How Making Minimum Payments Delays Your Debt Repayment (2024)

Credit card minimum payments are the bare minimum you’re contractually obligated to pay by your billing cycle due date. Minimum payment may also include interest, fees and other charges.

Understanding how paying the minimum affects your debt and credit utilization is important. It could take longer to pay off the balance, especially as interest charges increase.

You’ll Pay More Interest

Depending on your credit card balance and interest rate, it could take years to pay off your debt by making only minimum payments. That’s because interest compounds, meaning the amount you owe, increase monthly.

Under the Credit CARD Act, card issuers must include a minimum payment “warning” on monthly statements, including a table that shows how long it would take to pay off a balance with only minimum fees. Taking the time to account for all your income and paying more than your minimum monthly payment will accelerate your debt repayment.

Of course, making only the minimum payment in a short-term emergency or crisis is OK. But for many consumers, the minimum payment is a habit, and they need help to break the cycle. We recommend working with a qualified credit counselor like Symple Lending to find solutions like budgeting, saving, or earning more money to pay your balance faster.

You’ll Pay More Time

Paying more than the minimum amount each month will result in a faster balance payoff. This is because only a small portion of the minimum payment goes to the principal, and the rest is used for interest and fees.

You must ask your credit card company how long it would take to pay off the balance using only the minimum payment shown on your statement. According to experts at Symple Lending you should look for ways to pay a little more each month, particularly if you get a raise, taxable refund, or bonus.

You can find extra changes in your budget or unutilized subscriptions if you need more than the minimum. Even $10 per month can help you to pay off your debt. You can also increase your cash flow by taking on a second job or reducing other expenses such as entertainment or food.

You’ll Pay More Money

Paying off debts with only minimum payments takes a very long time. Paying off your debt with only minimum payments takes a long time.

Consider if you have any extra income or wiggle room within your budget. Make additional payments to your credit card debt if you have some space. You will save money, pay off your debt quicker, and improve your credit usage ratio.

Making your payments on time is also a great idea. It shows your creditors you are committed to repaying your debt. It’s also a great way to prevent your debt from going into collections. This can damage your credit score and increase interest rates for future purchases. When used responsibly, credit cards can help build credit. But only if your balance is low and you pay more than the minimum monthly payment.

You’ll Pay More Money

A credit card minimum payment usually equals 1% to 3% of the balance plus any accrued interest. That amount may seem small, but it will keep you in debt longer than if you paid more. Credit card issuers must display the amount of time it will take to pay off your balance when paying only the minimum on each bill.

If you’re currently making the bare minimum, consider ways to increase your payments. For example, you could make biweekly payments instead of monthly ones. Or you can cut back on unnecessary expenses like unused subscriptions. You can also comb through your budget to see if you have any money to spare, such as a tax refund or raise. The extra amount you pay toward your debt can be “snowballed” to help you pay off the rest of the balance much faster. This method of paying off debt can be very effective and help you stay out of debt for good.

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