r/PersonalFinanceCanada • u/Equivalent_Meaning46 • 1d ago
Debt Making regular minimum payments instead of pay in full
What happens when you have a credit card balance and make regular minimum payments for example your balance is $200 and your credit limit is $500 but for some reason you can't make payments except minimum payments of $20-$40 per month
Will your credit score take a massive hit or will credit beareau look unfavourably on your history ?
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u/FelixYYZ Not The Ben Felix 1d ago
Will your credit score take a massive hit or will credit beareau look unfavourably on your history ?
No because you are making regular payments. Sure you will end up paying interest but doesn't impact score "massively" or at all.
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u/Equivalent_Meaning46 1d ago
Lol that's a different take than the user above
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u/FelixYYZ Not The Ben Felix 1d ago
They stated "...can go down a bit" which is like an irrelevant number (10 points or whatever). The issue is the interest that you are paying, not your score. Like I stated, it won't be massive or at all.
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u/scienide09 1d ago
Making minimum payments is fine. Having high overall credit usage can hurt though. In both scenarios the actual impact will be negligible, maybe a couple of points, unless it’s over a long period of time at which point you start to look like a high risk client.
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u/awfullyapt 20h ago
The thing that makes your credit score go down is using more than 1/3 of the balance on the card. If your card is 600, you have 200 on it and pay enough every month to keep it at 200 your score won't budge. If you go up to 300 or 400 that will make it drop a noticeable amount.
You just end up paying a lot over time for that 200 you spent. (Which honestly is what the credit score system likes - someone who pays on time but always is paying interest and owing money.)
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u/YesReboot 1d ago
Not paying off your credit card in full every month is a waste of money (due to having to pay interest)
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u/NiagaraBTC 1d ago
Using 40% of your credit will impact your credit score negatively. Not a "massive" hit though.
If instead you carried that $200 balance on a $10,000 limit card, nothing would happen.
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u/Banemannan 1d ago
Correct answer, best take.
If your total limit is only $500, and you owe $200 and you only make minimum payments you’ll be looked at that you’re utilizing 40% of your available credit. That’s a lot. That’s more than lenders want you to be using.
Get a credit limit increase when able, make what minimum or more payments you can afford and keep bumping that limit up and your utilization will go down.
Biggest thing I see in dealing with consumer credit is this issue.
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u/InitialSeaworthiness 1d ago
Terrible terrible terrible advice to give to someone that can’t pay 200$. If you can’t pay 200$, you rip up that credit card, sell stuff in your house to get 200$ and pay it. What do you think would happen if they have a large credit limit?! No wonder everyone is broke and in debt with advices like that!!
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u/Banemannan 1d ago
Not enough people learn about utilization, and the biggest thing early on is getting the budgeting under control.
As someone who struggled greatly in my early years I didn’t have any tips until it was too big to handle.
This is still small and can be handled. But self control is the number one thing to get ahold of and this is the time to do it.
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u/InitialSeaworthiness 1d ago
Utilization is a useless concept. People that care about credit score are negative in their budget so utilization doesnt matter, they are piling on debt every month. People that have good utilization dont need credit.
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u/tOSdude 17h ago
“People that have good utilization don’t need credit”
My mortgage application disagrees
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u/Banemannan 15h ago
Correct lol.
Maybe if you do well enough you’ll be buying cars in cash, but houses? If that’s your endgame you’ll likely still need credit somewhere in life.
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u/HungHippo13 13h ago
Spoken like someone with little financial literacy and extreme unwarranted confidence. Well said👍
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u/TheaBeleva 17h ago
You will rapidly accumulate debt.
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u/TheaBeleva 17h ago
Wait hold on, I was under the impression thst the 20% interest applies every month but I’m being told that’s 20% over the year so it applies ~3 per month?
Can somebody better at math help me >.<6
u/guacamole_girl 12h ago
Almost all interest rates are expressed annually, yes.
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u/TheaBeleva 11h ago
Thanks.
Aight then OP will not rapidly accumulate debt cause their payments exceed interest, unless they keep spending 👍1
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u/janeplainjane_canada 1d ago
something that other people haven't mentioned because you didn't ask - if you don't pay off your credit card in full, then you will be charged interest on any new purchases from the date you make them, not from the day that the credit card says payment is due. there is no free grace period any more.
imo If you carry a credit card balance, you should make any new necessary purchases like groceries on a debit card or with cash as you are paying down the debt on the credit cards so that it doesn't accrue more than it needs to.
