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The minimum payment is the portion of your credit card balance you have to pay every month.
If you only pay that amount, you're in "good standing." Over time, however, it gets very expensive! You'll be reimbursing that debt for a long time. You'll pay a high cost in credit charges, including a lot of interest.
A $1,000 purchase using a credit card at 19.9% with a monthly payment of:
2.5% of the balance (minimum payment)
$1,444 in credit charges, over more than 14 years
50% of the balance
$34 in credit charges, over 8 months
100% of the balance
$0 in credit charges
There are solutions.
Start by contacting the credit card company. You may be able to work out an agreement.
You can also turn to consumer protection organizations. They offer budget consultation services free of charge: tips on managing your personal finances, settling your debts, etc.
The increase in the minimum payment aims to prevent debt problems. By reimbursing more of your debt each month, you pay less in credit charges.
The minimum payment provided for in your contract may not be less than 5% of the balance owing.
If the minimum payment percentage for your credit card was set at less than 2.5%, as of August 1, 2020, the minimum payment to be made every month must correspond to 2.5% of the balance owing.
The credit card issuer may charge more than 2.5% if the contract already provided for that possibility, but not if they amended the contract so as to charge more than 2.5% without your consent.
Over the coming years, credit card issuers will have to charge a minimum payment that corresponds to at least the following percentage of the balance owing:
Here is how the amount of the minimum payment affects the credit charges you have to pay.
A $1,000 purchase with a credit card at 19.9%
|Minimum Payment (percentage of balance)||Total Credit Charges||Time Required to Fully Reimburse|
|2%||$3,001||Nearly 26 years|
|2.5%||$1,444||More than 14 years|
|3%||$980||Nearly 11 years|
What if you only make the minimum payment? If it is set at 5% (rather than 2%) of your credit card balance, you will save $2,559 in credit charges!
Take a look at your account statement! You will see an estimate of the time it will take to reimburse everything, if you only make the minimum payment. You will also find your card's credit rate. Do you know how high it is?
Consult other resources offered by the Office de la protection du consommateur: