What Happens if You Only Pay the Minimum Payment on a Credit Card?

Paying only the minimum on your credit card keeps your account in good standing but leads to significantly more interest charges and a longer repayment period.

This practice can damage your credit score and create a debt cycle that becomes increasingly difficult to escape.

How credit card minimum payments work

Your minimum payment is the smallest amount you can pay to keep your account current. It's typically calculated as either a flat amount (like $35) or a percentage of your balance plus interest and fees—whichever is higher.

Making this payment by the due date prevents late fees, penalty annual percentage rates (APRs), and negative marks on your credit report.

Each card issuer sets their own minimum payment formulas, so check your credit card agreement to understand your specific terms.

The cost of minimum payments

While making the minimum payment occasionally won't derail your finances, consistently paying only this amount is costly.

Most of your payment goes toward interest rather than reducing the principal balance. This means you'll:

• Stay in debt much longer

• Pay substantially more than your original purchases cost

• Make slow progress on reducing your actual balance

For example, if you have a $5,000 balance on a card with 18% APR and make only minimum payments, you could spend over 20 years repaying the debt and pay thousands in interest—potentially more than double your original balance.

Impact on your cedit score

Regularly making only minimum payments can hurt your credit in several ways:

• High credit utilization: Your credit utilization ratio (amount of available credit used) stays elevated longer, which can lower your credit score. Experts recommend keeping this ratio below 10% for optimal scores.

• Extended debt periods: Lengthy repayment timelines signal potential financial stress to creditors.

Even if you make all minimum payments on time, your credit score may suffer from the sustained high balance.

When minimum payments make sense

There are limited situations when minimum payments don't lead to excessive costs:

• During 0% APR promotional periods, as long as you have a plan to pay off the balance before the promotion ends

• During temporary financial hardship when you need to prioritize essential expenses

But remember: if you have a card with deferred interest (rather than a true 0% offer), you'll be charged retroactive interest on your entire purchase amount if you don't pay in full before the promotional period ends.

Better strategies for managing credit card debt

If you can't pay your balance in full every month:

1. Pay more than the minimum whenever possible—even small additional amounts help

2. Focus extra payments on your highest-interest cards first

3. Limit new purchases while paying down existing balances

4. Consider a balance transfer to a 0% APR card (accounting for transfer fees)

5. Contact your card issuer to discuss hardship options or lower interest rates

6. Seek free credit counseling from nonprofit organizations who can help develop a debt management plan

Breaking the minimum payment cycle

The best way to avoid the minimum payment trap is to:

• Create a budget that includes debt repayment

• Track your spending to avoid unnecessary charges

• Build an emergency fund to prevent relying on credit for unexpected expenses

• Develop a realistic repayment strategy with specific timeline goals

Minimum ≠ Optimal

While minimum payments keep your account from going delinquent, they're designed to maximize profits for credit card companies, not to help you become debt-free.

Whenever possible, pay more than the minimum to save money, reduce debt faster, and improve your financial health for the future.