid: about $13,887.

Carrying more than one card? Compare debt snowball vs avalanche before you pick a payoff order, and watch for deferred interest on store cards. See your own timeline in the minimum payment calculator, or test payoff orders in the debt payoff calculator.

What a fixed payment changes

Now pay a flat $200 every month instead of the shrinking minimum. The first month still has $100 of interest, but $100 goes to the balance instead of $50, and that share grows every month. The same $5,000 is gone in 36 months, with about $2,000 in interest.

The difference isn't a trick. It's that the fixed payment doesn't shrink, so more of each dollar reaches the balance.

• Pick a fixed amount you can sustain, even if it's only a little above the first minimum.
• Keep paying that amount when the minimum drops.
• Stop adding new charges to the card while you pay it down.

Check your own statement

Card issuers calculate interest daily on the average balance, and minimum formulas vary. Your statement has a minimum payment warning box that shows how long the minimum takes for your actual balance. Use it, and use the calculator to compare a fixed payment.

Why the balance barely moves at first

In month one of the example, $100 of the $150 payment goes to interest and $50 goes to the balance. Next month the balance is $4,950, interest is $99, and the minimum is $148.50. Each month the minimum drops a little, and so does the share that reaches the debt.

That's the same reason paying a few dollars above the minimum helps so much: every extra dollar goes straight to the balance, which lowers next month's interest, which lets more of the next payment reach the balance.

If you can't pay more than the minimum yet

Sometimes the minimum is all the paycheck allows, and that's okay for now. Three small moves still help. First, stop new charges on that card so the balance can only go down. Second, pay the minimum as soon as the statement posts instead of on the due date; less balance sits there accruing daily interest. Third, pick a date to raise the payment, even by $10, and put it in your calendar.

When a three-paycheck month or a tax refund arrives, send part of it to the card. One-time payments go entirely to the balance, and they permanently lower every future interest charge.