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Minimum Payment
Definition
The minimum payment is the smallest amount a credit card or loan holder must pay each month to keep the account in good standing.
Explanation
Minimum payments are typically 1-3% of the outstanding balance. Paying only the minimum maximizes interest costs and extends repayment time significantly. For example, a $5,000 balance at 18% APR with minimum payments takes 15+ years to repay.
Always pay more than the minimum when possible. Paying the full statement balance each month avoids interest charges entirely.
Example
A $3,000 credit card balance at 19% APR with a $60 minimum payment would take 9+ years to pay off and cost over $1,800 in interest.