The true cost of making only minimum payments on your credit card

Minimum credit card payments might seem helpful, but they can cost you thousands, learn how to pay off credit cards sooner and escape the debt cycle for good.

Making minimum payments on your credit card might seem like a smart short-term fix, but it could be quietly costing you thousands of dollars over time. While it keeps your account in good standing and avoids late payment fees, it also traps you in a cycle of mounting interest, never-ending monthly repayments, and financial stress.

Let’s break down the true cost of only making minimum credit card repayments, and how to escape the trap for good.

What happens when you only pay the minimum?

Every credit card statement includes a minimum repayment, usually around 2–3% of your outstanding balance, or a set minimum dollar amount. But here’s the catch: the bulk of that payment goes toward interest charges, not your principal balance.

Take this example: If you owe $5,000 on a credit card with an annual interest rate of 18%, and you only make the minimum monthly payment of around $100, it could take more than 30 years to pay off the balance. You’d end up repaying over $12,000, more than double your original credit card debt.

That’s a long and expensive road for one shopping spree.

Why do credit card companies set minimum payments so low?

In short? Because it benefits them. Credit card issuers design these low minimum payment percentages to stretch out your debt repayment over a longer period, giving them more time to collect interest.

While that might be great for the card issuer’s profits, it’s not so great for you. Month after month, interest continues to build, especially if you’re still using the card and increasing your credit card balance.

Some credit card providers even encourage you to pay the nearest dollar above the minimum, which sounds helpful but still won’t make a real dent in your debt.

The psychological impact of long-term debt

Paying off debt slowly can feel like running on a treadmill, you’re moving, but not going anywhere. This ongoing financial difficulty can cause what’s known as debt fatigue, where your motivation dips and you lose confidence in your ability to become debt-free.

It’s not just about the dollars. It’s about the weight of seeing your monthly credit card statement barely change or worse still, going up. That constant pressure can impact your mental health, your decision-making, and your overall financial future.

How to break free from the minimum payment cycle

If you’re ready to stop going in circles, here’s how to turn things around:

1. Pay more than the minimum

Even an extra $50 a month can cut down your repayment period and save you heaps on interest. Use tools like a credit card repayment calculator to see how much quicker you can pay off credit cards sooner by upping your monthly payments.

2. Prioritise high-interest cards

Use the avalanche method: focus on cards with the highest annual percentage rate first, while maintaining the minimum repayments on others. It’s one of the fastest ways to reduce the cost of your credit card debt and repay your cards sooner.

3. Consolidate with a balance transfer

A balance transfer credit card with a 0% introductory interest-free period can give you time to repay your original balance without new interest piling on. But be cautious: once the promotional period ends, the interest kicks in, and sometimes it’s even higher. Make sure you’re taking full advantage of the interest-free time to clear your credit card debt sooner.

4. Use windfalls wisely

Got a tax refund, bonus, or unexpected cash? Put it towards your credit card payments instead of splurging. A one-off lump sum can significantly reduce your outstanding balance and help you pay off your credit card sooner.

5. Automate extra payments

Set up a direct debit to automatically pay more than the minimum repayment. You’ll stay consistent without having to think about it each billing cycle, and it’ll help you repay your credit cards faster without the effort.

How MyBudget can help you pay off debt sooner

At MyBudget, we help Australians avoid the debt trap by designing personalised repayment plans that suit your life and income. We’ll help you:

• Slash interest and pay off credit card debt sooner
• Avoid hidden charges and credit card fees
• Pay bills on time with automated services
• Rebuild your credit history
• Save for the future with achievable plans.

We’ve helped over 130,000 customers regain control and live free from money worries. Whether you’re trying to get on top of credit card balances, boost your emergency fund, or improve your credit rating, we’re here to make it happen.

Ready to break free from the minimum repayment cycle?

Getting ahead doesn’t require winning the lottery, just a solid plan, some guidance, and maybe a little help from the pros. Don’t let the costly interest charges of minimum credit card payments hold you back any longer.

Enquire online or call MyBudget today on 1300 300 922 to explore a tailored strategy that helps you pay off credit cards sooner, clear your credit card debt faster, and finally get ahead financially, because your life is too valuable to spend it paying off interest.