The credit card minimum payment trap

A $5,000 credit card debt. 19.9% interest. Minimum payment of 2%.

If you only pay the minimum every month, how long until that debt is cleared?

18 years. You’ll pay $6,900 in interest alone. On a $5,000 debt.

This isn’t an accident. It’s regulated design. Credit card minimums are set at levels that maximise interest income while keeping the borrower technically “not in default”. It’s optimised exactly for the bank, not the borrower.

Here’s what changes everything. Pay double the minimum. That same $5,000 debt clears in 4 years, not 18. Total interest: $1,400, not $6,900.

Paying even $50 more than the minimum every month cuts years off the repayment and thousands off the interest.

Rule
The minimum payment is the maximum time the bank wants you paying interest. Always pay more than the minimum. Always.

Action for this week
Look at your credit card statement. Find the “minimum payment” and “if you only pay the minimum” disclosures (they’re legally required but tiny). Set up an automatic payment that’s at least double the minimum.

Next week
Why you should review your subscriptions every six months, not once.

Know someone paying the minimum? Forward this.

P.S. Australia and the US both legally require credit card statements to show how long it takes to clear the debt at minimum payment. Most people never read it. That’s the design.