Paying Less Than Minimum Payment on Credit Card

Credit card balances can add up quickly, often causing the monthly minimum payment to skyrocket.

If you can only afford to pay the minimum monthly payment on your credit card – or worse, can’t even manage that amount, the financial consequences will escalate. It’s important to note that paying less than the minimum payment is not an option. Failing to meet this requirement means being considered delinquent on your credit card payment.

The consequences of not paying the minimum monthly payment are just as serious as skipping the payment entirely. You’ll face a late fee to begin with, and continued nonpayment can lead to a higher interest rate, debt collection calls, and even legal action such as wage garnishment.

Struggling to make the minimum payment is a clear sign of a serious debt issue that requires immediate attention.

What Is the Minimum Payment on a Credit Card?

The minimum payment is the smallest amount you must pay each billing cycle to keep your credit card account in good standing. While this prevents penalties like late fees, only paying the minimum can lead to long-term financial challenges.

Credit card companies calculate minimum payments in one of two ways:

1. A percentage of your balance (usually 2%–5%).
2. A flat fee, which may increase if your balance rises significantly, your interest rate goes up, or you accrue late fees.

Keep in mind: Late fees and interest are added to your balance. If your minimum payment is based on a percentage of the balance, these additions will cause it to increase.

While paying the minimum may seem manageable, it won’t make much of a dent in your balance because interest continues to accrue. This is particularly true if you use your card frequently or maintain a high balance. Paying as much as you can above the minimum every month will help reduce that balance.

Your credit card statement has a section that shows how long it will take to pay off your balance if you only make minimum payments – and how much more you’ll end up paying in interest. If you’ve never checked it out, take a look – it can be eye-opening.

Here’s an example of how much making only the minimum payment every month can cost you:

• Balance: $6,000
• APR: 22%
• Minimum Payment: $170/month
• Time to Pay Off: 4 years, 10 months
• Total Paid: $9,746

If you pay only the minimum, interest compounds over time, making it difficult to pay off your balance. In this example, you would have to pay an additional $3,746 on top of the original balance!

Credit card debt is a common struggle. By the end of 2024, Americans owed $1.7 trillion on credit cards, with more than 7% delinquent – behind on payments or not paying at all. If you’re feeling overwhelmed, know that you’re not alone, and there are steps you can take to regain control of your finances.

Consequences of Paying Less Than the Minimum Payment

If you make a payment that’s less than the minimum, the credit card company will apply it to your balance, but it doesn’t count toward making the minimum payment. If you pay your credit card bill online, a notice may appear when you make the payment that lets you know it’s not the minimum and that you’re still required to make the minimum payment by the due date.

Failing to make the minimum payment leads to a late fee added to your balance, increasing what you owe. Repeated nonpayments can trigger higher interest rates, damage your credit score, and appear as missed payments on your credit report. If you don’t catch up, ultimately, the credit card company may close the account, incessantly call you with collection requests and possibly take you to court to get their money back.

Late Fees

Credit card late fees were capped at $8 for the first late payment in 2024. Before that, the average consumers paid was $32, and Americans were paying $14 billion annually. The new rule by the Consumer Financial Protection Bureau only applies to large card issuers, but those lenders account for 95% of credit card balances and the CFPB found that most small lenders charge much less. Late fees can still increase as they accrue. They are added to your balance, which means interest is charged on the extra amount, which increases your balance exponentially.

Credit Report Impact

Credit card companies notify the credit bureaus – Equifax, Experian, and TransUnion – when payments are late or missed. These show on your credit reports, where they stay for seven years. Not paying on time, or at all, accounts for around a third of your credit score with all three bureaus. The lower your credit score, the harder it is to get a loan and the higher interest will be on any credit you do get, and can also mean higher insurance premiums, difficulty renting an apartment, and more.

Penalty Interest Rate

A credit card company can raise your interest rate as a penalty after two consecutive missed payments (60 days). The issuer must inform you 45 days before raising the rate of what the penalty annual percentage rate (APR) will be, and how long it will last. The card company is required to review your account after six months of paying the penalty rate and may lower it if you’ve made six months of on-time payments and haven’t exceeded your credit limit. Check the fine print on your card statement, though. Credit card companies only have to lower the rate on charges that existed when the penalty rate went into effect. The higher rate may still be charged on any purchases after the rate was raised. There is no limit on how high a credit card interest rate can go, but federal law sets a 36% limit for military members, and most credit card companies don’t go higher than that.