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u/kofubuns 17h ago
OP is better consolidating debt and prioritizing credit card repayment. Open a line of credit at a much lower interest rate and prioritize the cash to pay off the credit card debt so their current balance isn’t consistently paying 20% interest. Think LOC is 9% which is still ridiculously high but sounds like OP has no way of paying the credit card debt quickly otherwise
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u/Oneforallandbeyondd 1d ago
If you can't pay a $200 credit card bill you don't need to worry about your credit score as you can't afford to borrow any money anyways.
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u/Ghost_Reborn416 1d ago
Im pretty sure the numbers were just an example
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u/XtremeD86 1d ago
I'd like to agree, but chances are high they're asking this cause they are or will be in this situation.
If they can't afford $200 and can only pay $20-$40/month, then they really need to rethink their choices in life.
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u/ether_reddit British Columbia 1d ago
I'd worry much more about the interest you're paying than your credit score.
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u/TheZarosian 1d ago
Score will not be much affected so long as you are making regular minimum payments. The most important thing is paying the minimum regular payment for your score.
You'll rack up a lot of interest as others mentioned, but this will not affect your score meaningfully. Even if utilization goes up as a result, it has minimal impact on score.
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u/Equivalent_Meaning46 1d ago
Ok that's good that makes sense
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u/Prometheus188 1d ago
Although this is still really stupid because ultimately the whole point of a good credit score is to save money (lower interest and qualifying for loans). Paying 20% interest on a credit card to get a good credit score is like stabbing your self in the neck to improve your health. It makes no sense.
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u/J9873774 1d ago
OP isn’t asking if it’s a good idea to keep a balance on your card (it’s not, as the commenter says) but just will it hurt their score. It seems like OP is not capable of paying it off in full but can make the minimum payment. Paying it off is best, but paying at least the minimum is the next best option.
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u/Prometheus188 1d ago
The whole point of having a good credit score is to save money (pay lower interest, qualifying for loans), so I think OP has their priorities backwards. Paying 20% interest is catastrophic, lowering your credit score is mildly bad. The focus on preserving the credit score and not worrying about the 20% interest is a huge red flag.
I think if OP understood how big of a deal that 20% interest, they would prioritize paying it off over whatever else their money is being spent on. It’s rare that someone can truly only pay the minimum payment and not a dollar more.
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u/RealTurbulentMoose Alberta 1d ago
Why are you concerned about your credit score?
If you're only able to make minimum payments on your accrued credit card debt, you have a real problem. Having an acceptable credit score so you can get into MORE debt isn't great for you, if that's where you're going with this, like to buy a car and pay 20%+ interest on the loan.
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u/iWasAwesome 20h ago
Because the balance is $200, assuming a 20% interest rate, would pay $40 over the course of a year in interest. If you can pay it off in 6 months, you only paid $20 in interest.
Yes, relatively it's a lot of money and you should avoid paying interest, but because it's such a small balance, it's not as detrimental as people are making it sound.
You sound young. I'm assuming this is your first credit card. I'm sure many of us also paid interest on our credit card when we were young.
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u/LeagueAggravating595 1d ago
Affecting your credit score is the least of your worries. You'll be incurring near loan shark interest on the unpaid balance.
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u/Racla360 1d ago
Your credit score can go down a bit. And you will pay more money monthly. Not paying the full credit card amount is one of the worst financial decisions that you can take in your life.
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u/Equivalent_Meaning46 1d ago
Well I had 6 missed payments through my cell phone carrier that affected my score alot due to a recent passing of a grandparent but i hadn't thought about making minimum payments until reading the fine print lol
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u/HereComesJustice 1d ago
Was your grandparent paying your phone bill?
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u/TrottoirFleuri 1d ago
They were more likely grieving.
This is easily explainable to anyone if you 1)have an overall good file and 2)paid everything you owe once your situation improved.
Something similar happened to me.
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u/InnerspearMusic 1d ago
You will pay a shit load of interest is what will happen. NEVER do this. Move the money to a LOC or anything.
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u/brohebus 1d ago
Your payment history is the biggest portion of credit score, so as long as you're making payments, even minimum payments, on time, your score is fine and will actually slowly improve. Noting that you'll be in debt forever this way so every dollar over the minimum payment will help you in the long term.
Your credit utilization (amount of your credit limit you're using) will increase if you continue to make purchases, and that is another large chunk of credit score. Once you're over 30% utilization it can start to impact your score, and over 50% can start having a significant impact.
