Home Credit Card Debt Avoiding the Minimum Payment Trap

Avoiding the Minimum Payment Trap

Published March 2021 by Jordan Semprevivo

If your goal is to pay off credit card debt in a reasonable amount of time, you are going to have to pay more than the minimum payment. Here’s why.

Key Points
  • Just paying the minimum required payment will keep you in debt for a long time.
  • Look for ways to apply more to your monthly payments to pay down your debt faster and to pay less in interest.
  • Use our credit card calculator to see how much you can save by paying more.

Paying the Minimum is Not a Good Financial Strategy

You may think you are doing well financially as long as you are able to meet the monthly payment for paying off your debt, however, this isn’t always true. The “minimum payment trap” allows its users to believe they have control over their finances just because they are paying the minimum payment on their credit card debt.

In reality, the minimum payment trap keeps credit card users in debt longer, costing them more in the long run. Paying the minimum payment may protect you from late fees but you will still be charged interest on the remaining balance.

Paying Just the Minimum Payment Keeps You in Debt

For example, if you made a $3,000 purchase, with a credit card carrying a 20 percent APR and your creditor requires a 2 percent minimum payment, you only have to pay $60 per month. Here's how that will work out:

Credit Card Debt Chart

(Source: Calculator.net)

With a beginning balance of $3,000 and $3,503.94 in interest, you will end up paying a total of $6,503.94...and it will take you over 9 years to pay off your debt!

If you’re already stuck in a minimum payment trap, it’s not too late to get out of it.

Cut Back to Pay More than Your Minimum Payment

If you want to become debt free on your own, you should start with a plan, or a budget, that will meet your financial needs. No matter the budgeting method you choose, make sure you choose one that you will actually stick to in order to prevent overspending. Sticking to your budget should even help you manage your credit cards better, potentially keeping you from incurring more debt or going back into debt in the future.

Earn More to Pay More than Your Minimum Payment

If cutting back on bills is not enough to make a difference in paying off your debt, you may need to earn additional income. This doesn’t necessarily mean getting a second job, though that may provide a more consistent additional income. You can also earn extra income by:

  • Selling items around your home.
  • Creating something to sell.
  • Cleaning up antiques and selling them for a profit.
Any extra income can go toward paying more than your minimum payment on your credit card debt.

Benefits of Paying More than your Minimum Payment

Because of interest, just paying the minimum payment each month means you will end up paying much more for your purchases than if you paid more than the minimum required. The longer you take to pay off the purchases, the more you will pay in interest on the same principal.

Use our credit card calculator to see how much you can save on time and interest by paying more than the minimum payment on your own credit card debt.

If you want to pay off your credit card debt on your own in a reasonable amount of time, you need to pay more than the minimum monthly payments to make any real progress. If you can’t do that, consider seeking professional help through ClearOne Advantage. Our Certified Debt Specialists are standing by to help you explore your debt relief options and work out a solution that fits your budget. Call 866-481-1597 to speak to a Certified Debt Specialist today and get a free savings estimate.


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Topics: Credit Card Debt