Risk of Account Closure

If you continue to make less than the minimum payment on your credit card, the card issuer will likely close your account. The immediate effect of this is that your credit score will go down because you’ll have less credit available. You still have to make regular payments and pay off the balance. The credit card company will also likely continue to call you, asking you to catch up,  if you’re behind on payments, and eventually may hand your account over to a debt collection agency.

Debt Collection

If you fall too far behind on your credit card account, whether it’s closed by the creditor or not, they will pursue payment. This means nonstop phone calls, from either the credit card company or a debt collector. They may eventually file a suit to get their money back, even seeking to garnish your wages. All of this goes on your credit report, too, and stays there for seven years, telling future potential creditors, landlords, and insurance companies that you defaulted on a bill.

Steps to Take if You Can’t Make Your Minimum Credit Card Payment

If you’re behind on your credit cards, can’t afford the minimum payment, or even if you can only afford the minimum payment, the problem won’t go away, it’ll just get worse. The best course of action is to take charge of it. Don’t be embarrassed or feel as though you are going to be judged – taking control of your finances and being proactive is empowering.

Contact Your Creditor Immediately

If you’re having trouble making minimum payments, contact the credit card company immediately. The number is on the company’s website and your statement. Be polite, truthful, and to the point. Write down your talking points before you call so you stay on track. If you can pay less than the minimum, ask if they’ll negotiate a deal. Plan a budget before you call, so the amount you propose is a number that works for you. If you are cutting expenses or increasing your income, tell them. If your financial situation is temporary, tell them that, too. Ask about options. Many card issuers have hardship programs and may waive fees or lower credit card interest rates to make payments affordable.

Know Your Payment Policies

Credit card companies are not allowed to abuse or harass you, no matter how far behind you are. The Credit Card Accountability and Disclosure (CARD) Act, which protects consumers, sets rules for companies. They can raise your interest rates if you are 60 days or more late with payments, but you must be notified 45 days before it takes effect. If you make six consecutive months of on-time payments under a penalty interest rate, the companies must lower your rate back to what it was before the penalty. They are also not allowed to charge an inactivity fee if you don’t use your card while you’re catching up.

Read the information about payments and policies on your statement – it may be confusing, but knowledge is power. If you don’t understand how payments, interest, and fees work, call the card company and ask. If you do this before you get behind, you may decide the card is too expensive to keep using and avoid the problem.

Prioritize Your Bills & Budget

Budgeting will help you make on-time credit card payments. Budgeting is simple – all it means is keeping track of what money is coming in and where it’s going.

List your necessary fixed expenses (rent/mortgage, car payment, cable bill, cellphone bill, utility bills, etc.). Include minimum credit card payments in this list. Paying off credit cards should be a top priority, after making sure all your bills are paid on time. Figure out how much you can realistically spend on groceries, gas, and other costs. With the money that remains, add some to your credit card payments so you’ll pay more than the minimum. Stick to the budget and adjust it as needed. If you aren’t making enough money to cover your bills, including credit card minimum payments, cut expenses and see if there’s a way to increase your income.

Have a Credit Card Payment Plan

Having an organized plan to pay your credit card bill, or bills, every month, can keep you on track and ensure you pay at least the minimum. As you reduce your credit card debt, your payments will decrease. Some, or all, of these tips may help:

• If you have several credit cards, target one – the one with the highest interest rate, or the one with the lowest balance – and once it’s paid off, go after the next one.
• Set autopayments, and schedule all payments (not just credit cards) for the same day of the month to keep better track and ensure you have money in your account.
• It may be easier on your cash flow if you make two payments on the card during the billing period that add up to the minimum (or more).

How to Lower Your Minimum Credit Card Payment

If you’re struggling to afford your minimum credit card payment, there are ways to lower it. While these solutions might feel out of reach at first, exploring them carefully could help you find a way forward.

