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Answers given by someone else on this site indicated an assumption that minimum credit card payments were always at least the amount of interest that would be charged, meaning that the balance would always go down as long as minimum payments were made.

I found a counterexample of this, where the minimum payment was 5% of the balance (and interest rates much more than this) and thus if you make the minimum payment only your balance will always increase. It was pointed out to me that this was a Canadian card.

Do different countries have different regulations, or is this me making a mistake?

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Recent changes to US law changed the way the minimum payments were calculated. It is safe to say that practices in this area vary significantly from country to country. – duffbeer703 Dec 6 '10 at 17:53
is it monthly payment as 5% of the balance? What's the interest rate? Those are usually annual. 5% monthly is almost 80% annual – Vitalik Dec 6 '10 at 18:42
@Vitalik Doh! That's the mistake I was looking for. 5% is much more than the MONTHLY interest. – DJClayworth Dec 8 '10 at 15:52
"minimum credit card payments were the amount of interest that would be charged, meaning that the balance would always go down as long as minimum payments were made". No that does NOT mean that your balance will decrease, it means that your balance will reach equilibrium (as you pay off exactly the amount that your balance increases by). – msanford Dec 10 '10 at 18:06
up vote 13 down vote accepted

In the past, it was certainly possible for the minimum payment to be less than the interest. This situation was known as "negative amortization."

According to, this practice has been banned in the US. If you make the minimum payment, it must cover the interest + a portion going towards the principal.

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This answer is really an admission of my own mistake. My 'counterexample' is not a counterexample at all. The 5% minimum payment is much more than the monthly interest payment.

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The new little "if you pay box" tells me that if I pay the minimum, I will pay it off in 3 years as opposed to paying a bit more and paying it off in 9 months.

Therefore, in the US I think paying the minimum will make progress toward a zero balance.

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