Minimum Payment Calculator

Are you only paying the minimum? Find out how much your bank is actually charging you in interest and how many years it will take to be debt-free if you don't increase your payments.

Account Details

Usually 2% to 4% of balance
Absolute minimum (e.g., $25)
Current Minimum Payment
$75.00
Total Interest Cost $4,120.45
Years to Payoff 14.5 Years
Total Amount Paid $7,120.45

The Reality

You pay $1.37 in interest for every $1 borrowed.

The "Minimum Payment Trap" Explained

The minimum payment is the lowest amount you can pay each month to keep your account in good standing and avoid late fees. However, it is calculated to be as low as possible, ensuring the bank collects the maximum amount of interest over time.

How Banks Calculate Your Minimum

Most credit card issuers use one of two methods:

  • Percentage Method: A flat percentage of your total balance (usually 2-3%).
  • Interest plus Percentage: 1% of the principal balance plus all the interest charged during that month.

As your balance decreases, your minimum payment also drops. This "sliding scale" is what makes the debt last for years, as the amount going toward the principal gets smaller and smaller.

Why Interest Rates (APR) Matter

With an APR of 20% or higher, almost all of your minimum payment is consumed by interest. If your balance is $5,000 and your interest rate is 24%, you are charged $100 in interest per month. If your minimum payment is only $125, only $25 actually reduces your debt.

Minimum Payment FAQ

1. Does making only the minimum payment hurt my credit score?
Technically, no. As long as you pay the minimum on time, your payment history remains positive. However, it keeps your credit utilization high, which can lower your score.
2. What is a "Floor" or absolute minimum payment?
Most banks have a fixed dollar amount (e.g., $25 or $35). If your calculated percentage payment is lower than this floor, you must pay the floor amount.
3. Can I change my minimum payment amount?
You cannot lower the minimum required by the bank, but you can (and should) always pay more. Paying even $20 above the minimum can shave years off your payoff timeline.
4. Why does my statement show a "3-year payoff" amount?
Under the CARD Act, banks are required to show you how much you need to pay monthly to clear the balance in exactly 3 years, highlighting how much interest you'll save compared to the minimum.
5. Does interest compound if I only pay the minimum?
Yes. If you don't pay the full balance, the remaining interest "rolls over" and you are charged interest on your previous interest the following month.