My minimum payment is $22 and that is absurd

Ramit Sethi · April 7th, 2006

I’m paying off my credit card bill online right now, and the amount is $1,473. The minimum payment is only $22.00. In other words, I only have to pay 1.5% of what I owe right now. How sweet of you, Citibank!!

That is so ridiculous. If you only paid the monthly minimum, can you guess how long it would take to pay that off with 15% interest, and how much it would end up costing?

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  1. justanotherblogger

    It’s absurd only if you spend more than you have and carry a balance.

    To many others, low minimums allow 0% Balance transfers to be exploited more efficiently. 🙂

  2. Scott Reynen

    It’s ridiculous for creditors to recommend the minimum payment, but to offer it is just giving you an option to make a bad choice, which isn’t at all ridiculous. If you want to waste your money on interest payments in exchange for a little short-term benefit, it’s not Citibank’s job to stop you.

  3. they;re smart

  4. It will take you a little over 12 years to pay it off at that rate. Fortunetly for you, you will pay all/most of it off today.

  5. Charlie

    I’d just like to point out that the credit card companies may not have your financial best interests at heart. I know, it’s sort of a jarring realization, but they just don’t care about how you’re set for retirement.

  6. Credit card companies are out to make profit against your best interests? This is news to me!

    Seriously! The mind reels…

  7. George

    wow 15% interest, thats kinda steep for someone with good credit. Those rates are usually reserved for people with sub par credit. I suggest you give them a call and try to get that rate down. If they won’t drop it for you I suggest you either pay it all off or transfer it to a lower rate card.

  8. Jonathan

    Ramit has a older post somewhere titled along the lines of “I don’t care what interest rate you get on your credit card!” simply because of the point that you should always pay off the balance on your CC at the end of each month. Thus, you could havea 100% interest rate, and it wouldn’t matter.

  9. haha… if everyone was as smart as you, Ramit… the credit card compnies would go out of business!

    If you had 15% on $1,473, you would end up paying $220.95 extra! That’s a whoopin’ $1,693.95! I just follow the simple rule: Don’t buy what you can’t afford.

  10. Victor

    I hate when people say things like this. “Credit card companies are only interested in offering more credit”, or “Walmart is only interested in selling more stuff”, or “Businesses are only interested in making more money.” Duh, guys…it’s BUSINESS. Yes, there are businesses that give to charity and such, but in the end it’s all about the bottom line. Don’t be surprised when you find that out every two weeks.

  11. Steve Ryner

    Check out John Maeda’s Page for a nice Web 2.0 view of credit card payments.

  12. I’ve heard that if you pay off every month, then the bank will suddenly drop your ‘grace period’, forcing payments to be due when your billing period ends. they may do this without notifying you immediately.

    Needless to say, a lot of people are afraid. They have fear, they go oh crap, I’m a little over my head. I’ll just pay the minimum. And then next week, they’re more over their head. Okay, I’ll just pay the minimum, i’m saving up to make a better payment.

    After years of this fear-based procrastination, suddenly all lines of credit are maxed out and there’s nowhere to turn.

    Does this mean that the person doing this is a moron and stupid and deserves everything they get? They need help understanding how this stuff works, and they need help getting over the things that make them dig their head in the sand when something scary happens.

    This is life. Preying upon people like this intentionally is bad. Doing it unintentionally as part of your business model is unfortunate. Trying to educate people actively is a good idea.

    My father did this to our family in the mid 90’s. My parents didn’t have to be in 75,000 of non-automotive/mortgage debt. There was no reason. It started and snowballed and as it got worse, it only got easier to just pretend it didn’t exist for fear of the repurcussions.

    I’ve noticed that there’s a tendency towards forcing extreme personal responsibility on people in some circles. Look at the idea of making people solely responsible for their retirement.

    I suppose I’m getting socialist for some reason, but there’s responsibility when you deal with the general public. Playing tricks on people to extort money out of them, then turning them over to the Department of Homeland Security because they suddenly got up the nerve to dump $10,000 at their debt and erase it… no. Sorry.

    Link to what I’m talking about (credit cards and homeland security):

  13. Didn’t the government look into and/or pass a law requiring credit card companies to raise the minimum payment to one that would require some of the money to be paying toward the principle, so there’s a reasonable expectation of paying off the minimum and actually, eventually, paying off the debt? or is the 1.5% minimum a reflection of that? (if so thats pretty sad)

  14. Jonathan Radande

    The credit card companies are not evil. They are in the business of lending you money and making money. They impose minimum payments in order to give you an option to pay little over a long period of time.

    If you don’t know how to use your credit cards, you should not own one at all. Yes, if you pay only the minimum, you will end up paying out of your @ss. But at the same time, you should know better than to pay the minimum or even carry a balance.

    So i don’t think that the credit card companies are all that evil. it’s only its users who can, at some times, be extremely dumb.

  15. Why do you have credit card debt?

  16. johnnydebacle

    According to that Web 2.0 credit card payment app, with your data, you would pay it off in 2026 and would have paid $4100 in nominal dollars for your $1437 real dollar debt, if you only paid the minimum each month.

  17. johnnydebacle

    To correct myself, theter would still be approx half your debt left at that point.

  18. Jimbo Jones

    Watch this Frontline special from a year ago about the collusion between our representative Congress and the credit card industry. It will make you want to spit in the face of every scumbag in Congress.

  19. Rachel

    12 years is right.

    I favor calculating using:
    for loans.