How long to pay off a credit card with minimum payments: a Canadian worked example

Paying only the minimum on a credit card takes years because the minimum is usually a percentage of a shrinking balance, so the payment falls as the debt falls. In an illustrative example, a $3,000 balance at 20.99% with a minimum of 3% of the balance (at least $10) takes about 18 years to clear and costs about $3,750 in interest, more than the original balance. Paying a fixed $150 a month instead clears it in about 2 years for about $724. Your bank statement must show its own estimate of the minimum-only payoff time; this guide shows where that number comes from and how to beat it.

It belongs to the rewards card worked examples. All rates and minimum payment formulas are illustrative; your agreement sets yours.

How minimum payments are calculated

Card agreements in Canada use formulas such as:

a percentage of the balance, for example 2%, 3% or 5%, with a dollar floor such as $10;
interest and fees plus a percentage of the balance, for example interest + 1%;
a fixed dollar amount for small balances, with the full balance due if it is below the floor.

In Quebec, the minimum must be at least 5% of the balance owing, according to the Office de la protection du consommateur; see Quebec's rules. Elsewhere the formula is set by the agreement and shown in the information box.

The example: one balance, five ways to pay

Assumptions: $3,000 balance, 20.99% annual rate charged monthly (1.749% a month), no new purchases, payments made on time.

Payment method	First payment	Months to clear	Years	Total interest
2% of balance, at least $10	about $61	about 746	about 62	about $15,990
3% of balance, at least $10	about $92	about 218	about 18	about $3,750
Interest + 1% of balance, at least $10	about $83	about 265	about 22	about $4,751
5% of balance (Quebec floor)	about $153	about 105	about 8.8	about $1,515
Fixed $100 a month	$100	43	3.6	about $1,290
Fixed $150 a month	$150	25	2.1	about $724

Why the minimum-only paths are so slow. In month 1 of the 3% path, interest is $3,000 × 1.749% ≈ $52.47. The payment is about $91.57, so only about $39 reduces the balance. As the balance falls, the 3% payment falls too, and it never gets much ahead of the interest until the balance is small. A fixed payment does the opposite: as interest falls, more of each fixed payment goes to principal.

Step-by-step: the first three months at 3%

Month	Opening balance	Interest (1.749%)	Balance + interest	Payment (3%)	Closing balance
1	$3,000.00	$52.47	$3,052.47	$91.57	$2,960.90
2	$2,960.90	$51.79	$3,012.69	$90.38	$2,922.31
3	$2,922.31	$51.12	$2,973.43	$89.20	$2,884.22

After three months and about $271 paid, the balance has dropped by only about $116. (The example applies the percentage after adding interest; issuers' exact methods vary, which is why your statement's estimate may differ.)

Reading the estimate on your statement

Under the Financial Consumer Protection Framework Regulations, a bank's statement must include an estimate of the time in months and years it would take to pay the balance in full by making only the minimum payment, using assumptions set out in the regulations, such as the current rate continuing and the balance rounded up to the nearest hundred dollars. In Quebec, statements must also show the estimated number of months to repay at the minimum. Use it as a warning light: if the estimate is measured in decades, the minimum is not a plan.

Turning it into a plan

Pick a date by which you want the balance gone, for example 24 months.
Enter the balance, rate and years in the payoff plan calculator. For $3,000 at 20.99% over 2 years, it gives about $154.14 a month and about $699 of interest.
Set an automatic payment for that amount, not the minimum.
Stop adding new purchases to the card, or pay new purchases in full every month on top of the plan payment.
If you have several cards, put extra money on the highest-rate balance first while paying at least the minimum on the others.

Can a balance transfer or consolidation loan help? A lower rate helps only if you keep the fixed payment and stop adding to the balance. Test it with the balance transfer calculator and read the balance transfer worked example.

When the plan payment is not affordable

Call the issuer and ask about a lower rate or a payment arrangement; it costs nothing to ask.
Contact a non-profit credit counselling agency for a budget review and, if suitable, a debt management plan.
For larger debts, a Licensed Insolvency Trustee can explain consumer proposals and bankruptcy.
Avoid companies that charge upfront fees for "debt relief" promises; see the mistakes guide.

Missing the minimum payment is worse than paying only the minimum: it can lead to late fees, a higher rate under some agreements and a late payment on your credit report; see credit score effects.

Frequently asked questions

Does paying the minimum hurt my credit score?

Paying at least the minimum on time keeps the account in good standing. A high balance relative to your limit can still weigh on your score.

Why did my minimum payment go down?

Because the balance went down. A percentage-based minimum falls with the balance, which is exactly why it takes so long.

Is interest compounded daily or monthly?

Most agreements calculate interest daily on the daily balance and charge it monthly. The example uses a monthly rate for clarity; real figures differ slightly.

Does the 35% criminal rate limit apply?

Yes, all credit is subject to the 35% APR limit under the Criminal Code, but typical card rates are below it. The problem with minimum payments is time, not legality.

Sources

Justice Laws Website — Financial Consumer Protection Framework Regulations s. 66 (statement and minimum payment estimate)
Office de la protection du consommateur — Quebec 5% minimum payment and statement contents
Financial Consumer Agency of Canada — paying down credit card debt
Credit Counselling Canada — non-profit credit counselling agencies
Office of the Superintendent of Bankruptcy — Licensed Insolvency Trustees