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What happens when you make minimum payments
More than 11% of credit card holders make only minimum payments, which mostly cover interest and can extend debt repayment timelines to decades, experts say.
- Minimum credit-card payments can extend repayment timelines to 30 years or more, keeping debt for millions of households while benefiting creditors.
- Most creditors set minimum payments as typical minimum rates of two to four percent or a fixed floor amount around $25 to $35, applying payments to interest first and slowing principal reduction.
- For a $1,000 balance example at 23% APR with a 3% minimum payment, about $19 covers interest while only $11 reduces principal.
- For borrowers relying on minimums, making minimum payments prevents delinquency but remains the slowest, most expensive way to repay debt and can hinder creditworthiness and debt-to-income ratio.
- Paying more than the minimum speeds repayment and lowers interest, while borrowers who can't increase payments may consider debt-consolidation or financial professionals; every bill includes a required minimum-payment payoff warning.
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23 Articles
Coverage Details
Total News Sources23
Leaning Left1Leaning Right1Center20Last UpdatedBias Distribution91% Center
Bias Distribution
- 91% of the sources are Center
91% Center
C 91%
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