This Is ‘One of the Worst’ Strategies You Can Follow With Your Credit Card, and Over 40% of Cardholders Do It

The easiest way to deepen debt is carrying a balance on a credit card from month to month. Now a new survey highlights a common habit that makes it more difficult to escape debt. 

According to a recent LendingTree survey of more than 1,500 cardholders, about 41% of U.S. credit cardholders revealed that they typically only pay the minimum amount on at least one of their credit cards. That percentage rises to 58% among Gen Z ages 18 to 29 and drops to 19% among Baby Boomers. 

“That’s a big deal because regularly making only the minimum payment can be a recipe for staying mired in debt,” the LendingTree survey stated. 

For cardholders who regularly carry a balance, knowing the credit card’s interest rate is crucial. It determines how much extra they will pay on an unpaid balance. However, 44% of cardholders told LendingTree that they don’t know the interest rate on any of their credit cards. 

LendingTree stated in the report that “paying just the minimum is one of the worst habits you can get into with your credit card.” 

On the one hand, paying the minimum balance fulfills the minimum requirement of a cardholder and prevents penalties. On the other hand, paying just the minimum amount could cause cardholders to stretch repayment and add thousands of dollars to their total cost. 

Making the minimum payment is not a “debt repayment strategy,” Corinna Rose, a certified financial planner with Bell Investment Advisors, told CNBC Make It. Instead, it is a “debt maintenance strategy.””

“Making only the minimum keeps the account in good standing, but it often does very little to meaningfully reduce the balance,” Rose told the outlet. 

The average credit card balance

The typical U.S. cardholder with debt carries a $7,756 balance, and the average APR on current card accounts is 20.94%, according to LendingTree. At that rate, and without adding new purchases, paying only the minimum could keep you in debt for nearly 27 years and cost close to $13,000 in interest. 

“The big misunderstanding is thinking a minimum payment means you’re making real progress,” Rose said. “Often, you’re just keeping the account current while interest keeps working against you.”

What to do instead

In an ideal world, a credit card would be a way to pay, not a way to stretch a budget. That means charging only what you can afford to cover when the bill arrives and paying the balance in full each month. 

When a balance follows you from month to month, it can get harder to see what you’re actually spending. 

Rose says regularly being unable to pay off the full balance should be viewed as a signal to pause, not a personal failure. It may be time to review spending, build a realistic budget or take a temporary break from using credit cards while you regain control. 

“Don’t use tomorrow’s income to pay for yesterday’s spending,” she said.