Does Paying the Minimum Credit Card Payment Hurt Credit?

Making the minimum payment on credit cards might seem like a friendly option in a month when money is short, but don’t mistake it for safely treading water.

Yes, making the minimum payment beats suffering a credit-damaging missed payment, but it’s like stepping in quicksand. It could eventually sink you into serious credit card debt and do more damage to your credit score.

Minimum payments are designed to prolong credit card payment periods. The longer it takes you to pay, the more interest you are charged, which definitely is not in your favor. The deeper you go into debt, the worse your credit score becomes.

In short, making a minimum payment is a benefit to the credit card issuer, not the credit card holder.

So, it’s important to not only know how credit card companies arrive at minimum payments but also to understand how making minimum payments works and the impact it might have on credit ratings.

“From a financial standpoint, most minimum payments are too low to make real progress on your credit card balances,” Jonathan Feniak, a financial expert and general counsel at LLC Attorney, said. “Lenders (are) stretching your repayments for as long as possible to increase the interest you pay.”

What Are Minimum Credit Card Payments?

The minimum credit card payment is the least amount you can pay to avoid late fees. The minimum credit card payment can be a fixed amount or calculated as a percentage of the amount you owe.

If that minimum payment you made went solely toward paying down your principal, it wouldn’t be so bad. But it doesn’t. A credit card payment consists of the principal balance, interest, and any applicable fees. Only a small portion of your minimum payment goes to paying down the principal balance.

Unfortunately, many credit card holders see the minimum payment as a relatively safe haven in a financial storm especially compared to what happens if you stop paying credit card bills.

“One missed minimum payment can have an immediate impact on your credit score once it’s reported to the bureaus, usually after 30 days,” Reilly James Renwick, Chief Marketing Officer at Pragmatic Mortgage Lending, said.

“Paying the minimum keeps your account in good standing but increases aggregate interest costs. High credit utilization, generally caused by making only the minimum payment amount, could negatively affect your credit score and diminish the capability of new credit or loan approval.”

How Minimum Credit Card Payments Are Calculated

Credit card minimums vary from bank to bank. For small amounts, the minimum is likely a fixed amount, $25 or $35. For larger amounts, the minimum payment might well be set at 2%-4% of the total amount owed, including accrued interest and fees.

Let’s use a conservative example and say you owe $1,000 on a credit card; the interest rate is 20% and your minimum payment is set at 1% of the balance plus interest.

If you made only the minimum payment ($26.67) it would take you 117 months to pay off the bill and you would pay $1,056.74 in interest alone.

Only $10 of your initial payment would go toward the principal, the rest toward interest. After making payments for a full year, you would still owe $886.37.

When you consider that the median average credit card interest rate for the first week of 2025 was 24.37%, you see how making minimum payments can easily become a financial sinkhole.

How to Find Minimum Payments

The Credit Card Act of 2009 required card issuers to include a “minimum payment” warning on each credit card statement.

That warning is meant to increase transparency and ensure consumers understand that if they make only the minimum payment each billing period, they will pay more in interest – often significantly more – and that it will take them far longer to pay off their balance.

You can find minimum payment information on your credit card statement, or online if that’s how you access your account. Just know that the minimum payment can change month to month depending on the balance and accrued interest.

If you’re unsure about the amount you’re being charged or how to find minimum payment information, you can always call the customer service number associated with your card and speak to someone directly.

What Happens If You Miss Minimum Payments

The best argument for making only the minimum credit card payment is that it beats missing payments. Avoiding “deadbeat” status is not an extremely high bar as the so-called benefits of doing so indicate.

Missing multiple payments risks having your account turned over to debt collections if you fail to make payments for 90-180 days. It’s why consumers who are unable to pay credit cards are encouraged to be proactive by calling their credit card company to work out a friendlier repayment plan.

“Many credit card companies have hardship programs,” Melanie Musson, a personal finance and credit expert with InsuranceProviders.com, said.

“It’s in their best interest to work with borrowers with the goal of repayment, even if it takes a little longer. Once a credit card company charges off a debt (to a collection agency), they’re guaranteed a loss because they sell the debt for less than it is.”

Another good option for those unable to pay credit card bills is to consult with a financial advisor or schedule a free consultation with a nonprofit credit counseling agency.

“Nonprofit counseling is great because their advice is unbiased. There are no perks or commissions tempting them, so they’ll offer you the best path forward,” Feniak said.

“When you can’t make the equation add up, you need that unbiased look to help you understand where to cut expenses or increase your income. They’ve seen it all, and they can lend a lot of financial and emotional support during a difficult time.”

Some credit unions offer complimentary financial counseling. Local nonprofits, consumer protection agencies, and financial literacy workshops sometimes offer free or low-cost services to individuals struggling with debt.

Does Paying Minimum Payments Affect Your Credit?

Making the minimum payment is a way to avoid late fees and immediate damage to your credit score. But it’s like carrying an umbrella in a hurricane. Hardly the best strategy, and you should be careful not to let it give you a false sense of security.

“A benefit to making only the minimum payment is that it is a relatively low amount, which may allow the consumer who is having payment challenges to review their budget, income, and opportunities for making a better day-to-day plan with their finances,” Sara Griffin, financial coach at Sip Into Savings, said. “The negative is that you are carrying the balance of the credit card forward which will result in finance charges as that is how the credit company makes their money.”

Not only are you still accruing interest and barely denting your principal when you make minimum payments, but you could still take a hit to your credit rating because of how credit ratings are calculated.

Your payment history counts as 35% of your credit rating. That’s why it’s so important to pay on time.

However, 30% of your score involves a factor known as credit utilization. It’s not as complicated as it might sound. It’s the amount of available credit you’re using at any given time. In some cases, carrying large balances month after month is bad medicine for the health of your credit rating.

“From a credit history perspective, minimum payments can ensure you won’t see any credit score drops, but that’s only if you’re staying well within a healthy credit ratio and borrowing less than 35% of the credit available to you—and that’s across all accounts,” Feniak said.

Making on-time minimum payments as a way to build a strong credit history carries negative consequences at best and at worst belongs on the list of credit score myths.

Why You Should Pay More Than the Minimum Balance

If you can’t pay off your balance in full at the end of each billing period (it’s not your fault you took that vacation in the same billing period as emergency car repairs cropped up) do whatever you can to make more than the minimum payment.

Doing so will establish the same history of on-time payments as minimum payments do but it will save you significant money over the repayment period because you’re paying so much less in interest.

Paying off cards as soon as is realistically possible reduces the principal balance and total interest paid over time. Lower balances (that credit utilization thing again) can positively impact your credit score and bring the added benefit of stress reduction that comes from successfully managing and paying off credit card debt.

“I strongly recommend the services of nonprofit credit counseling services,” Renwick said. “They will provide excellent counseling, negotiate on behalf of your creditors for better terms, and (provide) realistic budgeting tools. For many people, these services are a real turnaround in debt reduction and regained financial stability.”