How the minimum payment calculator works
This calculator shows you exactly what happens when you pay only the minimum on your credit card each month and nothing more.
Enter your current balance and APR. The calculator immediately computes your minimum payment using the standard Canadian formula: the greater of $10 or 2% of the outstanding balance. It then builds a complete month-by-month amortization schedule showing how your balance, minimum payment, interest, and principal change over time.
The key insight is the shrinking payment: as your balance drops, your 2% minimum drops with it. In month 1 on a $5,000 balance, you pay $100. By month 24, your payment has dropped to about $76. By month 60, it is under $50. This declining payment is why payoff takes decades.
Use the extra payment slider to see what happens when you add a fixed amount on top of the minimum each month. The calculator runs a second parallel simulation and shows you the side-by-side comparison: months saved, interest saved, and total cost difference. The area chart overlays both scenarios so you can visualize the dramatic difference.
The minimum payment trap explained
The minimum payment trap is the mathematical consequence of a payment that shrinks proportionally with your balance. Because both the payment and the balance decline together, you never build the momentum needed to make meaningful progress against the principal.
Consider a $5,000 balance at 19.99% APR. Your first minimum payment is $100. Of that $100, approximately $83 goes to interest and only $17 reduces the principal. After 12 months of minimum payments, you have paid $1,162 but your balance has only dropped to about $4,326.
After 5 years, you have paid nearly $5,000 but still owe roughly $3,200. After 10 years, you still owe about $1,800. Full payoff takes more than 30 years, and the total interest exceeds $8,000.
The trap exists because credit card issuers designed minimum payments to be small enough that most cardholders accept them as "the amount I owe this month." The FCAC recognized this problem and now requires every credit card statement to show an estimated payoff timeline if only minimum payments are made.
The fix is simple: commit to paying a fixed amount that does not shrink as your balance declines. Even the minimum plus $50 extra each month transforms a 30-year debt into a manageable payoff timeline.
How minimum payments are calculated in Canada
Most Canadian credit card issuers use one of two formulas to calculate the minimum payment.
**Formula 1 (most common):** The greater of $10 or 2% of the outstanding balance. This is the formula used by TD, RBC, Scotiabank, BMO, and most other major banks. On a $5,000 balance, the minimum is $100. On a $500 balance, the minimum is $10.
**Formula 2 (some issuers):** 1% of the outstanding balance plus the monthly interest charge, or $10, whichever is greater. This formula results in slightly higher payments because the full interest is added on top of the 1% principal portion.
This calculator uses Formula 1 (2% or $10) because it is the most common across Canadian issuers and produces the most conservative (lowest) minimum payment estimate. If your issuer uses Formula 2, your actual minimum will be slightly higher and your payoff will be slightly faster than shown.
Important: if your balance is below the minimum threshold (typically $10), you owe the full balance. Any fees, over-limit amounts, or past-due amounts are added to the minimum. This calculator assumes no additional fees or missed payments.
| Balance | Minimum payment (2%) | Monthly interest (19.99%) | Principal paid |
|---|---|---|---|
| $10,000 | $200.00 | $166.58 | $33.42 |
| $5,000 | $100.00 | $83.29 | $16.71 |
| $2,500 | $50.00 | $41.65 | $8.35 |
| $1,000 | $20.00 | $16.66 | $3.34 |
| $500 | $10.00 | $8.33 | $1.67 |
Worked example: $5,000 at 19.99% APR
Here is a step-by-step comparison using a $5,000 balance at 19.99% APR with three scenarios. Enter these numbers into the calculator above to verify.
**Minimum payments only:** First payment is $100, of which $83 goes to interest. Payoff takes over 30 years. Total interest: over $8,000. Total paid: over $13,000.
**Minimum + $50 extra:** First payment is $150. Payoff takes approximately 46 months (under 4 years). Total interest: approximately $1,717. Total paid: approximately $6,717. You save over $6,000 in interest and 26+ years.
**Minimum + $100 extra:** First payment is $200. Payoff takes approximately 32 months. Total interest: approximately $1,098. Total paid: approximately $6,098. You save over $7,000 in interest.
The pattern is clear: the extra payment does not need to be large to have a massive impact. Even $50 per month above the minimum transforms a multi-decade debt into something manageable.
How to escape the minimum payment trap
Once you see the true cost, the next step is choosing a strategy to pay down your balance faster.
**Lock in a fixed payment.** Decide on a fixed monthly amount you can sustain and set up automatic payments. As your balance drops and your minimum shrinks, your fixed payment stays the same, so more goes to principal each month. This is the simplest and most effective approach.
**Round up aggressively.** If your minimum is $87, pay $150. If it is $43, pay $100. Rounding up ensures you always pay well above the declining minimum.
