What Happens If I Only Make The Minimum Payment On My Credit Card? - NerdWallet
Advertiser Disclosure

What Happens If I Only Make The Minimum Payment On My Credit Card?

You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.

One of the most important things we consumers can do to do to be sure that we’re on track to building a healthy financial future is to obtain a credit card and use it regularly. For most of us, getting a credit card represents our first opportunity to start building a credit history, so getting our hands on some plastic as soon as possible and using it responsibly will give us a head start on a long life of positive financial habits.

However, while millions of Americans are fulfilling the goal of dutifully using their credit cards and paying them off every month, there are others among us who find themselves succumbing to the Siren song of the minimum balance. After all, we all have a tight month every so often, and at times like this paying the total balance on your card can just seem so optional, especially compared to other bills.

But as easy as it seems to just pay the minimum balance on your credit card bill, the reality is that there are some truly scary consequences to failing to pay off your charges in full every month. Still not convinced? Take a look at these three negative consequences of making minimum payments described below – you can’t afford not to!

1. Your credit score will fall

Making minimum payments on your credit card is a quick fix to coming up short on cash for the month, but over time the debt you’ll build up over the course of just a few months of underpaying can really mess up your credit score. This is because 30% of your credit score is determined by how much debt you carry, particularly on revolving credit accounts (such as credit cards). This means that accruing charges on your card and failing to pay them off is like putting a dent in your credit score every month; over time, this adds up to a lot of damage.

The best thing to do is keep track of your spending and make sure that you don’t charge more than you can comfortably pay off at the end of the month. Otherwise, you can expect a nasty surprise the next time you check your credit score.

2. Your monthly bills start to balloon

Most credit card issuers only require a minimum payment of 4-6% of the total balance to be paid every month. However, if you pay only this minimum amount every month and continue to make charges on the card, the total balance on the card is going to rise substantially; in no time, that 4-6% is going to amount to a pretty high figure that you’ll have to fork over every month.

But it’s not only your credit card bills that will shoot up if you only make minimum payments. Thanks to the damage you’ll be doing to your credit score, other monthly obligations – such as insurance payments, loans, even rent or mortgage payments – will be expensive, too. Lenders, landlords, and insurance companies charge people with poor credit more, so it’s important to keep your credit card debt levels down and your credit score high to avoid this added expense.

3. Your credit card costs skyrocket

Paying only minimums on your credit cards is dangerous for a lot of reasons, but probably one of the most obvious because of the interest that’s accruing on the unpaid balance. The average interest rate on a credit card is 15%, so it’s very expensive to fail to pay off your balance in full.

Plus, most credit cards charge a fee for exceeding your credit limit, which is easy to do when you’re paying so little of your bill every month, so be sure to avoid this mistake by making full-sized payments on your card.

Credit cards are helpful tools for building good credit, but don’t give in to the temptation to only make minimum payments, no matter how convenient it might seem. There are serious and expensive consequences to not paying the full bill every month, so be sure keep a close watch on your spending to avoid this trap!

  • Did you find this article helpful?
  • yes   no
We want to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and safe by following our posting guidelines, and avoid disclosing personal or sensitive information such as bank account or phone numbers. Any comments posted under NerdWallet's official account are not reviewed or endorsed by representatives of financial institutions affiliated with the reviewed products, unless explicitly stated otherwise.