Why paying only the minimum on your credit card is so expensive

Your statement shows a 'minimum amount due'. Paying it keeps your account in good standing, but everything you don't pay starts collecting interest, and interest on credit cards is among the most expensive kinds of borrowing.

How credit card interest works

In the Philippines, the Bangko Sentral ng Pilipinas (BSP) sets a ceiling on credit card interest, currently 3% a month, or about 36% a year. Cards may charge less, but many charge close to the cap. Interest is computed on your unpaid balance, and once you carry a balance, new purchases usually stop getting the interest-free grace period until the balance is paid in full.

What happens when you pay the minimum

The unpaid balance is charged monthly interest, and new purchases can start collecting interest too. Because the minimum is small, most of it goes to interest and very little reduces what you owe. A balance you could clear in months can take years.

Example: on a ₱30,000 balance at 3% a month, interest alone is about ₱900 in the first month. If your minimum is around ₱1,000, only about ₱100 actually reduces your debt. Keep paying just the minimum and you could spend years and pay tens of thousands in interest for that same ₱30,000.

Build a way out

1. Stop using the card for new purchases while you pay it down
2. Pay more than the minimum every month, even a little more helps
3. If you have several cards, pay minimums on all and put extra on the one with the highest interest
4. Ask your bank about converting the balance to a fixed-rate installment if it's cheaper

Putting extra money on the highest-interest card first is called the 'avalanche' method; it saves the most interest. Some people prefer the 'snowball' method, clearing the smallest balance first for a quick win. Both work if you stick with them. What matters most is paying more than the minimum and not adding new charges.

Use cards the smart way

Pay the full statement balance by the due date every month and you pay zero interest while keeping the rewards. Set your statement and due dates in your budget app so you're never surprised.

• Treat the card like a debit card: only charge what's already in your budget.
• Avoid cash advances: they usually start charging interest immediately, plus a fee.
• Keep your usage well below your limit; maxed-out cards are a warning sign to lenders.
• Never share your OTP or card details by phone, text or chat. Banks will never ask for them.

In Iponista, add your card's statement and due days; it computes the exact amount to pay and reminds you.

Remember this

The minimum keeps you out of trouble, not out of debt. Pay in full, or at least pay more, and stop adding new charges.

Do this today

Find your last statement balance and due date. Plan to pay the full amount, or at least more than the minimum.