The minimum payment is the lowest monthly credit card payment you can make and remain in good standing with your credit card issuer. The minimum payment is just a small percentage of your balance, often 3% to 5%, and paying just that amount means you can use the rest of your money for other things. And while your minimum payment is cheap, it’s actually the most expensive way to repay your credit card balance.

Consider a credit card balance of $10,000 at 15% interest and 3% minimum payment. It would take 16 years to pay off the balance. You’d pay a total of $16,517.98 even though the amount you charged was just $10,000. The other $6,500 is interest you pay over the period it takes to repay your balance.

Ideal Credit Card Payment

Ideally, you would pay your entire balance in full every month. This isn’t so hard to do with low balances. Unless you make $300,000 a year or more, a $10,000 credit card balance might be hard to pay off in an entire month. So you’d have to repay that balance over time. But when is it ok to pay just the minimum.

You can’t afford more.

Since the minimum payment is calculated as a percentage of your balance, you’ll have a higher minimum payment when your balance is higher. In the example above, the minimum payment would be $300 per month. For many middle and lower income families, that’s a lot to pay for something that’s not providing a current, direct benefit.

When your income is so tight that you’re barely making ends meet, reducing your credit card payment to the minimum is acceptable. It’s certainly better than defaulting and lowering your credit card payment may make it easier to afford other expenses, like your mortgage or car payment.

You’re trying to pay off your debt.

The most effective way to pay off several credit cards, is to focus all your efforts on a single credit card at a time. That means making a big payment on one credit card while paying the minimum on all the others. Doing this lets you knock out individual credit cards quicker than if you were to spread the payment among all your other credit cards.

So it’s ok to pay the minimum on a credit card when it’s part of a plan to pay off your credit card debt. Pick a credit card to focus on first, perhaps the one with the highest interest rate or smallest balance, and pay as much as you can to that one credit card. Pay the minimum on the rest of your credit cards. Once the first balance is repaid, choose another credit card to focus on and then pay that off. Continue the process until all your balances are completely repaid.

Don't Get Caught in the Trap

Paying the minimum isn't just bad because of the amount of interest you pay, but also due to the amount of time it takes to repay your balance. Seldom is there a good reasons to pay just the minimum. Outside these times, you should pay as much as you can to reduce your balance quickly.