Carrying a balance on a credit card can be one of the quickest ways to get trapped in debt, and a common payment habit can make it much harder to get out.
More than 4 in 10 U.S. cardholders say they regularly pay only the minimum on at least one of their cards, according to a LendingTree survey of more than 1,500 cardholders. The share rises to 58% among Gen Z cardholders ages 18 to 29.
While paying the minimum avoids the penalties that come with missing your monthly deadline, much of that payment may go toward interest rather than reducing what you owe, potentially stretching repayment over years and adding thousands of dollars to the total cost. LendingTree describes paying only the minimum as “one of the worst habits you can get into with your credit card.”
The minimum payment is “not a debt repayment strategy, it’s a debt maintenance strategy,” says Corinna Rose, a certified financial planner with Bell Investment Advisors. “Making only the minimum keeps the account in good standing, but it often does very little to meaningfully reduce the balance.”
Here’s why making only the minimum payment can be so costly, and what you should try to do instead.
Why making the minimum payment isn’t enough
It’s easy to fall into the habit of making only the minimum payment each month. But if you’re carrying hundreds or thousands of dollars in credit card debt, you’ll need to pay more to make any real progress on paying back what you owe.
The average credit card balance among U.S. cardholders with debt is $7,756, while the average APR is 20.94%, according to LendingTree. At those levels, assuming no additional charges, paying off the debt while making minimum payments could take nearly 27 years and cost nearly $13,000 in interest alone, according to Bankrate’s credit card calculator.
“A big misconception is that making the minimum means you’re making meaningful progress. In reality, you’re often just treading water while interest does the heavy lifting in the wrong direction,” says Rose.
You also don’t have to wait until your statement closes or your payment is due to start paying down a balance, says Nathan Sebesta, a CFP and owner of Access Wealth Strategies. Credit card interest is typically calculated daily, so for cardholders carrying debt, paying sooner can help reduce interest costs.
“You can make payments at any time,” Sebesta says. “If you’re using a credit card for rewards or convenience, there’s nothing wrong with paying the balance down multiple times throughout the month and getting it back to zero as often as possible.”
Try to pay off your balance every month
Ideally, you should avoid carrying a credit card balance from one month to the next, says Sebesta.
Ultimately, “the goal should be to use the credit card as a payment tool, not as a way to spend money you don’t already have,” he says.
Carrying a balance month after month can also make it harder to keep track of your actual spending, Rose says, since part of each paycheck is already committed to purchases you’ve made in previous months.
Consistently being unable to pay your balance in full is “a warning light on the dashboard,” Rose says. “It doesn’t mean [a cardholder] has failed, but it does mean it’s time to take a closer look at spending habits, create a realistic budget, or potentially take a temporary break from credit cards altogether.”
One rule Rose uses with clients is, “Don’t use tomorrow’s income to pay for yesterday’s spending.”
Don’t miss the minimum payment, either
A credit card payment is considered late if you don’t pay at least the minimum listed amount by the due date. Your issuer may charge you a late fee, but payments generally aren’t reported to the credit bureaus until they’re at least 30 days overdue, per Credit One Bank.
After 30 days, the consequences can become more serious. A payment that’s 30 days late may be reported to the credit bureaus, potentially lowering your credit score and making future borrowing more expensive, Sebesta says. For someone with excellent credit, a single 30-day late payment could knock around 60 to 80 points off their credit score, according to Experian.
A missed payment that’s reported to the credit bureaus can stay on your credit report for up to seven years, although its impact on your credit score generally diminishes over time. If an account remains past due for several months, it could eventually be closed and cause further damage to your credit.
If you’ve missed a payment, Sebesta recommends paying it immediately and contacting the card issuer. If it hasn’t reached 30 days late, you may be able to avoid having it reported to the credit bureaus and could potentially have the late fee waived.
To avoid missing a payment in the first place, Rose recommends turning on autopay in your credit card’s online account or app settings.
“Don’t rely on memory when technology can do the work,” Rose says. “One autopay setting can save years of credit headaches.”
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