Calculator 04 · Credit cards
The minimum payment trap
Paying the minimum keeps a card account in good standing. It is not a plan to pay the balance off. Enter your card's minimum payment formula and see how long it really takes.
Your cardp. 1
What the minimum costsp. 2
| With no new charges, if each month you pay… | You would pay it off in about… | And pay an estimated total of… |
|---|---|---|
| Only the minimum payment | 19 years | $12,206 |
| $186 | 3 years | $6,689 (savings $5,516) |
Rounded the way statements state it: months under 2 years, otherwise whole years.
Minimum only18 years 8 months
Interest you avoid$5,683
| Line | Plan | Monthly | Time | Interest |
|---|---|---|---|---|
| 01 | Minimum only | from $134.16 | 18 years 8 months | $7,205.55 |
| 02 | First minimum, kept level | $134.16 | 4 years 11 months | $2,878.18 |
| 03 | Your fixed payment | $200.00 | 2 years 9 months | $1,522.13 |
| 04 | 36-month payment | $185.82 | 3 years | $1,689.42 |
- Minimum only
- Fixed $200
- 36-month $186
Educational use only — not financial advice. Assumes no new purchases, fees or rate changes. Issuers set their own minimum formulas; check your agreement.
Why the minimum takes so long
Most minimums are a small share of the balance, often a percentage plus the month's interest, with a dollar floor. As the balance shrinks the minimum shrinks with it, so each payment is smaller than the last and only the floor finally ends the debt. With $5,000 at 20% APR and a minimum of 1% plus interest (at least $25), the first minimum is $134.16, and paying only the minimum takes 18 years 8 months and $7,205.55 of interest. A level $200 a month takes 2 years 9 months and $1,522.13.
The warning on a US card statement
Since the Credit CARD Act of 2009, monthly statements must carry a Minimum Payment Warning (Regulation Z, 12 CFR 1026.7(b)(12)). It states how long paying only the minimum would take, in months if under two years and otherwise rounded to whole years, and the total you would pay. In most cases it also shows the monthly payment that clears the balance in 36 months, with its total cost and the savings, plus a toll-free number for credit counseling information. The box in the result recreates that arithmetic for your figures.
Sources
- Consumer Financial Protection Bureau, Regulation Z, § 1026.7(b)(12) Repayment disclosures: the Minimum Payment Warning wording, the repayment and total cost estimates, and the 36-month disclosures and when they are left out.
- Consumer Financial Protection Bureau, Regulation Z, Appendix M1 — Repayment Disclosures: how issuers calculate those estimates (monthly rate, no new charges, accuracy within two months).
Questions
Which minimum payment rule should I enter?
The one in your cardholder agreement, usually in the section on payments. Common shapes are a percentage of the balance plus interest and fees, or a flat percentage, each with a dollar floor. If the percentage alone is below the monthly interest rate, the balance can grow, and the result warns you.
Why might my statement show slightly different numbers?
Issuers may round the starting balance, use a daily rate and include fees in the minimum. Regulation Z treats an estimate as accurate if it is within two months of the exact figure, and anything over two years is rounded to whole years.
What does "first minimum, kept level" mean?
Paying this month's minimum every month instead of letting it shrink. In the example it cuts the time from 18 years 8 months to 4 years 11 months, because the payment no longer falls as the balance does.