What is a minimum payment?

When you get your credit card bills every month, you'll notice that there's a required minimum payment you must submit A lot of people who are strapped for cash will often send in only that much, but doing so isn't a good idea.

A minimum payment is usually listed as a percentage of the total amount you owe, but it's usually different for each account. The reason it's a good idea to pay more than that number is that paying only the minimum does little to chip away at debt, meaning that even if you don't spend another cent on that card, it could take years to pay off the balance.

However, every dollar above the minimum listed is contributed - by law - directly to your actual debt, not the amount of interest you've accrued. Therefore, the more you pay into your credit card balance every month, the more quickly the amount you owe will drop.