Skip to main content
  (217) 698-4844   rga@bergerfinancialgroup.com

  • Home
  • Berger Financial Group
  • About 
    • Our Philosophy
    • Our Process
    • Our Team
  • Our Services 
    • Fee-Only Financial Planning
    • Wealth Management
    • Retirement Planning
    • Investment Management
    • Business Consulting
    • Financial Education
  • Blog
  • Resources 
    • Useful Websites
    • Calculator Library
    • Video Library
  • Contact

    You are here

  1. Home
  2. Blogs
  3. Minimum Payment = Maximum Expense

Minimum Payment = Maximum Expense

Submitted by Robert Gordon & Associates, Inc on January 15th, 2020

Credit cards: A minimum payment might help you in the short term but could be one of your most expensive decisions.

Want to be your credit card company’s favorite customer? Just max out your card’s limit, agree to pay interest at a rate of 18 percent to 25 percent, and make only the minimum payment each month.

The minimum monthly payment is set by each card issuer, but it’s typically about 2 percent of the outstanding balance. Card companies want you to pay only the minimum, so that most of your payment is interest, not principal.

While you might be tempted to make only the minimum payment, that could be one of the most expensive decisions you ever make. Let’s see how three strategies affect the total cost, assuming the card has a balance of $5,000 and no further purchases are made.

Impact of Paying Only Minimum Payment

*The minimum is assumed to be 2 percent of the outstanding balance. The payment starts at $100 a month and gradually declines: The first $75 is interest; only $25 is applied against principal. Thus, in month 2, the new balance is $4,975 -- so the new minimum is $99.50 (two percent of $4,975).

As you can see, making the minimum payment is expensive. That’s ironic, because people choose the minimum payment precisely because they think doing so saves them money (which it does -- but only in terms of monthly cash outlay). That’s why you must always pay more than the monthly minimum. How much more? Ideally, you’ll pay off the entire balance!

Credit card debt can be some of the most difficult to get out of!

Learning how to make the most of your resources is part of the financial planning process.

Contact a CFP® Professional TODAY to see how you can develop your own financial plan!

Tags:
  • CFP®
  • Credit
  • Debt
  • Financial Planning
  • Spending

Book a Meeting

Tell a Friend

Looking to learn more?

Get in touch today

Contact Us

Additional info

  • Sitemap
  • Legal, privacy, copyright and trademark information

Contact info

  •   1201 South Veterans Parkway Suite A, Springfield, Illinois 62704
  •   (217) 698-4844
  •  

Attention:

Robert Gordon & Associates, Inc. and Berger Financial Group will never ask you for personal information via unsecured e-mail. Please be cautious of any correspondence that appears to come from Robert Gordon & Associates, Inc., Berger Financial Group or Charles Schwab that asks you to click on a web link or send personal information. Call and inform us of any questionable correspondence. If you are unsure, please call us. We welcome any reason to talk to our clients. Thank you.

RGA Privacy Policy       Current SEC Disclosure Brochure     Form CRS    Schwab Privacy

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

© 2025 Robert Gordon & Associates, Inc. powered by Berger Financial Group. All rights reserved.

Website Design For Financial Services Professionals