Credit cards
The minimum payment is the least you can pay without missing a payment. Follow £1,000 of card debt one month at a time, see why paying only the minimum keeps it going for 19 years, what £20 more a month does, then put in your own card's numbers.
1 · The small number on your statement
If you've had a credit card, you've seen two numbers on your statement: a big one, the statement balance, and a small one, the minimum payment.
Lots of us pay the small one and move on.
The minimum is the least you can pay by the due date without missing a payment.
But paying it isn't the same as paying your debt off.
You owe £1,000 at about 25% a year. You pay only the minimum each month and never use the card again. How long until it's gone?
2 · What's in it
On most cards the minimum is that month's interest, plus any fees, plus 1% of what you owe.
That's the least the rules allow. Some providers ask for more: Virgin Money's newer cards ask for the biggest of 2% of the balance, double the interest, or £25.
3 · £1,000, one month at a time
Say you owe £1,000 on a card charging about 25% a year, typical in the UK (24.71% on average, Bank of England). That's 1.857% a month.
This month's interest is £18.57. Add 1% of £1,000, which is £10, and your minimum is £28.57.
Pay it, and £18.57 of it just covers the interest. Only the £10 comes off what you owe: £990.
Next month the interest is worked out on almost the same balance: £18.39. The 1% shrinks too, so the minimum drops to £28.29.
your turn
4 · Nineteen years
As the balance shrinks, the minimum shrinks with it. Each month a little less comes off, so the balance falls slower and slower.
Paying only the minimum, the £1,000 takes 19 years and 3 months to clear.
Over those years you pay £1,642 in interest. That's more than you borrowed.
After 18 months of minimums you'd have paid £307 in interest but only £165 off the debt. The rules then make your provider contact you, and help you pay it off faster if it carries on.
Keep paying the first £28.57 every month instead of letting it shrink, and it's gone in 4 years 10 months, with £630 in interest.
Add £20 to the minimum each month: 3 years 4 months, and £358 in interest instead of £1,642.
your turn
5 · The way out
Where you can, pay the full statement balance. On most cards, that means no interest on your purchases at all.
If you can't, any amount over the minimum helps: every extra pound comes straight off what you owe.
Paying the minimum means you haven't missed a payment, which also keeps a 0% deal. It doesn't mean your debt is going away. It just isn't growing.
Moving it to a 0% card usually costs a fee, about 3.1% (£31), so you owe £1,031. Its minimum is often just 1%: pay only that and you'd still owe £718 when 36 months of 0% end.
Pay £28.64 a month, about your first minimum, and it's cleared before the 0% ends: £31 in all, against £630 for £28.57 a month on your 24.71% card.
The minimum is the least you can pay, not a plan to pay it off. On £1,000 at 25%, it takes 19 years and £1,642 in interest.
£20 more a month: 3 years 4 months and £358.
The story uses a typical 24.71% card and the least the rules allow. Your card's terms decide your real numbers.
It's in your card's terms and on your statement. Many ask for the interest plus 1%, but some ask for more, such as 2% of the balance or at least £25. Set a direct debit for at least the minimum so you never miss one.
Usually only when you've paid the statement in full, and often the one before it too. While you carry a balance, new purchases are usually charged interest. Cash withdrawals and balance transfers are charged interest anyway.
Check the fee, how many months the 0% lasts, the rate after it, and that you can pay enough each month to clear it in time. Most providers can take the 0% away if you miss a payment. If even the minimum is hard, free debt advice (MoneyHelper, StepChange) can help.
Put in what you owe, your card's rate and what you'll pay each month. See how long it takes and what it costs, against paying only the minimum and against moving it to a 0% balance transfer card, fee included.
paying that, it's cleared in
3 yrs 4 mths
Assumptions: no new spending on the card, no fees or missed payments, and the rate doesn't change. Interest is worked out monthly at your APR's monthly equivalent ((1 + APR)1/12 − 1) and rounded to the penny, as a statement shows it, and the minimum is worked out each month on that month's balance. The 0% transfer adds its fee to the balance and needs the new card's approval. On it you pay the same extra each month, its minimum is taken as 1% (at least £5), and whatever's left when the 0% ends is charged at your card's rate. If you'd clear it within a month or two on your own card, the fee can cost more than the interest you'd save. Education, not financial advice.
The video
The same story, drawn: the statement, the £1,000 bar that only loses £10 a month, 19 years of minimums against £20 more a month, and the 0% card. (The video rounds the first month to about £18.60 and £28.60; to the penny it's £18.57 and £28.57, and month 2 is £18.39 and £28.29.)
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How the numbers on this page are made. One model drives every drawing, readout and sentence. 24.71% a year is 1.24711/12 − 1 = 1.857% a month. Month 1 on £1,000: £18.57 interest + £10 (1%) = £28.57, leaving £990. Month 2: £18.39 + £9.90 = £28.29, leaving £980.10. Interest and the 1% are rounded to the penny each month, with a £5 floor (it first applies in month 175, below £175). Minimum only: 231 months (19 years 3 months), £1,642.41 interest, £2,642.41 paid in all. A year of minimums: £324.63 paid, £211.02 of it interest, £113.61 off, £886.39 still owed. The first 18 months: £307.35 interest against £165.48 off the debt. £28.57 every month: 58 months (4 years 10 months), £630.18 interest. Minimum + £20: 40 months, £357.95; + £10: 67 months, £573.43; + £50: 19 months, £172.54; + £100: 10 months, £96.18. Virgin Money's rule on £1,000: 2 × £18.57 = £37.14. A 0% balance transfer at a 3.1% fee: £31, so £1,031 on the new card; £1,031 ÷ 36 = £28.64 a month clears it inside 36 months for just the fee. Paying only its 1% minimum leaves £718.02 when the 0% ends, and £1,149.75 in all (fee + interest after) at 24.71%. The video says "about £18.60" and "£28.60" (the same sum, rounded) and its working card shows month 2 as £18.38 and £28.28 (from a monthly rate cut to 1.857%); the page uses the exact figures.