What minimum payments really cost you

A worked example

Take a $8,000 balance at 24% APR, with the minimum set at that month’s interest plus 1% of the balance.

The first minimum is $240. Of that, $160 is interest and only $80 reduces what you owe.

The same $240 leaves your account in month one. Holding it steady saves $9,572 and 18 yr 9 mo.

These figures come from the same math as the calculator above, so the two always agree.

How this calculator works

You enter a balance, an APR, and your current minimum if you know it.

Each month it adds one month of interest, which is the APR divided by 12. Then it applies the minimum and repeats until the balance reaches zero.

If you leave the minimum blank, it uses a common issuer formula: that month’s interest plus 1% of the balance, never less than $25.

If you enter your real minimum, it works out the share of principal your card uses and follows your card instead of the formula.

It assumes no new purchases, fees, or rate changes. Issuers usually charge interest on a daily balance, so your statement can differ a little from these figures.

Why the minimum shrinks

Your minimum is a formula, not a fixed bill. Most issuers set it at one month of interest plus about 1% of the principal. As the balance drops, both parts drop. Pay a little, owe a little less, get asked for a little less next month.

Nothing hidden is happening. The structure simply favors the card company, and following it costs you decades.

Read the full explanation in How long will it take to pay off my credit card debt?

What your statement already tells you

Federal rules require most credit card statements to carry a Minimum Payment Warning. It shows how long paying only the minimum takes, and what it costs in total.

Most statements show the monthly payment that clears the balance in three years, and how much that payment saves.

Those estimates assume you add nothing new to the card. The rule is 12 CFR 1026.7(b)(12), part of Regulation Z.

If your statement shows a different figure from this calculator, trust the statement. It uses your card’s exact formula.

Questions people ask about minimum payments

Does paying only the minimum hurt my credit score?

Not directly. Paying at least the minimum on time keeps the account current, and payment history is the largest factor in most scores. The cost shows up somewhere else. A balance that barely falls keeps your credit utilization high, and utilization carries a lot of weight too.

Why did my minimum payment go down?

Your balance went down, so both parts of the formula did too. Paying that smaller amount is exactly how a balance stretches across decades. Keep paying last month’s amount instead.

What if my minimum does not cover the interest?

Then the balance never clears, and the calculator tells you so. At a 24% APR the monthly rate is 2%, so a minimum set at a flat 2% of the balance only ever pays the interest. If that describes your card, the minimum on its own is not a plan.

How much more than the minimum should I pay?

Anything above the minimum goes to principal and shortens the payoff. The simplest rule is the one in the example above: keep paying your first minimum and never let it drop. To see what an extra $50 or $100 a month does, try thedebt payoff planner.

Is the minimum the same on every card?

No. Each issuer sets its own formula. Many use that month’s interest plus about 1% of the balance, and others use a flat 2% or 3%, usually with a floor around $25 to $35. Your cardholder agreement states the formula for your account.