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Find a credit card that best suits your needs. Compare interest rates, balance transfer rates, annual fees and more from Australia's leading lenders, big and small. - Data last updated on 22 Mar 2018

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Paying the lowest monthly repayment off your credit card sounds simple. After all, it’s the minimum amount of money your provider requires you to pay. The dollar amount is easily found displayed on your monthly credit card statement.

However, the problem is, it can also be misleading. That’s because if you pay only the lowest monthly repayments, you could end up with a much larger debt that will take you years to pay off.

How is the lowest monthly repayment calculated on a credit card?

Usually credit card providers will set the lowest monthly repayment to about 2-3 per cent of the outstanding balance. Usually, added to this will be any interest due for the month and possibly part of the annual fee, if there is one.

The minimum payment should cover all of the interest, and also part of the money you owe. Every month the same calculation is made. However, as your debt balance reduces, so does your lowest monthly repayment. This means that even if you have a small debt, it could take several years to pay off.

Example #1

  • Credit card debt: $500
  • Interest rate: 17 per cent
  • Time to pay off: 2 years, 8 months (making minimum repayments)
  • You’d pay: $622

Example #2

  • Credit card debt: $3,000
  • Interest rate: 18 per cent
  • Time to pay off: 22 years, 3 months (making minimum repayments)
  • You’d pay: $8,383

How can you reduce your credit card debt faster?

Even if you have only a relatively small amount owing on your credit card, it can take an extraordinary long time to pay off if you make only the lowest monthly repayment.

To avoid paying a huge amount in interest, here are some steps you could take to get on top of your credit card debt:

  • Pay as much as you possibly can above the minimum payment. Anything extra you can pay each month that’s more than the lowest payment will go directly to repaying what you’ve borrowed. This means your debt will be repaid faster and will end up costing you a lot less in interest.
  • Try to avoid putting any more purchases on the credit card. If you keep paying for goods and services with your credit card, your debt will increase, as will the time it’ll take you to pay it off.
  • Consider transferring your debt to a balance transfer credit card. Zero per cent balance transfer credit cards can be good if you’re having trouble paying anything more than the minimum payment. This is because every dollar you pay goes straight to repaying the debt, not interest. There is often a one-off fee involved, and the 0 per cent interest usually only lasts for a limited amount of time; often between six months and 36 months, depending on the credit card you choose. RateCity has a balance transfer tool to help you compare the cards currently on offer.


A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

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