Minimum Payment

The minimum payment is the floor a lender requires each month to keep an account in good standing. On credit cards it is typically a small percentage of the balance, often around 2 percent, or a low flat dollar amount, whichever is greater. Paying it avoids late fees and credit damage, which is why it feels safe.

The trap is that minimum payments are designed to keep you in debt. Because the minimum shrinks as your balance shrinks, paying only it stretches repayment over years or even decades and can cost more in interest than the original purchases. Paying any fixed amount above the minimum dramatically shortens the timeline, since every extra dollar goes straight at the principal. Our credit card minimum payment trap playbook shows just how long the minimum keeps you paying and how to break out of it.