Definition
The smallest amount a credit card issuer accepts each month to keep the account current, typically a small percentage of the balance (often 1-3%) or interest plus a sliver of principal. It is designed to keep the account healthy for the lender, not to pay off the debt.
Why it matters
Minimums shrink as the balance shrinks, which stretches payoff across decades and maximizes interest paid. Paying any fixed amount above the minimum breaks that design; paying only the minimum while still charging is how balances become permanent.
Example
A $6,000 balance at 22% APR on minimum-only payments takes decades to clear, with total interest rivaling the balance itself. A fixed $300 a month clears the same debt in about 25 months for roughly $1,500 of interest.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.