Skip to content
4.6

Why minimum payments cost so much

Pay the full credit card balance every month, and if you cannot, pay as far above the minimum as you can.

Close-up of a person using a credit card and laptop in a financial setting with cash and calculator.
Photo: Tima Miroshnichenko / Pexels
Area: MoneyFrom age 16Time to learn: 20 minutes

You will be able to explain, using your own statement, why paying only the minimum keeps you in debt for years.

SafetyIf you cannot make even the minimum payment, call your card issuer before the due date and ask about hardship options. US statements must list a toll-free number for credit counselling, and non-profit credit counselling is also available in Canada.

Why it matters

The minimum payment is set low, so much of it goes to interest and little to the debt itself. Card interest rates are high: in 2025, US commercial bank card accounts that were charged interest paid an average of over 22% a year. US rules, and Canadian rules for federally regulated issuers, require statements to show how long minimum payments will take.

How to do it

  1. Find the minimum payment box on your statement. In the US it is titled 'Minimum Payment Warning'. In Canada, statements from federally regulated issuers show how long payoff takes at the minimum.
  2. Read its numbers: how long payoff takes if you pay only the minimum, and the total you will pay.
  3. Work out this month's interest: balance × yearly rate (APR) ÷ 12. For $2,000 at 18%: $2,000 × 0.18 ÷ 12 = $30.
  4. Subtract the interest from the minimum payment. If the minimum is $60, only $30 reduces what you owe.
  5. Compare with paying more. Canada's FCAC example: $2,000 at 18% paid at $60 a month takes 3 years and 11 months and costs $793 in interest. At $160 a month it takes 1 year and 2 months and costs $231.
  6. On US statements, find the line showing the monthly payment that clears the balance in 3 years, and how much you would save.
  7. Pay the full statement balance by the due date when you can. If you do not, you will usually pay interest from the date of each purchase.
  8. If you cannot, set up an automatic payment above the minimum and stop adding new charges to the card.

Common mistakes

  • Treating the minimum as the normal payment.
  • Paying the minimum while still using the card.
  • Ignoring the interest rate because the monthly payment looks small.
You can do this when …you can point to the minimum payment warning on a statement and explain, with its numbers, how much the minimum costs you in interest.

Sources

  1. CFPB: Regulation Z §1026.7, periodic statement repayment disclosures
  2. Financial Consumer Agency of Canada: Paying off your credit card
  3. Federal Reserve: Consumer Credit G.19