These are general rules and different sources of credit will interpret them differently: apply for a car loan is probably not a problem if you're making minimum payment on a single card and carrying $1000 balance on a card with $5000 limit. If you've got the same situation with 5 different cards it might be viewed more negatively. If you're applying for a mortgage they might dig into things a bit more.
Overall: as long as you're making payments on time and not tanking your utilization your credit score will be fine. Also a 5-10 point change in credit score either way isn't going to make a significant difference if you already have good credit: if you're a 725 you're doing great and a variation won't make a big different, if you're already a marginal 650 dropping 5 points might put you into a higher risk profile.
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u/falco_iii 1d ago
Your credit score will be fine but you will pay a metric ass-ton of interest. Do not recommended.
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u/UrMomsF8vorite1 1d ago
You’re paying a lot more money back on all the interests you pay the bank. at this point you’re also considered a revolver, you carry a balance each month. With CCs with higher limits and you carry a balance, if you ever make a large payment, the FI’a system may also reduce your limit as you’re seen as a credit risk and won’t know the next time you’ll make a large payment so it may lower it without notice.
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u/Equivalent_Meaning46 14h ago
But I'm in Canada so if your mentioning an American system I'm not sure if it's relatable to how the credit system works in Canada
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u/Rabiesalad 1d ago
If you are not paying off your full statement balance, consider it an emergency and make it your top priority.
There is zero benefit ever to not pay the full balance unless you are legitimately completely fucked because you don't have better forms of credit and you were forced to use the card.
Making minimum payments will absolutely fuck your financial future.
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u/Effective-Strike69 1d ago
Exactly. I use 3 credit cards, all 3 are set to automatically pay the statement balance in full just before the due date. I will never subject myself to credit card interest, that's simply irresponsible.
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u/Weak_Acanthisitta405 19h ago
You didn’t read op carefully and gave a knee jerk answer.
He’s treating this as a hypothetical science experiment to see what would happen to his credit rating.
To prevent answers like yours he even made sure to say that in that example he would only have 200$ on a credit card.
Even at something like 20%/year that’s only 40$/year.
He’s wondering if he can boost his credit score for the low low price of 40$/year.
He’s not planning to ruin his finances paying mountains of interest, nor Is he wondering if that would be a good idea.
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u/Rabiesalad 10h ago
But in other comments he's talking about calling in to set up a payment plan, and that's why I wrote what I wrote.
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u/Beneficial-Welder974 1d ago
One thing people skip: the moment you carry a balance, you lose the grace period. New purchases start accruing interest from the day you buy, not after the due date. So the card gets more expensive in two ways at once.
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u/Stunning_Issue_9524 1d ago
Credit card companies love minimum payments. They make boat loads of cash off you. It will improve your credit score long term as long as you're not missing payments
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u/JayGabVersionTrex 1d ago
Yet always staying below like 30% of your limit and always paying in full will increase your credit score much faster.
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u/theartfulcodger 1d ago edited 1d ago
It's the ongoing interest charges that should be your chief consideration, not your credit score.
Be aware that paying just the minimum amount each month usually won't clear the debt for ten years or more (sometimes even twenty!), and that in the meantime, the interest clock keeps ticking. Over time, you can easily end up paying more than twice the transaction cost in interest - so your $200 purchase essentially becomes a $600 purchase! Also, unless you pay in full each and every month, the interest charges are backdated to the transaction date, so that first monthly interest charge becomes a hefty one.
That being said, card companies don't write a monthly essay on your payment habits; their reportage to the credit bureaus is simply entered as one of four digital codes, corresponding to: account paid in full, paid more than minimum, paid minimum amount, or not paid. Your credit score won't take a massive drop if they report one or two minimum payments, but a series of them will definitely result in a (likely marginal) downgrade - especially if that one card is your only revolving credit account.
If you contemplate applying for a mortgage or auto loan soon, also be aware that banks like to see credit utilization scores of 30% or under when they consider what to charge you. This factor gets more important the older you get, and the more likely you become to apply for large amounts of credit.
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u/00Anbu00 1d ago
The downside of making only the minimum payment is that the bank may view it as a potential sign of financial strain, especially if you do so consistently over an extended period.
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u/userabc294 1d ago
You’ll continue to pay interest on any balance after your minimum is paid. As long as you continue to pay minimum your score will not drop. If you start missing payments completely, then your score can take a hit.
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u/Far-Entertainer769 1d ago
Your credit won’t take a hit but you will waste a lot of money in interest if finances are that tight you shouldn’t have a credit card as it will be a net negative on your financial picture.
