Minimum payment on credit cards
Minimum payment on credit cards….
The minimum payment is the portion of the credit card balance that must be paid each month. By paying only this amount, you’re “in good standing”. But in the end, credit can be expensive! The longer you take to pay off your debt, the more expensive your purchase will be as credit charges accumulate.
On August 1, 2023, the minimum payment on credit cards rose from 3.5% to 4%, and will continue to increase by 0.5% per year, reaching 5% in 2025. This measure is designed to prevent debt problems. By repaying more each month, you pay less in credit charges.
DOES THIS AFFECT YOU?
This increase applies to cards issued before August 1, 2019. Cards issued after this date already have a minimum payment of 5%.
WHAT DOES THIS MEAN IN CONCRETE TERMS?
For example, you make a purchase of $1,000, with a 19.9% credit card, repaid in monthly payments of :
- 5% of the balance ➡️ you will have paid $1,412 in 6 years. You will have paid $441 in credit charges.
- 4% of balance ➡️ you will have paid $1,607 in nearly 8 years. You will have paid $607 in credit charges.
- To avoid paying interest, make sure you pay the FULL balance shown on your statement. You have 21 days to do so. If you only pay part of the balance, interest is calculated on the total amount of your purchases, not on the remaining balance.
- To calculate how long it will take you to pay off a purchase and how much it will cost you in total (including credit charges), use this calculator.
- Use our budget grid to get an accurate picture of your current financial situation.
- If you’re having trouble getting a clear picture of your budget, don’t hesitate to book a free budget consultation!