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What Happens If You Only Pay the Minimum Payment on Your Credit Card?

Why pay more than the minimum due on your credit statement each month? To avoid accumulating new interest.

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Updated June 26, 2025
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Edited by John Howard
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Written by Rachel Alulis
Here at MoneyFor, our goal is to help you make informed financial decisions. We are committed to accuracy and impartiality in all our content. It’s important to note that articles may reference products from our partners who compensate us. This influences which products we feature and their presentation on our site, not our evaluation.

Key takeaways

  • When you only pay the minimum each month, you’ll keep your account in good standing but will owe more in interest.
  • Paying your balance in full will get you out of debt faster and save you money on interest.
  • Managing your credit card payments responsibly helps you establish a strong credit history and avoid long-term debt.

If you make the minimum payment on your credit card each month, you may feel like you’re doing a good job, but the reality is you could be setting yourself up for failure. What is the problem with paying only your minimum credit card balance each month? The answer is simple: it barely makes a dent in the principal. You will accrue interest on the outstanding balance and prolong your debt.

Let’s go over exactly why you need to pay more than the minimum and what you can do to avoid falling into credit card debt.

Jump to:

What is the minimum payment on a credit card?

The minimum payment on a credit card is the smallest amount you must pay to keep your account in good standing. It is only a small percentage of your outstanding balance, plus interest, or a low flat fee.

When you make the minimum payment by the due date, your account is considered paid on time. The credit card company will not charge a late fee or impose a penalty APR. You will accrue interest on the remaining balance.

How are credit card minimum payments calculated?

How minimum payments are calculated depends on the issuer. Most issuers charge a small percentage of your total outstanding balance, typically 1% to 3%, plus interest and additional fees. Some issuers require a flat fee, normally $25 or $35. Others will charge a percentage or flat fee, whichever is greater.

For example, if your balance is $1,000 and the percentage used is 2%, your minimum payment would be $20. Since this is below $25, your issuer may increase your minimum payment to $25. Still a very small amount compared to your full balance. This calculation ensures that you cover some of the interest and fees, but it does little to reduce your principal.

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What to consider when paying the minimum credit card payment

Making minimum payments helps keep your account in good standing, but it will take you longer to pay off your debt. It can also keep your balances high, which can potentially hurt your credit score.

When you’re deciding how much to pay, take a look at your monthly statement. Credit card companies are required to tell you how long it will take you to pay off your balance and how much interest you’ll pay if you only make minimum payments. They put this information in the Minimum Payment Warning on your monthly statement.

Let’s look at an example where you have a $1,000 balance with a 20% APR and a minimum payment of $20.

Minimum Payment Warning
Monthly paymentTime to pay off balanceTotal amount paid
Only the minimum payment9 years$2,168
$100 per month1 year$1,103 (savings of $1,065)

If you pay the minimum amount, it will take you 9 years to pay off the balance, and you’ll pay approximately $1,168 in interest. Take the same scenario, but pay $100 a month, and you’ll pay off the balance in one year, incurring roughly $103 in interest charges. Clearly, paying more will save you money in the long run.

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Why is it more difficult to get out of debt when only paying the minimum payment?

Only paying the minimum balance on your credit card can hurt your financial health. Interest charges will be applied to the unpaid amount, increasing how much you owe and making it harder to reduce your balance. In the end, you could end up paying far more money than you originally spent.

Paying more interest

If you pay only the minimum payment required, the remaining balance continues to accrue interest. Credit card interest compounds daily. Companies use a daily periodic rate that is derived from your APR. The interest is then added to your outstanding balance. Each day, your interest is calculated on a slightly higher balance that includes the interest from the previous day.

While the daily interest charges are small, they will add up, especially if you carry a balance from month to month. The Federal Reserve Bank of St. Louis reported an average interest rate for credit cards of 21.37% as of February 2025. Accumulating interest at a rate that high means you’ll pay significantly more over time.

Taking longer to pay off debt

Minimum payments are only a small fraction of the bill. Most of the money goes toward interest rather than reducing the principal balance. With credit card interest compounding daily, this will stretch your repayment period over many years, even for relatively small amounts.