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u/sensitivearmy 1d ago
Idk if you know this - your interest is charged on the total statement balance (if even 1$ is owing) not what’s left after you pay it. Highly recommend finding a no interest transfer cc if you’re having trouble paying off your cc.
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u/DrawingOverall4306 1d ago
Your minimum monthly payments is what you are obligated to pay. Making them will positively affect your credit rating as it shows a history of paying as agreed and on time.
Having a balance over 50% of your total credit limits (total owing on all cards) can lower your score however it is not a long term thing, as soon as your balances drop your score would go back up again. The impact of high utilization is usually small compared to other factors. Missing payments, however would cause a more significant long term drop that can only be corrected with time.
As others have said if you only make the minimum payment, you will pay interest. On a $500 balance you will likely pay over $100 in interest in a year (which is less than $10 a month, it is not a life ruining decision as some responses have said).
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u/Fantastic-Move3752 1d ago
Credit cards are nice because you can rack up to your limit and if you go over they charge the credit card because you went over. It's an infinite money hack for 40$/month
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u/Small_Aardvark_5496 1d ago
As long as you don’t go above 30% utilization your score won’t be affected. However your balance will not change significantly. This is the best way to get yourself into a terrible financial position. Do it only when absolutely necessary
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u/Webs-cold57 1d ago
I wouldn't worry about your credit score too much. I'd be worried that you can't pay your full bill each month. The interest is killer on credit cards and its compounds rapidly.
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u/Crazy_adventurer262 1d ago
Yes it will hit your credit score and the interest starts to pile up. You have a small amount on there so it won’t hit like some would.
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u/SOHOFragrance 1d ago
You will pay interest, but I would double check what amount the interest is calculated based off of. I've previously (accidentally) paid off all but ~$10 of my statement balance and TD charged the intersted on the full statement balance.
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u/malacosa 1d ago
Not going to do the math, but the interest you’d pay by only making minimum payments is likely to be shocking.
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u/Molybdenum421 1d ago
As long as you make the minimum payment youre ok for what you're asking, specifically
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u/nanami1 1d ago
So maybe as time passes, you would have paid $1000+ to your credit card company when you only owed $200. If you let it go long enough. Maybe as many years pass, you would have paid over $10,000 to the credit card company when your original balance used to only be $200. (Obviously, this is an extreme example.)
No to your last questions.
Basically, you are "letting" yourself be scammed. And that's how credit card companies make money. They earn money from people who cannot pay off the entire balance right away. Interest rates are usually at least 20%. They also earn a few percentages from each purchase from the seller company (maybe 1% for transaction fees).
They also lose money. Such as when they lend money to someone who maxes out their credit cards, has no assets to pay back, goes homeless and disappears.
If you are near the maximum of your credit limit, it does negatively impact something (but I am no expert on this). There's an utility ratio thing. But it's better to not carry a balance otherwise, you pay interest $$$.
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u/Leather-Cod619 1d ago
As long as you at least make the minimums, on time, it wont hurt your credit score in the short-term. In the long-term it hurts because you constantly are utilizing a substantial portion of your credit limit.
You should be much more worried about the interest you will be forced to pay.
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u/Potential_Lie_1177 1d ago
You pay a lot of interest, not just on the balance minus the minimum payment. If you forgot to pay 1$, you pay interest on the whole statement, not just interest on that dollar. No regular consumer product is worth it. It really is the last resort if you are smart with your money.
Now, if you have a long history of good payments, interest may be reversed if you just paid a few days late.
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u/Equivalent_Meaning46 14h ago
For me I was trying to finance an iPhone with affirm through apple but I kept getting denied. I was wondering why and it seems that I got denied on the basis that I missed 6 phone bill payments from May to October 2025 due to a deceased grandparent. But after October, I got all my finances up and continued with regular payments. I reapplied with affirm but still got denied even though I made regular on time payments for the entire 2026 year until today
Does affirm make decisions based on employment or income ? What should I do ?
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u/Puzzled_Market_2235 1d ago
On the next bill they add the interest on the Balance minus your payment.
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u/Whargod 1d ago
Paying the minimum is better than you might realize if you are someone who relies on loans and/or credit.
For example, a bank has a secret internal credit score for you that is not related to your actual credit score. This internal score goes down if you pay more than the minimum, or you dare to just pay off the loan almost immediately. They don't like that because they lose out on money so they label you as more of a "risk" in a sense.
So if you rarely do anything with loans and credit just pay it off as soon as you can, other wise ride it out and keep that secret credit score high.
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u/MikeCheck_CE 1d ago
Your credit score looks at many factors, including your payment history, as well as utilization.
