Americans nationwide are carrying more credit card debt than ever, totaling $807 billion in 2021. Ten years ago our collective card debt was just $668 billion. Big jump.

Many of us have not just one or two but six credit cards. And you probably have credit card debt for good reason - to pay off medical bills, to buy the extras you want, or to just get by (because prices are skyrocketing everywhere).

You may be paying just the minimum due each month. Is this a good idea? The simple answer is no. That’s because of the interest you’re paying on your unpaid balances. Which only grows and compounds the longer you keep paying just the minimum due.

What is the “minimum payment due”? 

Every month, your credit card statement shows your “minimum due.” That’s the amount you’re required to pay to keep your account in good standing and to avoid paying a late fee (if you pay it by the due date, which is also noted on your statement every month). 

Basically, a “minimum due” (also called a “minimum payment” or sometimes just your “min due”) is essentially the lowest amount your bank will accept as payment toward your credit card’s balance each month. 

But keep in mind: it changes month by month, depending on your balance and your interest rate. That’s important to remember. If you pay the minimum due one month, then keep using the card the next month, your next minimum will be higher. It won’t be a fixed amount. 

How is my "minimum payment due"calculated?

Your minimum payment is based on your interest rate and your current balance and can fluctuate month to month based on how your balance changes.

Check your credit statement. They might spell out the math for you, front and center. But for some cards, you might need to dig through your credit card agreement. 

For some cards, it’s just a flat percentage of your entire balance. For other cards, your minimum due is a percentage plus the cost of interest and fees. Again, check the fine print on your card agreement. 

Some cards charge a flat fee when your balance goes too low, and for some cards, when your balance gets below the flat fee, you may be required to pay the full balance. 

Confusing? Yes, it is. Almost makes you want to pay them all off right now…

The benefits of paying the minimum payment due each month

If you can’t pay off your credit card in full every month, you may need to rely on just paying the smallest amount you can. That’s understandable. We all get behind. Sometimes paying the minimum due is the best we can do.

Sometimes more urgent expenses take priority. Like medical emergencies or basic car repairs just keep you on the road. Ideally, you’ll use your savings for unexpected expenses like those. That’s the best way to tackle big bills, instead of adding to your credit card debt. 

But just to be clear: making a minimum payment – and doing it on time – actually doesn’t hurt your credit score. In fact, whenever you pay a minimum due by the due date, credit bureaus consider that positive information. On-time payments are part of a positive payment history – a major factor in determining your credit score. Even when you’re only paying the minimum due. 

But try not to do it over and over, month after month. You’ll pay much more the longer you keep at it. 

The disadvantages of paying the minimum payment due each month

Whenever you can, pay as much as you can on your credit card bill. Paying the minimum due each month will be costly. Whenever you don’t pay anything less than the full amount, interest accrues. 

But what does that mean? How does “interest accrue”? Let’s put that in plain terms. 

When you pay only the minimum due, or anything less than the full balance, you’ll be charged interest every day your balance goes unpaid. That’s your card’s Daily Periodic Rate, or DPR, which is really just your card’s APR divided by 365, for every day of the year. For example, if your card has a 15.99% APR, your DPR would be 0.0438%.

That might not seem like much, but it adds up fast. And it’s added to your next month’s balance, where it’s called a “finance charge.” So the next month, if you only pay the minimum due again, you’ll pay interest on any new total balance, including the finance charge, the daily interest you were charged over the month. 

Even if you stop using the card but you keep paying only the minimum due, your minimum payment will go up every month – because those finance charges (the daily interest charges) keep adding to your bill. Month after month, that can really snowball.

Ways to pay off your Credit Card

Paying off credit cards takes discipline, in addition to a good calendar and decent calculator skills. Juggling due dates can get confusing and figuring the smartest payment isn’t always clear. It’s easy to fall behind – or just fall back on always paying the minimum due.

That’s where debt pay off methods can help. If you haven’t tried one yet, check out the two most popular ones: the Snowball method and the Avalanche method. 

With the Snowball method, you’ll pay the minimum due on all your cards, but you’ll pay more on the card with the lowest balance. When you’ve paid that one off, move on to the card with the next lowest balance. 

With the Avalanche method, you’ll also pay the minimum due on all your cards, but you’ll pay more on the card with the highest interest charges each month. That’s not necessarily the card with the highest interest rate or APR. It’s the card that you’re paying the most interest on – and that can change month to month. This method requires comparing your card statements every month, and you probably won’t pay off a card in full so fast. But you’ll pay less in interest charges over the long haul.

Some folks find making multiple payments each month easier. Making small incremental payments week by week can feel less burdensome than making one large payment at the end of each month. Other folks take on a side hustle, securing more income and dedicating it to paying off their cards. 

Bright can also help. Our MoneyScience™ AI studies your finances and makes card payments for you, when it makes sense for you, finding the fastest way to get you debt-free. We can pay off your cards up to 3x faster. 

Conclusion

Your “minimum due” is essentially the lowest amount your bank will accept as payment toward your credit card’s balance each month. Whenever you pay it, the rest of your balance begins accruing interest, which is added to your next bill. To avoid the interest cost, try a debt pay down method or start using Bright Money.