Hurting your credit score

Paying the minimum by the due date prevents late or missed payments, but it can still damage your score. Credit utilization is the second biggest factor in determining your credit score. Utilization is the amount you spend relative to your credit limit. The rule of thumb is to keep your utilization rate under 30%. Lower is even better.

When you don’t pay off your balance each month but instead add to it, you will end up with a higher balance and, consequently, a higher credit utilization rate. The higher rate will negatively impact your credit score.

Why does higher credit utilization decrease your credit score? High utilization indicates that you are relying on credit. Overly relying on credit means you are at risk of not paying your bills. Your score will reflect that you are a higher-risk borrower.

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What is the advantage of paying your credit card balance in full each month?

Paying your credit card balance in full, or at least more than the minimum amount, helps you reduce interest and improve your credit score. You may even avoid debt altogether.

Save on interest

Pay your credit card balance in full each month, and you won’t pay a dime in interest. Credit card companies typically charge interest only after the grace period has ended. The grace period is the 21 to 25 day period between the end of your billing cycle and the payment due date. During this period, you can pay your balance without incurring interest charges.

Build credit

Paying your bill in full helps establish a positive payment history and makes it easier to maintain a low credit utilization ratio. These two factors make up 65% of your FICO credit score, the score used by 90% of lenders. When you want to build credit, paying your bill in full and on time is the best thing you can do.

Reducing credit card debt faster

When you pay more than the minimum, you will be on your way to getting out of debt faster. The credit card company will be able to apply more of your payment to the principal, lowering your balance, and reducing how much interest is applied daily. The more you pay, the less interest you’ll accumulate each month and the faster you’ll be out of debt.

Read more about credit cards!

Statement balance vs minimum payment

When you go to pay your credit card bill, you will have multiple options. The two main ones are to pay the statement balance or the minimum payment.

The monthly minimum payment is the smallest amount you can pay to keep your account in good standing. Only paying the minimum can lead to owing much more than you originally spent.

The statement balance is the total amount you spent during the billing cycle. It includes all charges, interest, and other fees. Paying the statement balance in full will help you avoid interest.

FeatureMinimum paymentStatement balance
DefinitionThe smallest amount you are required to pay by the due date.The total amount you owe at the end of the billing cycle.
Amount1% to 3% of your balance plus fees and interest or a flat $25All charges, interest, and fees for the billing period
Impact if paidKeeps account in good standing but may increase interest charges and extend repayment time.Keeps account in good standing, reduces interest and debt faster
Interest chargesInterest is applied to the unpaid balanceNo interest if paid in full
Credit score effectPaying only the minimum can negatively affect credit utilizationPaying in full can improve your credit utilization
Recommended useOnly use during emergenciesAlways pay in full

Strategies for paying more than the minimum

Paying more than the minimum is often easier said than done. Here are a few strategies to help you pay more and stay out of debt:

Stick to a budget

A smart strategy for how to get out of credit card debt fast is to create a strict budget and use the extra cash to pay more than the minimum. Track your income and expenses to determine where you can make cuts. Then put all the extra money towards your credit card bill.

Increase the margin in your budget

When you’re paying off debt, you need to earn extra money. Take on a second job like driving for Uber or Lyft. Sell items you no longer use on Facebook Marketplace. Even an extra $30 a month can help you pay off balances faster.

Pay throughout the month

One trick is to make multiple payments. When you pay your balance down throughout the month, you will have an easier time paying your bill in full when due. Figure out how much you spend on average per month. Then set up autopay for half that amount for when your first paycheck hits your account. You will automatically reduce your balance before you have a chance to spend your pay.

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Alternative options for paying off credit card debt

If you’re struggling to pay off existing credit card debt, try consolidating it to save money.

Consider a balance transfer

While you can’t usually pay one credit card with another, balance transfer cards offer a workaround for those wondering, can you pay a credit card with a credit card. Balance transfers let you move your existing credit card balance to a new card with a low or 0% introductory APR. You won’t accumulate interest during the promotional period so all of your payment goes toward reducing the principal.

Balance transfer cards can help you pay off balances faster and save money, but they come with fees. If you don’t pay off your balance in full during the introductory period, you will be charged a higher interest rate. While potentially helpful, use with caution.

Personal loan

Personal loans for bad credit are another consolidation option. They often have lower APRs, which can reduce the total amount paid. The fixed repayment schedule can also make it easier to manage your debt.

