The Minimum Payment that Comes At A Cost

For many, the only way to pay their credit cards is to pay it off in full each month. They treat credit as a convenience and they know it comes at a price.  The average interest rate is 19.9% on any balance carried forward. However, it is not uncommon to be caught in the minimum payment trap.

According to a survey by Harris/Decima for Hoyes, Michalos & Associates , 38% of Canadians carry a balance on their credit card. Nearly half of those carry a balance most if not all of the time. Whether we make minimum payments because we think that’s all we have to pay or because we simply haven’t the income to make larger payments, many of us are lingering in this trap without realizing the full cost over the long term. 

The Hidden Costs of  the Minimum Payment

People that pay only the minimums are seeing their balances grow out of control due to interest charges that add up every month. If you carry a $3000 balance at 19.9% interest and a minimum payment is generally 3% of that balance, your minimum payment would be $90.  That $90 payment includes $49.75 a month in interest alone, leaving only $40.25 to be applied to your balance. It will take 6 years to pay off your card (provided you’re not adding new purchases to it!) and you will pay nearly $1400 in interest charges alone.

The Extra $50

An extra $50 on that payment can turn 6 years and $1400 into 2 years and 3 months with interest charges of $732. A far less scary proposition.

But where to find that extra $50? That extra money can often be found in the money that slowly leaks from our account over the month. One $5 grande latte per day from a cafe can add up to $160 a month. Cancel that $95 cable plan and subscribe to a $12 streaming service. Better programming without advertisements for a fraction of the cost. Subscribe to two streaming services to cover all of your home entertainment needs for less than $25 a month. You will still realize a savings of $70 a month.

The numbers involved in making just the minimum payment are certainly sobering. It’s not impossible but it is improbable that you can maintain a good credit history while only making the minimum payments. Can you find 5 different ways to save $10 and then add it to your payment?


At PYLO Finance Inc., we believe that small changes can make for bigger gains. Our team is happy to speak with you about any questions you may have.



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Disclaimer: This Blog/Web Site is made available by PYLO Finance Inc. for general educational purposes only and you should seek appropriate counsel for your specific situation. This Bog/Web Site should not be used as a substitute for competent advice from licensed professionals and councilors in your province.

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