Minimum Payments

Shows what paying only the minimum on a credit card really costs, and the one change that fixes it.

It isn't the Debt Payoff calculator with one debt. A card's minimum is a percentage of the balance, so it shrinks as the balance does. Each month you pay a little less, and the debt stretches out for years. That shrinking is the trap, and it's what this calculator models.

Inputs

The card

Balance: what you owe today.

APR: the rate on your statement.

The minimum

Percent of balance: how your card sets its minimum, usually 1–3%.

But never less than: the floor most cards apply, often around $25.

Your statement states both. Leave them blank and 2% with a $25 floor is assumed.

What you get

Paying the minimum clears it in a number of months or years, starting at your first minimum and falling as the balance does. Beneath it are the total Interest, the Total paid, and your First minimum.

The one change that fixes it compares two habits that start at the same payment:

›Paying the shrinking minimum
›Paying that same amount, frozen, where you keep paying this month's minimum every month instead of letting it fall

It shows how long each takes and the interest each way. A note sums up how much sooner the frozen payment clears the card and how much it saves.

If the minimum is smaller than the interest the card builds up each month, the result says This balance never goes away. The balance grows however long you pay.

Why freezing works

Your first minimum is an amount you're already managing to pay. Keeping it fixed as the balance falls means more of every payment goes to principal each month, which is the opposite of what the shrinking minimum does.

It needs no extra money this month. It needs you not to take the lower payment when the card offers it.

Freezing the minimum is the smallest fix. To clear several cards in the right order, use the Debt Payoff Calculator. To put a card into your plan, add it under Debts in the Builder.

This calculator doesn't have an Add To Budget button.