Minimum payment
The smallest amount a credit card issuer will accept to keep an account current — designed to avoid penalty, not to pay off the debt.
The minimum payment is the smallest amount a credit card issuer will accept without treating the account as past due. It is not a suggestion about what the debt actually costs — it is a threshold designed to keep the account current. A common formula is 1% of the balance plus that month's interest, subject to a small floor.
The trap is that the minimum shrinks as the balance shrinks, so progress slows exactly as it is being made. On a $6,000 balance at 24% APR, the first month's interest is $120, and a 1%-plus-interest minimum is $180 — $120 of which is interest, only $60 principal. Paying only the minimum takes about 21 years and roughly $10,887 in interest. Paying a fixed $180 every month clears the card in about 4 years, 8 months, at roughly $3,987 in interest.
The lever is a fixed payment instead of a declining one, at whatever size the budget honestly supports.
Plumb is financial education, not financial, investment, tax, or legal advice.