Guide
Why paying only the minimum costs so much.
The minimum payment is not designed to pay off the card. It is designed to keep the account current. Those are different jobs, and the difference is measured in years. Here is one balance, paid three ways.
What a minimum payment is made of
Most US issuers bill a minimum of roughly 1% to 2% of the balance, plus that month's interest, with a floor around $25. Some bill a flat 2% to 4% with the interest inside it. Your statement says which. The examples below use 2% plus interest, which is the model Advizel falls back to when it does not have your issuer's own figure.
$5,000 at 24.99% APR, month one
- Interest this month
- $105.18
- 2% of the balance
- $100.00
- Minimum payment
- $205
More than half of that first payment is interest. Only $100 of the $205 touches what you owe. And the interest is daily: the issuer applies 24.99% ÷ 365 to each day's balance, so a month at 24.99% costs a little more than 24.99% ÷ 12 would suggest.
The trap, in one sentence
Because the minimum is a percentage of the balance, it falls every month as the balance falls. You pay $205, then $203, then $201, and the payment keeps shrinking to meet the balance on the way down. That is why "minimum only" does not end in five years or seven. It ends in eleven and a half.
The same $5,000, three ways
| How you pay | Paid off in | Total interest |
|---|---|---|
| The minimum, whatever it is each month | 139 months | $4,872.73 |
| $205 every month, held flat | 35 months | $2,087.09 |
| $305 every month ($100 more) | 21 months | $1,196.49 |
Look at the second row. It is the same $205 you were already paying in month one. The only change is refusing to let it shrink. That alone takes eight and a half years and $2,785 of interest off the top. The third row adds $100 a month and cuts the total interest to about a quarter of the minimum-only figure.
Other balances, same shape
| How you pay | $3,000 at 26.99% | $5,000 at 24.99% | $8,000 at 22.99% |
|---|---|---|---|
| First minimum | $128 | $205 | $315 |
| Minimum only | 115 months · $3,002.01 | 139 months · $4,872.73 | 161 months · $7,372.80 |
| First minimum, held flat | 34 months · $1,334.10 | 35 months · $2,087.09 | 36 months · $3,110.53 |
| Held flat, plus $100 | 16 months · $605.56 | 21 months · $1,196.49 | 25 months · $2,107.59 |
The pattern holds at every size: minimum-only runs ten to thirteen years and costs close to the original balance again in interest. Holding the first minimum flat brings every one of them under three years.
What to do with this
- Find this month's minimum on your statement and treat it as a floor that never drops. Set the autopay to that dollar amount, not to "minimum due".
- If you can add anything, add it to one card, not all of them. Which card is the avalanche vs. snowball question.
- If the minimum itself does not fit this month, that is a different problem with different answers, and paying late is the most expensive one. Most issuers have hardship programs that lower the rate or the payment for a period. Ask before the due date, not after.
What Advizel does with this
Advizel shows every card's payoff both ways: what happens if the minimum keeps shrinking, and what happens if today's payment is held flat. Where your issuer reports its actual minimum, it uses that figure rather than the 2% model, so the dates are your dates. If you ever need the hardship conversation, it gives you the exact words for the call.
See your own payoff dates.
Advizel is on Google Play. It runs this arithmetic on your real cards and keeps it current as the balances move.
Get Advizel on Google Play