Do you feel like you’re on a debt treadmill?
You faithfully make your credit card minimum payments each month. Yet no matter how long you’ve been doing this, it seems your debt rarely goes down. More often than not, when the next bill comes in, it appears you owe more than you did the month before.
Millions of Americans are on that same debt treadmill. What may surprise you is that credit card minimum payments are designed to keep you on this treadmill. Understanding how they work can help you get off the treadmill and actually make some progress toward paying down your debt.
More Americans Are Making Only the Credit Card Minimum Payment
According to a July 2025 study by the Federal Reserve Bank of Philadelphia, at the end of last year, one out of every nine active credit card accounts was receiving no more than the minimum payment each month.
At 11.04%, the percentage of credit card accounts making just the minimum payments is the highest since late 2012. In other words, based on the more than 585 million credit card accounts in the U.S., over 65 million accounts are making just the minimum payment each month.
When consumers can only afford to make the minimum payments on their credit cards, it could be a sign that their finances are stretched to the limit. That can be a red flag for those consumers — and for the economy as a whole.
“Coupled with the elevated credit card delinquency rates that we also observe, the high level of consumers making just the minimum payment indicates that a rising portion of consumers are struggling with their credit card bills,” says Victoria Osorio, a quantitative analyst at the Federal Reserve Bank of Philadelphia. “Given the importance of consumer spending to the economy as well as the credit risk implications for banks, this is an indicator to watch going forward.”
For individual consumers, paying only the minimum payment on credit cards can hurt their finances on two fronts, says Margaret Poe, head of consumer credit education at credit bureau TransUnion. “Making only the minimum payments on your credit card accounts can have two negative implications: You’ll pay interest on the unpaid balance, and your credit card debt can accumulate,” Poe says.
The broader impact of higher minimum payment activity is compounded by the fact that credit card purchases have been playing a growing role in the economy. “The share of overall consumer purchases made with credit cards has been steadily increasing over the past decade,” Osorio says. “A greater share of accounts paying the minimum likely implies a larger share of the consumer base is paying additional interest and is at a higher risk of credit card delinquency.”
Over the past 10 years, credit cards have surpassed debit cards to become the most frequently used method of payment by consumers, according to the 2024 Federal Reserve’s Diary of Consumer Payment Choice survey. In 2015, credit cards were used for 18.3% of consumer payments. In 2024, that increased to 34.5%.
Between rising delinquency rates and the share of consumers paying just the minimum, it’s clear that many are struggling to keep up with the resulting credit card payments. That’s where the debt treadmill comes in.
[Read: Best Credit Cards.]
Credit Card Minimum Payments and the Debt Treadmill
Credit cards can be used as a safe and convenient substitute for cash, and in many cases there’s little or no cost to consumers as long as they pay their balances off promptly.
It’s when consumers start regularly carrying balances that the problems start. Minimum payments are often so low that you might actually see your balance grow over time despite making each required payment.
For example, if you have a $1,000 credit card balance, you may get a bill that says your minimum payment is $35.
If you end up making that payment and then make $100 worth of purchases on your credit card during the next month, you could face a $20 interest charge. So, while your previous payment had subtracted $35 from your balance, you’d still have a total of $120 in new charges. Even though you’d kept up with the minimum payment requirement, your balance had actually risen by $85 to $1,085.
If you keep this up month after month, you’ll soon realize you’re on the credit card debt treadmill.
How Banks Calculate Minimum Credit Card Payments
How minimum payments are calculated will differ by credit card issuer. Minimum payments are determined by most issuers by using the greater of 1% of the balance plus fees and interest charges for the month, or a flat rate of $25 or $35.
Since interest and fees will just keep up with new assessments during the month, you’re only paying down your balance at a rate of 1% per month. If you use your credit card for more than 1% of your balance during the month, that balance will actually rise if you make just the minimum payments.
Customers who regularly carry a balance from month to month are called “revolvers.” Their debt keeps being rolled over, or revolving, instead of being paid off quickly. Revolvers are attractive customers to credit card companies, says Osario.
“These borrowers can be quite profitable for the card issuers in the long run. As long as they continue to make payments towards their overall balance, these customers will pay high-interest payments on the unpaid balance, which the card issuer profits from,” Osario says.
According to a 2022 analysis by the Brookings Institution, a consumer with a $3,000 credit card balance at an 18% annual percentage rate and a payment floor of $35 would take 11.5 years to pay that off if only making the minimum payments. Over that time, the cardholder would pay an additional $3,154 in interest.
According to the Federal Reserve, the average credit card rate was 21.91% in the first quarter of this year. So, taking into account the current data, the repayment period would be even longer and the amount of interest paid even greater.
[Read: Best Cash Back Credit Cards.]
How Credit Card Minimum Payments Are Harmful to Consumers
Making just the minimum payment on a credit card has a few disadvantages for consumers:
— It can take a long time to pay off your balance. You may spend several years paying off debt from purchases that are long since forgotten.
— Your balance may rise over time. If you continue to use your card, you may see your balance rise rather than fall over time. This is the situation many Americans find themselves in. According to data from the Federal Reserve Bank of New York, credit card debt has grown by roughly 48% over the past five years, faster than most other types of consumer debt.
— You may pay more in interest. Prolonging the debt is particularly harmful because credit cards generally have higher interest rates than other forms of consumer debt. As the analysis by the Brookings Institution demonstrates, you may end up paying more interest than the amount you originally borrowed.
— It can negatively affect your credit score. Higher balances can be a drag on credit scores. “Credit utilization, sometimes called credit usage, is an influential credit score factor in some scoring models. Credit utilization measures how much credit you’re using compared to your total credit limit,” Poe says. “If your credit card balances climb, you may see the effects on your credit score.”
[Read: Best 0% APR Credit Cards.]
How to Get Off the Credit Card Debt Treadmill
Here are some ways to get yourself off the credit card debt treadmill:
— Rework your budget. Reworking your budget can mean less spending and more money for credit card payments. This may require a lifestyle change. That may not be easy, but if you don’t do it, rising debt payments could eventually bring harsher charges.
— Take a break from using your credit card. If you can’t pay more than the minimum, try to stop using your credit cards until you can. It doesn’t take much new spending to exceed the monthly minimum payment, so your debt could keep rising. Not being able to pay more than the minimum can be a sign that you’re close to the financial edge.
— Prioritize debt. If you have multiple credit cards, try to keep up with the payments on all of them. Then put any extra money toward the debt with the highest interest rate. That will give your payments the most bang for your buck.
— Consider refinancing. This could reduce interest costs and also put you on a faster repayment schedule. Personal loans or balance transfer credit cards are options for refinancing credit card debt at lower rates. Just make sure it’s part of a broader debt reduction plan so you don’t continue to increase your credit card balances.
— Ask for help. If you can’t get a handle on paying down your debt, consider getting professional help, such as from a nonprofit credit counseling agency.
You can use more than one of these methods to pay down your credit card debt. The first step is to recognize that you need to do more than just make the minimum payments.
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Credit Card Minimum Payments and the Debt Treadmill originally appeared on usnews.com
Update 08/07/25: This story was previously published at an earlier date and has been updated with new information.