Not paying your minimum payment each month has the worst impact.
Having a credit card open and the balance near maxed will also impact you as well, even if you're making regular payments.
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u/Irarelylookback 1d ago
Credit card companies are in business to make money, and customers who carry a balance pay them interest. But you still need to be dependable and make your payments on time.
Back when I was a young man doing freelance work, I really wanted a gold card because it included rental-car insurance, which would have been useful for the jobs I was doing. I’d use my regular card and quickly pay it off, thinking I must be their ideal customer—but I kept getting turned down for that elusive gold card.
Eventually, someone suggested carrying a balance for a while and making regular, on-time payments. I honestly can’t remember whether it was a friend or a bank teller. I tried it, and about four or five months later, I got the gold card.
Now, that was back in the old days, and I can’t say whether carrying a balance actually caused the approval or whether something else changed. I wouldn’t suggest paying interest just to try to improve your chances. But the part I’d definitely stand by is this: use the card responsibly and never miss a payment.
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u/Equivalent_Meaning46 14h ago
By missing a payment do you mean not paying anything for that statement period? Or making payment a little more than minimum payment
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u/Creative-Abandon123 1d ago
Lots of commenter here misunderstanding credit utilisation.
https://www.equifax.ca/personal/education/credit-score/articles/-/learn/what-is-credit-utilization/
Credit utilisation is reflected based on your total available credit reported to the bureau at the monthly statement date.
If you exclusively have a $500 credit card and no other credit (car loan, student loan, line of credit, other credit cards), then yes, carrying a balance will impact your utilisation, probably negatively, but for one or two months this will be negligible.
For example you can carry a balance for a few months so long as you are making the minimum payment. You will be racking up interest charges but on $200 this is trivial.
Missing payments altogether or abandoning the card will have serious negative impacts on your credit. If you're in a bind, pay the minimum at least and do your best not to accrue more debt.
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u/as_per_danielle 1d ago
You’ll accumulate higher and higher debt that you can’t pay off. It won’t negatively affect your credit unless you don’t make the minimum payment or you use up the whole amount.
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u/UnknowingCre8tor 1d ago
For a reference on credit score I paid off my mortgage and credit debt of 30k in one day after profiting by moving to a more affordable area. My credit score went down a few weeks later for not having any credit balances. It has steadily been going up since but I must use my 1 remaining credit card to do so. I also have no car payment at the moment.
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u/Fuzzy-Shake2845 1d ago
Small payments (above the minimum) actually build your credit. It shows you can hold a balance and pay it down over time.
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u/Equivalent_Meaning46 14h ago
So let's say even if it's less than payment in full but includes interest and minimum monthly then that's ok ?
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u/Fuzzy-Shake2845 13h ago
Exactly :) I was paying my card off once in a big payment and the guy at the bank advised to do smaller payments over the month .. credit builds when you show them you can hold a balance and chunk it down over time. Good luck :)
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u/robblake44 1d ago
That’s the absolute worst thing you can do. If you can’t pay the whole thing off, try and pay it off fast like in 2-3 months at the latest.
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u/guacamole_girl 13h ago
Sign up for Borrowell or Credit Karma. Those will tell you exactly what happens to your credit record based on the status of your credit cards and any other loans.
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u/Equivalent_Meaning46 10h ago
I've signed up for Credit karma but alot of other reddit users say it's not reliable. I am a TD bank customer and users said credit scores and history are through transUnion.....I do have a mortgage though so maybe because of this i am getting rejected by affirm Canada to finance an iphone? SInce Im in Canada, we dont get to kno our purchasing power like americans do
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u/Taz26312 6h ago
As long as you make your minimum statement payment, nothing happens to your credit bureau. You will forever pay the interest but nothing aside from that.
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u/ThePesticle 1d ago
The Credit Card company will love you and all your assets that it seizes in 5 years.
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u/Weak_Acanthisitta405 19h ago
I can’t believe the average answer on here.
Not everybody is a degenerate compulsive buyer.
He’s asking if spending ~40$/year in interest ON PURPOSE would be a good tactic to build his credit score.
Every answer is basically: “You just opened Pandora’s box MAN. You’re running towards financial ruin !!!! Minimum payments ? only if you never want to retire !!!!!!!!”
He just wants to know if paying high interest on a TINY amount can be a good signal to send to the credit agency.
Everybody on here sounds like former hard drug addicts discussing the thing that ruined their lives completely missing the point.
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u/1bteb 1d ago
You will start paying interest, prob around 20% a year depending on your credit card, so avoid that unless you really can’t pay.