Every credit card and many loans have a minimum payment — the smallest amount you must pay each month to keep the account in good standing and avoid a missed payment fee.
What a minimum payment usually covers
On credit cards, the minimum payment is typically calculated as a percentage of the outstanding balance (often around 1 to 3 percent) or a fixed minimum amount, whichever is higher, plus any interest and charges. This means at higher balances, the minimum is higher in cash terms, but may still be a small fraction of what you owe.
Why minimum payments alone can be slow
If you only pay the minimum each month, a significant portion of each payment goes toward interest rather than reducing the balance. The balance reduces slowly, and the time to clear the debt fully can be considerably longer than most people expect.
What happens if you pay more than the minimum
Paying more than the minimum payment reduces your balance faster and reduces the total interest paid over time. Even a modest additional payment each month can make a meaningful difference to the total cost and the time to repay.
Checking your credit card terms
Your credit card statement or provider should show how long it would take to repay your balance if you only made minimum payments. This is a regulatory requirement in the UK. If you are not sure where to find this, check your online account or contact your provider.
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Ask Fin provides general guidance and educational support. It does not replace regulated debt advice. If you are struggling with debt, consider speaking to a qualified debt adviser or a free debt advice charity.