Minimum Payment Calculator
Discover how long it takes to pay off credit card debt making only minimum payments and see the true cost of the minimum payment trap.
Common Issuer Minimum Payment Formulas
Formula A: Greater of $25 or (1% of Balance + Monthly Interest) | Formula B: Greater of $35 or (2% to 3% of Balance)- Decreasing Payment Trap: Because the minimum is a percentage of your balance, your required payment shrinks every month as the balance decreases, prolonging payoff for 15–30 years.
- Interest Compounding: In early years, up to 75%–85% of your minimum payment goes solely to interest, not principal reduction.
Step-by-Step Worked Example
Calculation Steps:
How to Use This Calculator
Assumptions & Limitations
- Simulates strict adherence to the declining monthly minimum formula down to the issuer minimum floor.
Frequently Asked Questions
Why do credit card issuers set minimum payments so low?
Low minimums maximize the issuer's interest profits. Setting low monthly obligations keeps the borrower solvent while maximizing the number of years interest compounds.
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