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Ages 10+ · Money · Credit and loans
The minimum payment trap
Coins paid in all020406080100120104Minimum only558 a month5012 a month4620 a monthcoins
The same bike, four ways to pay.
The big ideaA minimum payment is the least a bank accepts. It barely cuts what is owed.

How it works

In the made-up town of this story, Pia put a forty-coin bike on a card, so forty coins were owed. The bank adds one extra coin for every full ten owed, so the extra is four.

The statement said 44 and a minimum payment of 5. The minimum is the least the bank accepts this month. Four of the five coins paid the extra, so only one cut the forty.

Paying only the minimum, the balance creeps down one coin a month, and forty coins take forty months. Pia paid 104 coins for a bike that cost 40.

A minimum is a gate, not a finish line. Paying more each month shortens the road.

Pia owes 404 extra: 44Paysminimum 54 pay theextra1 cuts the40
Where the first minimum goes.
A minimum is• The least the bank accepts• Mostly extra at first• A way to stay in good standingA minimum is not• What clears the debt• A plan with an end date• Always the same number
What a minimum is and is not.

Example 1: The extra on 40

  1. The bank adds 1 extra coin for every full ten owed.
  2. 40 has four full tens, so the extra is 4.
  3. 40 + 4 = 44 coins on the statement.

Example 2: Where the first minimum goes

  1. The minimum is 5 coins.
  2. 4 of them pay the month's extra.
  3. 5 − 4 = 1 coin cuts what Pia owes.
  4. So she owes 40 − 1 = 39.

Example 3: The second month

  1. 39 has three full tens, so the extra is 3.
  2. 39 + 3 = 42, and the minimum is 4.
  3. 42 − 4 = 38 coins are owed.
  4. The steps go 40, 39, 38, 37: one coin down each month.

Example 4: Twelve a month

  1. After month one: 40 + 4 − 12 = 32.
  2. Then the pile goes 23, 13 and 2, and then none.
  3. Pia pays 12 + 12 + 12 + 12 + 2 = 50 in all and is free in 5 months.

Example 5: The difference

  1. Minimum only: 104 coins in all.
  2. Twelve a month: 50 coins in all.
  3. 104 − 50 = 54 coins less with twelve a month.

Words to know

minimum
The least the bank accepts this month.
balance
The coins still owed.
extra
What the bank adds each month on what is owed.
statement
The page that says what is owed and the minimum.
good standing
Not falling behind on the card.

Watch out

Try it

  1. Pia owes 40 and the extra is 4. What is on the statement?
  2. Of a minimum of 5, 4 pays the extra. How much cuts what Pia owes?
  3. About how long does paying only the minimum take?
  4. Which costs fewer coins in all: 12 a month or the minimum only?
Answers: 1. 44 · 2. 1 · 3. Forty months · 4. 12 a month
Try at homeWith a grown-up, find a sample statement from a bank's help pages and read what paying only the minimum would do.
For grown-upsRead a sample statement from a bank's help pages together and find what it says paying only the minimum would do. This is a pretend town and not advice about any real card.
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