Stop Using Your Credit Card

If you’re having trouble paying bills, the credit card comes in handy. That also makes it part of the problem. Put away the cards, stop buying online, and focus on making minimum payments, or a little more if you can afford it. If you don’t use the card, the balances will decrease and your payments will, too. It’ll be slow if you only pay the minimum. If you can pay more, focus on the card with the highest interest for the biggest savings, or if you need motivation, focus on the one with the smallest balance. The most important thing is, to stop using your credit cards.

Lower Your Credit Card Balance

Find some money, even if it’s a one-time payment, to make a big enough payment to lower the balance significantly enough that the minimum payment decreases. A smaller balance means less accumulated interest, which has an impact on how much you pay short-term and long-term. If your card charges a flat fee, that is usually based on how much you owe and unless you’re paying the card’s minimum flat fee, it will decrease if your balance goes down significantly.

Negotiate With the Credit Card Company

Call the customer service number that appears on your statement, or the back of your card, and ask if you can negotiate a lower interest rate, which will lower your payment. This will likely only work if you are up to date on payments, but every card company is different. They may lower the interest rate if the alternative is that you’re going to fall behind.

Legal Alternatives to Paying Credit Card Debt

Credit cards are an unsecured debt, meaning there is no collateral for lenders to claim if they aren’t repaid. As an example, a mortgage or car payment are secured debt – the lender can take back your house or car if you don’t pay. The loan is secured by the property. Credit card companies, on the other hand, take your word that you will pay what is owed.

If you can’t pay and have exhausted all other alternative solutions you may want to consider debt settlement. This is usually done through a for-profit debt settlement company, or you can do it yourself. It’s the one legal way to not pay the full amount you owe, though it comes with costs, both short-term and long-term.

A debt settlement company will negotiate a payout with the credit card company that’s less than what you owe, usually around 50%. You pay the settlement company, which puts the money into a separate account until the agreed-upon amount is reached, and then the debt settlement company pays off your card.

This form of debt relief has both short-term and long-term costs.

Debt settlement companies will charge a fee, which means you’ll still end up paying extra.

Your credit score will drop anywhere from 50 to 150 points. This is because you stop making payments on your cards once you enter into a contract with the company, so that shows on your credit report as nonpayment. Once the debt is settled, the fact you didn’t pay the full amount owed also stays on your credit report. Both the nonpayments and the fact you defaulted on the balance stay on your credit report for seven years.

While that may not seem important in the face of getting out from under that credit card debt, it means that any time you try to get credit or a loan, the lender will see that red light flashing that says you haven’t paid back everything you borrowed. That likely means you will be paying extremely high interest rates if you get any credit at all.

You will also have to pay income tax on the amount of the balance that was not paid if it’s more than $600.

If you negotiate a less-than-full-amount settlement with your credit card company on your own without using a debt settlement company, all of the financial hits still apply, aside from the company’s fees.

Nonprofit Debt Settlement

Some nonprofit credit counseling companies offer credit card forgiveness, sometimes called “less than full balance,” or nonprofit debt settlement. The nonprofit credit counseling agency works with your credit card companies to negotiate a payoff amount, usually 40%-50% of what you owe. The credit card company immediately charges off your card, so you don’t have the string of missed payments that may come with for-profit debt settlement. Once you make 36 on-time payments to the nonprofit credit counseling company, which pays the card company, the rest of the balance is forgiven. To be eligible, you must be at least 180 days behind and have the income to cover the program’s monthly payments. The nonprofit credit card company charges a small administrative fee, but not the high fees of the for-profit companies. The plans aren’t accepted by all card companies, and you will still have to pay income tax on the forgiven amount. The card charge-off will still be on your credit report for seven years, so your credit score will still take a hit.

Seek Credit Counseling

After notifying the credit card company of your financial situation, there’s another call you should consider making. It’s to a nonprofit credit counseling agency.

These nonprofit companies offer free advice on budgeting and help you dig out of your money hole. A counselor might suggest you enroll in a debt management program. They would work with creditors to reduce your interest rates and pay off credit card and other debts in three to five years.

It’s one thing to get out of debt. It’s another to stay there. Ideally, the counseling program will give you the budgeting skills and discipline to stay out of debt. That way you’ll never have to worry again about not being able to make a minimum payment on a credit card.