How the minimum is set
The FCA’s rules (CONC 6.7.5R) say a card’s minimum payment must at least cover that month’s interest, any fees and charges, and 1% of the balance. That way every minimum payment reduces what you owe, however slowly. Card providers can ask for more than that, and most set a floor, such as £5, for small balances. If you owe less than the floor, the minimum is the whole balance.
Common minimum payment rules
| Rule | Used by, for example | On £3,000 at 24.9%, month 1 |
|---|---|---|
| Interest + 1%, at least £5 | Barclaycard, Capital One, NatWest | £86.66 |
| Interest + 2.5%, at least £5 | Lloyds, Halifax | £132.50 |
| Interest + 2.5%, at least £25 | MBNA | £132.50 |
| At least 2.5% of the balance | HSBC-style | £86.66 |
Your statement and card terms say which rule applies to you. Rules change, so check yours rather than relying on this list. On the 2.5% rule, the legal interest + 1% is higher here, so that’s what you’d pay.
Why paying the minimum is so slow
On the interest + 1% rule, most of each payment goes on interest, and only about 1% of the balance comes off. As the balance falls, so does the minimum, so the debt shrinks more slowly every year.
Take £3,000 at 24.9% APR, paying only the minimum (interest + 1%, at least £5):
- the first payment is £86.66 and the last is £4.12
- it takes 335 months, 27 years 11 months, to clear
- you pay £5,297.70 of interest, £8,297.70 in all
On a rule of interest + 2.5%, the same balance clears in 157 months with £2,155.19 of interest. A higher minimum costs more each month but far less overall.
The simple fix: keep the payment the same
Instead of letting the payment fall, keep paying the first month’s minimum, £86.66, every month. The card clears in 57 months, 4 years 9 months, with £1,875.69 of interest. That’s more than 23 years sooner and £3,422.01 less, for no more than you’re paying today.
Setting up a fixed direct debit for more than the minimum does the same thing automatically. Paying £100 a month clears it in 45 months with £1,443.82 of interest; £150 a month, 26 months with £792.62.
If you can’t pay the minimum
Paying less than the minimum counts as a missed payment. It can bring a fee, end a 0% deal and harm your credit file. If you’re struggling, contact your card provider early: under the FCA’s rules it must treat you with forbearance and due consideration. Free, confidential help is available from MoneyHelper.
If you’ve been paying mostly interest for a long time, your provider may contact you about persistent debt.