How is a minimum credit card payment calculated in Canada?
Most Canadian cards set the minimum as a percentage of the balance (commonly 2 to 3 percent) or a fixed floor such as $10, whichever is greater. In Quebec, a phased-in rule requires a minimum of at least 5 percent of the balance for cards issued more recently.
Why do minimum payments take so long?
Because the minimum is a percentage of the outstanding balance, it falls as the balance drops. The payment shrinks each month, so it covers less principal over time, stretching payoff to decades on high-interest cards.
How much interest do minimum payments cost?
On a high-interest card, paying only the minimum can more than double the total you repay and take 15 to 25 years. Fixing your payment at a constant dollar amount instead can cut years and thousands of dollars off the cost.
Is it better to make a fixed payment?
Yes. Paying a fixed dollar amount that is at least the current minimum keeps attacking the principal instead of shrinking with the balance. It dramatically reduces both the payoff time and the total interest.