Sources and numbers last checked . How we check

Topic: Money basics

All lessons

← 4.5 previous lesson: Setting up direct deposit with a void check · 4.7 → next lesson: The rule of 72
1Body16 lessons
  1. 1.1Washing your hands properly
  2. 1.2Getting water out of your ear
  3. 1.3Brushing your teeth for two minutes
  4. 1.4Riding a bike
  5. 1.5Getting up off the floor without your hands
  6. 1.6Slow breathing to calm down
  7. 1.7How to put in a tampon
  8. 1.8How often should you wash your hair
  9. 1.9Reading a nutrition label
  10. 1.10Sleeping with your phone outside the bedroom
  11. 1.11Doing 10 full push-ups
  12. 1.12How to stretch your hip flexors
  13. 1.13How to swaddle a newborn, and when to stop
  14. 1.14Reading a prescription label
  15. 1.15Booking a doctor's appointment and describing symptoms
  16. 1.16Knowing your blood pressure
2Mind15 lessons
  1. 2.1Staying with boredom
  2. 2.2Naming what you feel
  3. 2.3Grounding yourself after a fright
  4. 2.4Letting someone see you upset
  5. 2.5What to wear to a funeral, where to sit, and what to say
  6. 2.6What to write in a sympathy card
  7. 2.7Focusing for 25 minutes
  8. 2.8How to stop overthinking
  9. 2.9The 988 crisis line
  10. 2.10Changing your mind when the evidence changes
  11. 2.11The 7 stages of grief, and why grief comes in waves instead
  12. 2.12Telling a friend you're not okay
  13. 2.13Knowing when stress needs professional help
  14. 2.14Building a habit by tying it to an old one
  15. 2.15Spending an evening alone without screens
3People17 lessons
  1. 3.1Introducing yourself and asking a question back
  2. 3.2Asking a question in front of a group
  3. 3.3Apologising properly
  4. 3.4Disagreeing without insults
  5. 3.5Writing a clear email, subject line to sign-off
  6. 3.6Comforting someone who is crying
  7. 3.7What to say to someone who lost a loved one
  8. 3.8Saying no without an excuse
  9. 3.9Phoning a business
  10. 3.10How to burp a newborn
  11. 3.11Asking for consent
  12. 3.12Resigning from a job in writing
  13. 3.13Answering interview questions with the STAR method
  14. 3.14Walking into a room of strangers
  15. 3.15How to write an obituary
  16. 3.16Speaking up in a meeting
  17. 3.17Pausing an argument
4Money17 lessons
  1. 4.1Counting back change
  2. 4.2Comparing unit prices
  3. 4.3Endorsing and depositing a check
  4. 4.4How do you write a check
  5. 4.5Setting up direct deposit with a void check
  6. 4.6Why minimum payments cost so much · You are here
  7. 4.7The rule of 72
  8. 4.8What does APR mean on a credit card
  9. 4.9Making a monthly budget
  10. 4.10Reading a contract to find how to cancel
  11. 4.11What is a high yield savings account
  12. 4.12What is a contingent beneficiary, and how to name one
  13. 4.13Filing your own tax return
  14. 4.14How retirement accounts save you tax
  15. 4.15Index funds and why fees matter
  16. 4.16Ask for a raise with a number
  17. 4.17Know how long your savings would last
5Safety17 lessons
  1. 5.1Call 911 and give your location
  2. 5.2Plan two ways out in a fire
  3. 5.3Sheltering from a tornado: watch vs. warning
  4. 5.4The five water survival skills
  5. 5.5Test a smoke alarm and change its battery
  6. 5.6Cool a burn with running water
  7. 5.7AED pad placement: how to use an AED
  8. 5.8Carbon monoxide detector beeping: what it means and what to do
  9. 5.9Put out a pan fire with a lid
  10. 5.10How is a fire extinguisher used? The PASS method
  11. 5.11Stop heavy bleeding
  12. 5.12The recovery position
  13. 5.13Spot a stroke and call 911
  14. 5.14Hands-only CPR
  15. 5.15Help a choking adult
  16. 5.16Respond to an opioid overdose with naloxone
  17. 5.17When can an infant car seat face forward
6Information16 lessons
  1. 6.1Work out a tip in your head
  2. 6.2Why gift card payment means scam
  3. 6.3Wrong number text scam, and how to spot other scam texts
  4. 6.4How to turn off location on iPhone and Android
  5. 6.5Working out percent change
  6. 6.6Spot a phishing message
  7. 6.7How to block spam calls on iPhone and Android
  8. 6.8Turn on two-factor login for email
  9. 6.9How to check if your phone is hacked
  10. 6.10Trace a claim before you share it
  11. 6.11Check an AI chatbot's answer
  12. 6.12Spot a bar chart that exaggerates
  13. 6.13Hang up on a 'bank' caller
  14. 6.14What never to paste into an AI chatbot
  15. 6.15Self-reported vs measured numbers
  16. 6.16Relative risk vs absolute risk
7Kitchen17 lessons
  1. 7.1How to set a table
  2. 7.2Cracking an egg cleanly
  3. 7.3Following a recipe and measuring accurately
  4. 7.4Using an oven safely
  5. 7.5How to tell if an egg is bad
  6. 7.6Boiling an egg to the yolk you want
  7. 7.7How to cook rice on the stove
  8. 7.8How long is cooked chicken good for in the fridge
  9. 7.9Chopping an onion with the claw grip
  10. 7.10Storing raw meat safely in the fridge
  11. 7.11Reading food date labels
  12. 7.12How to thaw chicken fast
  13. 7.13How to season cast iron
  14. 7.14Cooking chicken to a safe temperature
  15. 7.15Five dinners you can cook from memory
  16. 7.16Planning a week of dinners with one shopping trip
  17. 7.17Cooking dinner for six, all ready at once
8Home17 lessons
  1. 8.1Making a bed with tucked corners
  2. 8.2Removing sticker residue
  3. 8.3Cleaning a toilet properly
  4. 8.4How to clean a shower
  5. 8.5How to get blood out of clothes
  6. 8.6Laundry symbols: how to read a care label
  7. 8.7Doing a load of laundry
  8. 8.8Cleaners you must never mix
  9. 8.9How to get rid of fruit flies
  10. 8.10Unblocking a toilet with a plunger
  11. 8.11Resetting a tripped breaker
  12. 8.12Building a 72-hour emergency kit
  13. 8.13Shutting off the water
  14. 8.14Reading a utility bill
  15. 8.15How to clean a dryer vent
  16. 8.16Recording a rental's condition on move-in day
  17. 8.17Splitting chores with a housemate
9Hands18 lessons
  1. 9.1Tying shoelaces that stay tied
  2. 9.2How to wrap a present
  3. 9.3Addressing an envelope
  4. 9.4Tying a square knot (reef knot)
  5. 9.5How to tie a clove hitch
  6. 9.6Reading a tape measure
  7. 9.7Hammering a nail in straight
  8. 9.8How to fix a separated zipper
  9. 9.9Sewing on a button that stays on
  10. 9.10Tying a bowline
  11. 9.11How to remove a stripped screw
  12. 9.12Hanging a heavy picture securely
  13. 9.13Tying a four-in-hand necktie knot
  14. 9.14How to put air in tires
  15. 9.15How to change windshield wipers
  16. 9.16Checking the oil and other fluids under the hood
  17. 9.17Assembling flat-pack furniture
  18. 9.18Changing a flat tire

Find a lesson

Spot an error? Tell us

General education, not medical, legal or financial advice.

From undertaught.com/manual/minimum-payment. Free, sourced lessons for every skill at undertaught.com/manual.