Making the minimum payment on a credit card month after month can be nice in the short term. After all, you live up to your obligations, and small payments hurt your wallet and bank account less today.

However, in the long run, making a minimum payment has serious consequences for your financial health, potentially leaving you heavily in debt and damaging your credit score. The best way to avoid this fate is to make larger payments. Even relatively small payments can make a difference over time.

Minimum credit card payments are the lowest required payment shown on your statement balance. When you make a minimum payment on time, you are meeting your requirements as a cardholder and contributing to a positive payment history on your credit report. But that doesn’t mean you’re in the clear.

Making the minimum monthly payments on your credit cards can cause maximum pain. By paying only the lowest amount required each month, you increase the time it takes you to erase your credit card debt and pay a lot more interest than you would otherwise.

A minimum payment by credit card can be a short term approach to dealing with financial problems. By itself, a minimum payment won’t hurt your credit score because you don’t miss any payments. Still, experts strongly suggest making more than the minimum payment each month to avoid digging yourself into a financial hole.

Courtney Nagle, Associate Marketing Director at the National Foundation for Credit Counseling, says, “Limiting your debt payments to minimum monthly payments is an expensive way to manage debt and is not a recommended long-term solution. She recommends paying off the balances as quickly as possible to save money and give your budget “some breathing room.”

Nagle says that minimum monthly payments for credit cards are calculated in one of two ways: using either a fixed percentage or a formula.

Fixed percentage. Some credit card issuers, including most credit unions and subprime lenders (those that offer credit cards to customers with bad credit history), use a fixed percentage to determine your minimum monthly payment. credit card, according to Nagle.

In this case, a minimum credit card payment is based on the total balance of the cardholder’s monthly bill, including finance charges and all charges, Nagle explains. Credit cards with a fixed percentage minimum payment typically require 2-4% of your balance each month.

Taking this into account, if your total credit card balance is $ 3,000 and the fixed percentage is 2%, your minimum monthly payment would be $ 60.

Formula. Some large credit card issuers calculate minimum payments using a formula. They add up the minimum payment based on a percentage of your total balance, excluding interest and fees, Nagle explains. They then add any interest and charges to the minimum balance due.

For example, according to Nagle, a balance of $ 1,250 at an interest rate of 16% would result in a minimum payment of $ 29.17 if the minimum payment percentage formula is 1%. The 1% equals $ 12.50 and the interest equals $ 16.67 (no charge), which adds up to $ 29.17.

Usually, a minimum monthly payment is at least $ 15, regardless of how your balance is calculated, says Ed Mierzwinski, senior director of the Federal Consumer Program at the US Public Interest Research Group, or PIRG, an advocacy group. non-profit rights.

Paying as low as $ 15 can be worth it if you’re strapped for cash, but making minimum credit card payments isn’t a long-term solution.

Because of the interest charged by a credit card issuer, your debt can easily go from hill to hill if you only make the minimum payment each month. This is because as long as you keep a balance, the credit card company will continue to charge interest on the balance.

The following table shows how much of a difference there is between making a minimum payment and making more than the minimum payment. For this illustration, let’s say the minimum payment is 2% of the outstanding balance, the interest rate is 18.9%, and no new purchases are added to the card.

Cardholders should pay attention to the “minimum payment warning” section of their credit card bills. This section includes a table showing how much money and how many years it will take to clear your balance if you only pay the minimum amount each month. This disclaimer is required by the Federal Credit Card Liability and Disclosure Act, 2009 or the Credit Card Act.

When done on time, minimum monthly payments can help you maintain a good credit rating, says Nagle. Your payment history – which includes paying your bills on or before due date – represents 35% of your FICO score. FICO is the leading provider of credit scores in the United States. Another advantage: making at least the minimum payment allows you to avoid late fees and other penalties.

But making only minimum payments can still hurt your credit ratingsays Thomas Nitzsche, media and brand manager at Money Management International, a non-profit organization that provides financial advice and education. He says it’s because cardholders who make a minimum payment may have reached or nearly reached their credit limit, causing their credit usage to be too high.

Use of credit, which represents 30% of your FICO score, measures the amount of credit available versus the amount of credit used.

Whether you are making minimum payments or not, you should aim to keep your credit card balance at 30% or less of your credit limits. For example, if the credit limits on all of your cards total $ 6,000, your balances should be $ 1,800 or less.

The fact that the ratio of your credit card balances exceeds 30% of your credit card limits can lower your credit score, says Mierzwinski.

Making a minimum payment on time can make sense “when your budget is tight to keep your score from slumping,” Nagle explains.

As a one-time event during a temporary financial hardship or if your credit card has a 0% short-term promotional interest rate, Nitzsche adds that it’s okay to make a minimum payment. But if minimum payments are made regularly, “then that can become a problem,” he says.

Jeffrey Arevalo, financial wellness expert at GreenPath Financial Wellness, a nonprofit that provides financial advice, says, “Even paying just $ 10 more than the minimum each month will help pay off the balance much faster. “

Mierzwinski agrees: “Even a 4% or 10% payment can drastically reduce the interest paid and speed up the repayment,” he says.

If you consistently find yourself making minimum payments on your credit cards, there are steps you can take to overcome this barrier.

Create a family budget. A family budget – whether it’s on paper, in a spreadsheet, or on an app – can keep your personal finances on track, including your credit card debt.

Reduce expenses. Nagle suggests canceling your cable TV service, freezing your gym membership, or reducing the number of times you eat out as some of the steps you can take to “dramatically improve your debt repayment strategy.” “.

Contact your credit card issuers. If you are having legitimate financial difficulties – you lost your job, for example – Nitzsche recommends contacting your credit card companies to see if they will lower your interest rates, which will allow you to reduce the cost of paying off your loan. your debts.

Look in a balance transfer. Switching from a higher interest balance to an interest free or lower interest credit card can save money as the interest you pay will be reduced or eliminated during the promotional period. Keep in mind, however, that most balance transfer offers are chargeable (usually a percentage of the transferred balance).

Pay off balances in full. It may take a while, but you should aim to pay off your credit card balance in full each month. If you do this, you will avoid paying high interest and potentially save thousands of dollars in the long run. To get there, you can try one of these reimbursement methods.

Making a minimum credit card payment is okay from time to time, but it shouldn’t become routine. Regularly making minimum credit card payments can cost you thousands of dollars in interest as you struggle to pay off balances over a decade or more.

“If you’re maxing out on a certain number of cards, you need a new way to approach your card usage,” says Mierzwinski. “Lock them up and make the biggest payments you can afford. “