Minimum Credit Payments Act


ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » Research » Guides » Cardholder Benefits » Minimum Credit Payments Act

Minimum Credit Payments Act

Updated: May 28, 2019

The content is accurate at the time of publication and is subject to change.

As long back as 2004, credit issuing companies were making quick and decisive moves towards lowering cardholders' minimum payments, claiming that the act would leave a customer with some additional disposable budget. And it did work. Cardholders opened their monthly statements and were just happy to find their minimum due was reduced to 2%, which certainly meant they were going to save.

But there was a pitfall as well. Every single instance of saving went no further than a certain month and in fact only took you a much longer period of time to repay the balance. As of2004, the idea of reducing the minimum payments was twofold - to make you feel you're saving but actually having you pay times more in total interest charges.

Cardholders who are far from the habit of examining the fine print and calculating the charges they are paying to the bank are little, if any, aware of how the minimum credit payment is calculated and what it is meant for.

The minimum payment is the percentage of your current outstanding balance that you are obliged to pay to your bank every month. In 2004 the minimum due was reduced to 2% which meant that with a debt of $3.000 at 18% APR your monthly payment will be $60. Part of it will go to cover the principle $3.000 itself and the other part will pay for the interest. Add to it all other charges on your card and it will take you more than 20 years to pay off that $3.000 and an awful amount of interest over that.

Well, it is easy to calculate that the more your minimum payment is, the faster you will get rid of the debt and the less you will pay in credit card interest rate.

Unfortunately, not all consumers understand the hidden math and so readily seize the opportunity to save every other cent on debt repaying.

However, the Senate Bill of 22 January 2008 which goes as Credit Card Minimum Payment Notification Act of 2008 is believed to bring more clarity into the matter for cardholders and certain caps on revenues as a result for issuers.

The Act is expected to change consumers' faith in the well-intentioned policy of keeping the minimum monthly due so low.

Complying with the Act, credit card companies are required to place a note in every monthly credit card statement warning that paying only the minimum due will increase the time of debt repaying and interest on the debt.

A monthly statement will also include sort of calculator that will show how long exactly and how much you will pay, making only the minimum on your balance.

Evidently, the legislation will bring notable relief into debt-inclined households and notable disturbance and obstinacy towards its acceptance among credit companies. However, the evolution of credit card minimum payment idea should knock at the door of every household with a plastic, especially that household for whom a credit card has become a source of everyday funding.

The evolution should bring us to intelligent credit card use and smart everyday financial decisions. It is expected to teach us that it is through abandoning the idea of minimum monthly payments that we will really save on debt repaying and will get more of spare cash for everyday personal disposal.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related Research:

Citi Premier® Card – A World Elite Mastercard Travel Credit Card

Citi Premier® Card – A World Elite Mastercard Travel Credit Card

Posted: February 10, 2021

Citi, a advertising partner, offers the Citi Premier® Card, which gives elevated ThankYou points for your travel expenses and, with the recent update of the rewards program, for purchases at restaurants, supermarkets, and… Continue reading

Discover it® Miles Review: Turn Miles Into Travel Experiences or Cash

Discover it® Miles Review: Turn Miles Into Travel Experiences or Cash

Posted: February 10, 2021

Many travel credit cards come with tempting perks, requiring some effort bonuses, a complicated rewards structure, and steep annual fees. The Discover it® Miles is probably the best Discover card for travel, especially if you do not travel… Continue reading

Top 5 Secured Credit Cards: December 2021 – Experts’ Choice

Top 5 Secured Credit Cards: December 2021 – Experts’ Choice

Posted: October 22, 2020

The COVID-19 pandemic has made significant changes not only in people’s lives and their financial standing but also in the entire financial sector of the U.S. We have collected the best secured card offers from our partners so that you can… Continue reading

You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!