How is a minimum credit card payment calculated in the US?
US card issuers typically set the minimum as a percentage of the balance (often 1 to 3 percent) plus interest and fees, or a fixed floor such as $25 to $35, whichever is greater. Card statements must show a minimum-payment warning under the CARD Act.
Why does paying the minimum take decades?
The minimum is a percentage of a declining balance, so the payment shrinks each month and covers less principal. On a high-APR card, minimum-only payments can take 15 to 30 years and cost more in interest than the original balance.
What is the CARD Act minimum-payment disclosure?
The Credit CARD Act of 2009 requires issuers to disclose, on each statement, how long it will take to pay off the balance making only minimum payments, and how much you would pay monthly to clear it in 36 months. This calculator illustrates the same math.
Should I pay a fixed amount instead of the minimum?
Yes. Paying a constant dollar amount at least equal to today's minimum keeps hitting the principal instead of shrinking with the balance, which sharply reduces payoff time and total interest.