**Use balance transfer cards.** Several Canadian issuers offer 0% balance transfer promotions for 6 to 12 months with a 1% to 3% transfer fee. During the promotional period, every dollar you pay reduces principal. Divide your balance by the promotional months to calculate the required monthly payment.
**Consolidate with a personal loan.** A personal loan at 8% to 12% has a fixed monthly payment and a fixed term, eliminating the minimum payment trap entirely. On $5,000 at 9.99% over 3 years, the monthly payment is $161 and total interest is $803.
**Contact a credit counselling agency.** Non-profit credit counselling agencies accredited by Credit Counselling Canada can negotiate reduced interest rates (often 0% to 5%) and set up a Debt Management Plan with fixed monthly payments over 4 to 5 years.
- ✓Lock in a fixed monthly payment above the minimum and automate it
- ✓Round up payments aggressively to the nearest $50 or $100
- ✓Transfer your balance to a 0% promotional card and pay it off within the promotional period
- ✓Consolidate into a personal loan with a fixed rate and fixed term
- ✓Contact a non-profit credit counselling agency for a Debt Management Plan
How credit card interest works in Canada
Credit card interest in Canada is calculated using daily compounding on the average daily balance. Your card issuer divides the APR by 365 to get the daily periodic rate, then applies it to your outstanding balance every day.
A 19.99% APR card has a daily rate of 0.05477%. On a $5,000 balance, that is $2.74 in interest per day, or approximately $83 per month. The effective annual rate (accounting for daily compounding) is 22.13%, higher than the stated APR.
If you carry any balance from the previous month, new purchases begin accruing interest immediately. The 21-day grace period only applies when you pay your full statement balance by the due date. Once you are in a payoff cycle, every additional purchase adds to your interest cost from day one.
The minimum grace period of 21 days for new purchases is mandated by the FCAC. Cash advances and balance transfers typically have no grace period, and cash advance rates are often 22.99% to 29.99%.
This calculator approximates monthly interest as balance multiplied by APR / 12, which closely matches the daily compounding result for standard billing cycles.
Frequently asked questions
What is the minimum payment on a Canadian credit card?
Most Canadian issuers set the minimum as the greater of $10 or 2% of the outstanding balance. On a $5,000 balance, that is $100. On a $500 balance, that is $10. Some issuers use 1% of balance plus monthly interest instead.
How long does it take to pay off a credit card with minimum payments?
On a $5,000 balance at 19.99% APR, minimum payments take over 30 years. A $10,000 balance takes even longer. The timeline is so long because the minimum payment shrinks as your balance drops, so you never build momentum against the principal.
How much interest will I pay with minimum payments only?
On a $5,000 balance at 19.99% APR, minimum payments result in over $8,000 in total interest. That means you pay more than $13,000 total for a $5,000 debt. The exact amount depends on your APR and starting balance.
How much does an extra $50 per month save?
On a $5,000 balance at 19.99%, adding $50 per month to the minimum saves over $6,000 in interest and cuts the payoff time from 30+ years to under 4 years. Even small extra payments have a dramatic impact.
Why does the minimum payment keep getting smaller?
Because the minimum is calculated as a percentage of your balance (typically 2%). As your balance drops, so does 2% of that balance. This declining payment is intentional in the formula but it traps you in a cycle where you barely reduce the principal each month.
What percentage of my minimum payment goes to interest?
At 19.99% APR, approximately 83% of your first minimum payment on a typical balance goes to interest. As your balance declines, the interest portion decreases slightly in dollar terms, but it remains a large share of each shrinking payment.
Is it better to pay off my credit card or save money?
Paying off credit card debt first is almost always the better financial decision. A credit card at 19.99% costs far more than a savings account or GIC earns (typically 3% to 5%). Every dollar that reduces your credit card balance effectively earns a 19.99% return.
Does this calculator account for new purchases?
No. This calculator assumes you stop using the card while paying it off. New purchases while carrying a balance accrue interest immediately (no grace period), which extends your payoff timeline. For a calculator that includes ongoing purchases, use our Credit Card Interest Calculator.
How is this different from the Credit Card Payoff Calculator?
The Credit Card Payoff Calculator lets you set a fixed monthly payment or target payoff date. This Minimum Payment Calculator specifically shows what happens when you pay only the minimum and how extra payments on top of the minimum change the outcome. Use this calculator to understand the minimum payment trap.
Can I change my minimum payment formula with my bank?
No. The minimum payment formula is set by your card issuer and written into your cardholder agreement. However, you can always pay more than the minimum. Setting up a fixed automatic payment above the minimum is the most effective way to escape the minimum payment trap.