# Credit Card Minimum Repayment Calculator

## Will you be in debt for years?

BEWARE – borrow £3,000 at 21 and you'll be almost 50 before it clears. Making just the minimum repayment can keep you in debt for years, so debt costs soar. Use our calculator to see how much you could save by increasing how much you pay, plus we've full information on how to escape the trap.

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## The Minimum Repayment Calculator

Take your credit card statement and plug the details into the calculator below to see how long it will take you to clear your debt if you just paid the minimum (and how much interest will rack up).

Then see the impact of paying a higher fixed amount each month. Aim for the maximum you could comfortably afford each month – you could be surprised at how much it will save you.

• ### Where do I find these details on my credit card statement?

The amount you owe should be clear, but as credit card statements often contain a whole load of information, it can sometimes be tricky to find the interest rate and minimum repayment you need.

First up, always use the full version of your statement rather than the list of transactions you may find on mobile or online banking. You can usually find this available as a pdf to download, unless you still receive it in the post. Once you have this, here are tips to help find the right figures:

• Your interest rate. This is often displayed near the amount you owe, and should look something like 21.9%, though this can range from around 6.9% to 69.9% depending on your card. If it displays a simple rate, or a compound rate, use the compound figure which is the equivalent of the APR.

Sometimes there are different rates depending on how the card is used, such as a higher rate for cash. If this is the case, use the rate that's most appropriate to the type of transactions you owe, which is usually the purchase or standard rate.

• Your minimum repayment. Look for a 'Summary Box' which should contain the minimum repayment for your card. It usually looks something like "Greatest of 1% of balance plus interest, 2.25% of balance or £5". In this example, you'd need to enter 2.25% in the '% of outstanding debt' field and £5 in 'with a minimum'.

## What is a minimum repayment?

Put simply, it's the lowest amount you must pay each month on or before the due date. Failure to pay on time usually results in a fee and, worse, a missed payment marker is added to your credit report, which can damage your score and ability to get future credit.

### How much is the minimum repayment?

The minimum payment is usually a percentage, so how much you'll pay will depend on a couple of things – the amount you owe and your credit card provider's rules.

A typical minimum repayment will be around 1 to 2.5% of how much you owe (usually including any interest or charges, such as late fees) or £5 to £25, whichever is higher. A lender's rule might say something like:

Greater of 1% of balance plus interest or £5

In this example, if the full amount on your statement was £1,000, including any interest or charges, the minimum repayment would be £10. As this is higher than £5, this is the lowest amount you'd need to repay. If you owed £200, you'd need to repay at least £5 as 1% is only £2.

## Warning. Paying just the minimum payment could keep you in debt for years

Minimum repayments must at least cover the interest, so your balance will fall each month, provided you don't spend more. However, as the amount you have to repay each month is a percentage of how much you owe:

### As your debt decreases, so does the amount you need to repay

This means it takes longer to clear, and the longer you borrow for, the more interest you're charged.

With any debt, the aim should always be to repay it as quickly and cheaply as possible, and minimum repayments are designed to do the opposite – making your debts last for longer than if you made fixed repayments each month (and boosting banks' profits).

To illustrate this, using just the minimum repayment to pay off £3,000 in credit card debt (with no further spending on the card) would take a staggering 28 years, with an interest cost of over £4,750.

• ### How 28 years and £4,750 in interest is calculated

Outstanding balance: £3,000
Credit card interest rate: 21.9%
Minimum payment: 1% plus interest or £5 – whichever is higher

If you only paid the minimum, the amount you repay reduces each month. As the table below shows, at first there's not much difference; at the start you'd pay just under £80, then a month later it's a tad over £79.

However, after a year you'd only be repaying a little under £72 a month, and the repayments continue to drop – meaning the balance reduces more slowly over time, while the interest costs continue to mount up.

Assuming you never spent on the card again, and just made the minimum repayments, it would take 28 years to pay it off, and cost almost £4,790 in interest.

How much you'd actually be paying off

AFTER MINIMUM PAYMENT
One month £80
Two months £79
12 months £72
60 months (5 years) £44
120 months (10 years) £24
240 months (20 years) £7
Based on £3,000 debt at 21.9% with minimum payments of 1% of the balance + interest. All figures rounded to nearest pound.

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## The quicker you repay, the less the debt costs

Most cards waive interest on spending (though not cash withdrawals, which usually attract interest from day one) if you pay the money back in full and on time by this due date, so this is the cheapest option if you're able to.

If you opt to pay a smaller amount, or the minimum repayment, the amount you still owe is carried over to the next month and you'll be charged an amount of interest on the whole balance, until you repay it (unless you're on a special 0% deal, which we'll explain more about below).

### How to beat the minimum repayment trap

Here are steps you can take to reduce the cost of your credit card debt – and the time to clear it. If you've tried both of these or neither are suitable, see our guide for Persistent Debt Help for further ways to beat the cycle, including where to find free one-on-one debt help.

### 1. If you can't repay in full, repay as much as you can afford (and ALWAYS the minimum)

We're starting here as this is often the easiest place to start. The minimum repayment trap is based on the fact that the more debt you've repaid, the lower your repayments go.

So to stop that, simply make a fixed repayment based on what you can afford, rather than allowing the repayment to decrease each month. If you can commit to the same amount each month, you can usually ask your credit card company to change your direct debit to a fixed amount. Alternatively, if you need to change the affordable amount each month (either up or down) a standing order or bank transfer that you can control may be easier.

Though if you're doing this, always set up a direct debit to pay at least the minimum repayment to avoid the risk of missing it, or paying it late, so as not to get a fine or mark on your credit file.

Important. If you've multiple cards or debts, always pay the most expensive first and just make the minimum repayments on others. Once that's paid off, focus on the next expensive – see Credit Card Shuffle for more help.

This can save you £1,000s in interest and gets you debt-free MUCH faster

Going back to the example above, with a £3,000 debt on a typical card at 21.9% interest, it'd take 28 years to pay off the debts and cost over £4,750 in interest – if only the minimum repayments were made.

For the first month this is around £80. Yet if you continued to repay this every month, you'd clear the debt in just five years and the interest cost would be about £1,740 – a saving of nearly £3,000. And the more you can pay back, the quicker and cheaper it is, as the table shows.

The difference the repayment makes

REPAYING TIME TAKEN TO REPAY IN FULL INTEREST COST
Minimum (1% + interest or £5) 28 years £4,750
£80/month 5 years  £1,740
£120/month 2 years 9 months £910
£240/month 1 year 3 months £390
Based on £3,000 debt at 21.9%, assuming a fixed interest rate, with no additional spending on the card and no fees incurred. All figures rounded to nearest ten pounds.

### 2. Shift debt to 0% interest with a balance transfer

A balance transfer is when you get a new card that repays debts on other credit or store cards for you, so you owe it instead but at 0%. This means you'll be debt-free quicker as repayments large or small will go towards clearing the actual debt, not interest.

The longer the 0% period, the longer you have to clear the debt without worrying about paying interest, though note you must make at least the minimum payment or you could lose the 0% deal. The longest deals (usually offering 2yrs+ at 0%) or those for poorer credit scorers (often around 6mths 0%) typically have a 1%-4% one-off fee as a percentage of the amount borrowed, yet there are cards that have no fee, so you can shift debt for free.

Pick the card with the lowest fee in the time you're sure you can repay. If you're unsure, go longest for safety, even if there's a fee. See the Best Balance Transfers guide for all the best buys. Importantly, they're NOT for new spending as it isn't usually at the cheap rate. See all-rounder cards if you've a need to do both.