Best practices for credit card payments

To maintain a good score and avoid unnecessary debt, it’s important to:

  • Make on-time payments
  • Don’t spend too much
  • Open new accounts only when needed

Learn more on MoneyFor!

Always pay by the due date

Pay your bill in full by the due date to avoid fees, damage to your credit score, and penalty APRs. You can set up automatic payments or put reminders in your phone to stay on top of bills.

Keep a low credit utilization ratio

Your credit utilization rate – the percentage of your available credit that you’re using – is an essential credit scoring factor. Aim to keep this rate below 30%, lower than 10% is even better. Keep track of your spending and pay down your balances regularly to avoid exceeding this limit.

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The risks of not making the minimum payment

Failing to make at least the minimum monthly payments can have serious financial consequences. First off, the credit card company will consider it a missed payment. They will charge you a late fee and report it to the credit bureaus, resulting in a negative mark on your credit report. Your issuer may also impose a penalty APR (higher than the normal APR) on your balance.

Continued missed payments may result in your account being sent to collections. Having an account in collections will significantly damage your score and make it more difficult to borrow in the future.

Your credit card company may even take you to court. Winning the lawsuit could lead to wage garnishment or liens, making the question “can credit card companies take your house?” a very real concern. While credit card companies can’t directly repossess your home, it is possible for them to go after your property.

To avoid these consequences, make the minimum payment each month at the very least.

What happens if I can’t afford the minimum payment and only pay $25 a month?

If you can only afford to pay $25 per month, and that’s less than the minimum, the credit card company will consider your payment missed. They will likely charge a late payment fee, report your missed payment to the credit bureaus, and may impose a penalty APR. While paying something towards your bill is good, it will not keep your account current if it is below the required minimum.

What you need to do is contact your credit card company and work out a solution. Your creditor may be able to reduce the interest rate, put you on a payment plan, or enroll you in a hardship program. Be polite and honest about your financial situation. Most credit card companies want to be paid and so are willing to negotiate with customers.

Frequently asked questions

1. Does paying the minimum payment hurt credit?

Only making the minimum payment can hurt your credit score since it keeps your balances high. Your score suffers when your credit utilization is over 30%. That said, when you make the minimum payment by the due date, your bill will be considered paid on time. The on-time payments can improve your score.

2. Why does making only the minimum payment slow down debt repayment?

Paying only the minimum is a problem since the bulk of your payment goes toward interest rather than reducing your outstanding balance. This means your debt decreases very slowly, while interest continues to accumulate. Over time, you end up owing significantly more than you spent.

3. If I pay the minimum credit card payment, do I get charged interest?

When you pay the minimum, you will be charged interest on the outstanding balance.

4. What happens if I don’t make the minimum payment each month?

If you do not make the minimum payment, your creditor will charge a late fee and report the missed payment to the credit bureaus. They may also impose a penalty APR. You will owe more interest and have a negative mark added to your credit report.

5. Do I still have to pay the monthly minimum amount if I spend $0 with my credit card?

If you do not have an outstanding balance on your credit card, you will not have to make a minimum payment.

6. Should I pay off my credit card in full or leave a small balance?

Settling your credit card account in full each statement period will help your credit score and save you money on interest. Carrying a balance does not help your credit score. It only costs you money in interest.

7. How can I lower the minimum payment on my credit card?

Contact your issuer to lower your credit card interest rate. Ask if they offer options like temporary reduced minimum payments, payment plans, or hardship programs. Explain why you need to lower your payment, be it job loss, unexpected expenses, or other financial difficulties. They may be willing to help.

Bottom line

Why pay more than the minimum payment due on your credit statement each month? By paying more than the minimum payment amount due, you can reduce the principal faster, minimize the interest you owe, and shorten the time it takes to pay off your debt. Paying as much as possible toward your credit card bill saves you money in the long run and improves your overall financial health.

Making the minimum payment might seem like an easy way to manage your bills, but it can trap you in a cycle of debt that becomes increasingly difficult to break. Over time, you’ll end up paying significantly more in interest, extending your repayment period, and potentially harming your credit score.

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About the author

Author Rachel Alulis Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor's credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor's degree in journalism and an MBA.

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