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The Credit Card Minimum Payment Trap

The Credit Card Minimum Payment Trap will often lock you into debt forever. The minimum payment is usually 1%, 2% or 3% of your balance plus interest and any outstanding fees. 

The Credit Card will also have a minimum payment such as $45 or $35 when your balance gets that low.

Do not get into this trap as over the long term it will cost you a lot of money.  Solving the Trap is easy. Pay off your credit card every month.  


Credit Card Minimum Payment Trap Loan Examples


Here are some excellent examples I have created using the Bankrate.com Credit Card Calculator.


$6,000  Credit Card Loan Minimum Payment Trap

Terms for this example: 18% interest  1% Minimum payment, $30 minimum payment.


Your initial minimum payment $150, this will drop as you pay down the balance.  The first month you will pay $60 in principle and $90 in interest.  The second month $59.40 principle and $89.10 in interest.


It will take 291 months (over 24 years) and you will pay $8,423 in interest  plus the $6000.  If you miss a payment your interest rate will go up and your credit score will go down.  You have spent 24 years in the Minimum Payment Trap.


If you charge anything else on this card that you plan on paying this month it will also be charged interest from the transaction date to the day they receive payment.   Any extra  purchases will not get float or grace period.


$500 Balance Minimum Payment Trap

You carry a $500 balance and you spend $800 per month for gas and groceries on the card every month but pay it down to at least $500.  So the $800 is spent evenly over the month and you pay within 12 days of the statement. 


You will pay 1.5% on the $500 balance for 30 days

and ½ $800 for 30 days

and $1,300 for the 12 days it takes to get the payment to the credit card company. 


($500*.015)+($400*.15)+(($1300*12)/30)*.015)= $21.30 interest per month


If you made the $821.30 payment you would still have a $500 balance.  


Pay off your Credit Card every month to stay out of the Minimum Payment Trap. If you did not pay off your card last month you will be charged interest on your purchases from the date of the transaction to the date the payment is received.  If you paid off in full your card you will get both float until the statement prints and a grace period.
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